Auckland Council needs to take careful note of what happened to the ratepayers of the Kaipara district

The Auditor-General's damning report into the Kaipara District Council's Mangawhai sewerage scheme is a salutary counterbalance to the positive Ernst and Young report on the public private partnership model for building new infrastructure commissioned by Auckland Mayor Len Brown.

The Mangawhai scheme was just such a PPP beast. Far from it being a triumph, it's resulted in a full council sacked, and angry ratepayers lumbered with a bill for $63 million, nearly twice the originally quoted price of $35 million.

The Audit Office has written glowingly of the PPP model in the past, and Auditor-General Lyn Provost says nothing in her report to reverse this view. Instead, her finger is pointed directly at Kaipara District Council saying it was just not up to the task of negotiating and managing a PPP scheme.

Ms Provost says the council decided that it wanted to explore a public private partnership approach, to keep the debt "off the balance sheet" and to put as much risk as possible on to the private sector provider. "In my view, this decision took KDC out of its depth."


She said the council "did not fully understand the complexity of what it was doing" and "the early decision to use a PPP approach put too much emphasis on achieving a certain accounting outcome and the transfer of risk, and not enough on value for money and affordability".

In her "lessons learned" conclusion, she emphasises "the need to ensure that entities have the expertise to manage complex [PPP] contracts". She added "accounting issues should not drive the decision to enter into a PPP" and "transferring risks has costs and should not be seen as an end in itself".

All of which is obviously true. But listen to any political supporter of PPP and chances are, top of their list of justifications includes removing the debt off the balance sheet, and trying to saddle the risk with the private partner.

The Kaipara report paints a picture of a bunch of country bumpkins, mesmerised by the lure of buying a new sewerage works on layby, a little down-payment to begin and the rest paid off on the never-never. But before Aucklanders say we wouldn't fall for such arguments, this is exactly the same sort of propaganda heard around Auckland of late.

Can we be certain that Auckland Council won't go wrong in this complicated world as well. And that if it does, there will be a guardian angel with expertise from the Audit Office hovering overhead, just waiting to come to the rescue.

The Audit Office failed Kaipara, will Auckland be any luckier? After all, the Audit Office's failure was hardly a unique event.

In recent years, there's been a growing number of government agencies, set up to prevent bad stuff happening to bumpkins and city slickers alike, but when tested, falling down on the job.

From Pike Creek mining, to adventure tourism, hot air ballooning, outdoor education and leaky homes, the bureaucratic backstops meant to keep us safe and secure have just kept failing.

On the Kaipara, despite several years of alarm bells set off by concerned locals, Audit New Zealand failed to spot the growing catastrophe. Ms Provost admits it is a "woeful saga" and apologises unreservedly that "some of the work done on behalf of the Auditor-General has fallen short of the standards I expect".

That's putting it gently.

When she points out that "KDC failed to attend to its fundamental legal and accountability obligations ... and effectively lost control of a major infrastructure project" you might well think that Audit New Zealand's failure to spot this lapse over a several year period, in particular the period 2006-2009, was rather more than just "falling short of standards".

Indeed an apology seems rather inadequate, particularly if you're an elderly ratepayer now faced with your share of a $62 million sewerage scheme to pay off.

The Kaipara saga highlights, for Ms Provost, the need for councils getting involved in "sophisticated contracting techniques" to have "the expertise to manage complex contracts".

With the Audit Office not able to guarantee it will be there - and wide awake - when needed, and with no first-hand experience to fall back on, going down the PPP path seems a perilous risk for Auckland Council to even contemplate.