The blown out cost of Transmission Gully is pushing up over $3.5 billion, and it's still not complete.
Commuters and truckies could now be driving 27km down Transmission Gully into Wellington this morning, if it weren’t for fundamental flaws in tendering out the project.
But after the publication of an uncompromising project review, roading and infrastructure bosses are adamant they have learned from the cruel lessons of the debacle.
The interim findings into the north Wellington motorway project blowout finds the public-private partnership was flawed from its start. The price has soared from its initial $850 million estimate to $1.25 billion – and climbing.
But that's in 2016 dollars. Translated into what New Zealanders will pay in coming years, it is hitting nearly $3.5b.
Ten years on, nobody in government can remember how they had calculated that initial price. But the review finds the Government tendered the contract far too cheaply, by double counting savings the private sector could bring to the project.
There were variations: an increase in the design speed to 110kmh and revised structural requirements for some of the 25 bridges, as well as problematic seismic and geotechnical information – but changes should have been anticipated, the review finds. The problem, it seems, was in getting consent for those changes – that was a bridge too far.
While the calculations of what is still to be paid are as murky as the history of how the initial price was set, what is clear is that the contract requires government to pay about $125 million a year for 25 years, to the Wellington Gateway Partnership that is building it.
In addition, the taxpayer has injected an additional $400m, much of that in progress or "distress" payments after the builders complained they were hamstrung by variations and delays caused by the Covid-19 slowdown and shutdown last year.
The road was supposed to be completed in April 2020 but has been delayed by an estimated 18 months because of new earthworks, consenting and surfacing requirements, storm and earthquakes and, according to the contractors, Covid-19.
Review leader Steve Richards says Transmission Gully was always going to be a large and complex road project. But the key problems were in its planning, he says, and if that was done better and the issue identified earlier, then some of the delays and over-runs might have been avoided.
The Waka Kotahi transport agency says it has already proactively captured lessons learnt from Transmission Gully and applied those to the Puhoi to Warkworth private partnership, north of Auckland.
And Ross Copland, chief executive of Te Waihanga Infrastructure Commission, says the Commission will implement the remaining recommendations directed by the Minister for Infrastructure. These are primarily about how they manage future PPP projects. The existing guidance dates back to before the Commission was even established.
He notes there will be different considerations for transport and social infrastructure projects, in procuring public-private partnerships.
Infrastructure Minister Grant Robertson has detailed recommendations for Te Waihanga and Waka Kotahi, including remedying a lack of transparency about PPP decision-making and improving the "less than ideal" risk management around consenting – as well as getting the price right at the start.
“The price was set far too low from the beginning," he says. “Obviously this was not a recipe for success."
He ordered a further review of the Transmission Gully project at its completion.
Robertson and his colleague, Transport Minister Michael Wood, both pointed the finger at the previous National Government's come-what-may determination to set up Transmission Gully as a public-private partnership of unprecedented magnitude, and at haste.
Only one bidder, the Wellington Gateway Project, was considered, The only other serious tenderer, a Fulton Hogan/Fletchers joint venture, wasn't even considered because it could meet the "affordable" fee demanded by government. But National's new transport spokesperson Michael Woodhouse said the successful consortium wasn't forced to build the road.
"The report makes some quite outrageous comments that imply that the contractors were forced into signing up to a contract – if they were not satisfied with the terms of the arrangement at $850m they should not have put ink on paper," he told RNZ.
Costs would have increased anyway because of inflation, speed changes and Covid-19, not because this was a public-private partnership, he said. "The costs that shouldn't have escalated is that nearly $200m that they paid when they were advised they shouldn't have."
