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Transmission Gully Review Finds PPP Model Not To Blame

An independent review into Te Aranui o Te Rangihaeata - the Transmission Gully motorway - has found that external events, budget, governance and consenting issues, rather than the Public Private Partnership (PPP) model, were among the contributors to the project’s time and cost overruns.

The review echoes conclusions from a prior review completed in 2021 in highlighting significant failings in the accuracy of the project’s initial cost estimate or Affordability Threshold as well as aspects of its earlier stage governance.

The reviewers also said that, given the risks and events that impacted the project (Kaikōura earthquake, weather, COVID-19), there’s no evidence that time and cost outcomes would have been better under a non-PPP procurement/contracting model.

The review was led by independent expert Steve Richards and overseen by the New Zealand Infrastructure Commission, Te Waihanga. Its executive summary and recommendations were released today alongside some guiding insights for future megaprojects.

Finalisation and release of the review has been delayed because Transmission Gully has not yet been completed to the standard required by the NZ Transport Agency Waka Kotahi (NZTA), and final assessment of the project’s costs and benefits may not be available for some time. Te Waihanga felt it was important to release key findings now so they can be applied immediately to current and proposed projects.

The key findings include:

- While there was room to improve the execution of the PPP, the use of the PPP model was not the root cause of the time and cost overruns

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- The builder did not anticipate the complexity of the New Zealand Resource Consenting system and was not able to secure all necessary approvals from the Consenting Authority

- Recurring relationship issues between key parties hampered progress

- Project governance issues, including problems with effective decision-making, were a factor earlier in the project

- The Affordability Threshold was set too low.

Te Waihanga Chief Executive Ross Copland says that infrastructure delivery challenges are wide-ranging, and many things can impact on agreed budgets and schedules. This can erode confidence. "Decision-makers are losing confidence in the numbers presented to them at business case stage," he says. "We’ve seen unusually high cost overruns in PPP, alliance and traditional contracts alike so it’s clear the issues run much deeper than selecting the right commercial model."

The recommendations and findings from the Transmission Gully review endorse a number of recommendations made in the New Zealand Infrastructure Strategy (2022-2052).

"We can also improve our consenting system for both regulators and the regulated when it comes to managing big infrastructure projects. I'd like to see us getting good value across the board - including that consent conditions are proportionate to risk and really do provide environmental benefit. The case for wholesale reform in how we manage the environmental risks of big projects has never been stronger. Likewise, the focus on project leadership, relationships and good project governance are consistent with findings from previous work by Te Waihanga and we need to act on these recommendations promptly," says Copland.

He says it is essential the sector work together to learn from past issues to quickly restore confidence in its ability to deliver agreed project outcomes on time and within budget. Copland reports that in a recent study on public infrastructure transparency led by Massey University no completed project had proactively released a post-completion review of their project. "As any good coach will tell you, high performance requires a team culture of systematically reviewing every performance and embedding the lessons learned. Disclosing the findings of those reviews is essential for building public trust and allowing others to learn. We need to lift our game in this regard.

"We are very grateful to NZTA and the wider project team who shared their insights, lessons and ideas for improving future projects. Thanks also to lead reviewer Steve Richards."

[Copies of this report package (Transmission Gully Post Construction Review - Executive Summary and Insights for the Future, including a foreword from Te Waihanga and a statement from NZTA) are available on the Te Waihanga website].

Background notes

In August 2020, the Government directed Te Waihanga to oversee an independent review of how the Transmission Gully Motorway Project was commissioned. When this was released, in April 2021, the Government instructed Te Waihanga to do a further review once the project was complete.

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