The unfinished Harrington St parking building. Photo / George Novak
The Auditor-General has criticised Tauranga City Council over its failed $19 million Harington St transport hub project.
Among the criticisms were that the council focused on price over whether the project could be delivered.
In a letter to council chief executive Marty Grenfell released publicly today, Office of the Auditor-General inquiries manager Dave Lemmon laid out flaws in the procurement process the council used for the project.
The project, expected to provide 550 carparks in the Tauranga CBD, had a $29m budget when construction started mid-2018.
The council abandoned the half-finished build last year after serious seismic issues were identified in the structure, having spent $19m.
Facing an estimated $9.8m demolition cost, in March it sold the site to the lead contractor for $1. Settling the construction contract and unused materials netted the council just $200,000.
In the letter, Lemmon said the council would have "nothing to show for the money it has spent".
"This raises significant questions about the procurement process used by the council for the building."
"We decided to look into the issue."
Lemmon said there were several aspects of the project that did not show good procurement or governance practices.
"These included a lack of a business case or overall plan for procurement, using panel members for work for which they were not appointed to the supplier panel, focusing on price to the detriment of whether the provider could deliver the work being contracted for, an unclear purpose for the project even after it had started, and unclear responsibilities while it was being carried out.
"This is not what is expected when a local authority, or any public organisation, is spending public money."
He also questioned whether the council should have taken further advice earlier regarding its costs and benefits analysis.
His letter noted there were "often" short time-frames for tenders, including one that was open for only a week, with the contract awarded 10 days later. Documentation for many aspects of procurement was "minimal", in his view.
He also found council staff had appeared to have "worked hard to ensure that the project was being delivered as fast as possible and for least cost".
Lemmon said after abandoning the build the council reviewed its procurement processes and started to make changes. The Government appointed four commissioners to govern the council earlier this year, replacing elected members. For those reasons, he decided to write the letter in place of a full inquiry.
He said the letter did not cover matters such as the cause of the failure.
Grenfell, who took over as chief executive in 2018, said the council welcomed the Auditor-General's letter and recognised the procedural failings in the procurement and management of this project.
"Prior to the Auditor-General's interest in this matter, we had commissioned two independent reviews. The recommendations from these, and the Auditor-General's letter, are in the process of being implemented.
"We have put in place a range of measures to improve project delivery, governance and procurement processes."
That included disestablishing the standalone project management office and transferring direct accountability for delivering capital projects to the business units that would ultimately be responsible for the asset.
"Central to this reform is the new capital programme assurance division and new procurement policy.
"The draft Long-Term Plan has an extensive programme of capital projects and the creation of [the division] will support our project delivery with increased capability, expertise and confidence."
The council's commissioners are set to receive the letter in a public meeting on Monday, as well as the prior procurement reviews and an update on improvements.
The council is pursuing legal action in an attempt to recover costs relating to the building.
As part of the deal for the $1 sale of the property - including land valued in mid-2020 at $5.45m - the purchaser will provide at least 200 public car parking spaces on the site, or 95 spaces if the structure is demolished.
The project overlaps the terms of three mayors.
Stuart Crosby, whose three terms ended in October 2016, said his council put funding for the project into the Long-Term Plan but did not oversee the procurement.
"The car park building was part of the City Centre strategy that was signed off at a strategic level in mid-2016. The 2015-2025 Long-Term Plan made provisional resources available for the building on the basis that it would be paid by parking fees over time.
He said that as a general rule, the mayor and councillors did not get involved in procurement or tender processes, but he could not speak to this project as he had retired as mayor by then.
He said all should learn from the Auditor-General's report and professionals involved in the building failure should be held to account professionally and financially.
His successor, Greg Brownless, who served one term, said he was glad the Office of the Auditor-General was investigating.
Brownless said some of what was mentioned in the report "concerned me a lot".
For example, "it defies logic" as to why staff would use a supplier panel when some members were "outside of their area of expertise".
"But it seemed at the time that management was at somewhat disarray and the quality of advice given to staff was very poor."
He said that was why "major changes" to the management team were made during his term. This included Grenfell's appointment.
Brownless noted the actual cause of the failure of the project was not part of the report.
"That is quite crucial."
Overall, Brownless said having a car parking building for the CBD retailers and the public was "very important" and this "should have resulted in a car parking building".
Whether there would be "nothing to show" from the project - as the letter said - depended on what happened next, now that the site had been sold.
He was not involved in that decision, made by the next council, but his wish would have been to see the responsible parties required to finish the project.
Former mayor Tenby Powell, who was elected in October 2019 and resigned the following November, said the project was indeed a failure.
"We are in desperate need of a multi-purpose building that this offered... To have it fail to this level is a tragedy for the city."
He said the council should have been able to rely on the expertise that was given to them at the time.
2015
Council approves proposal to build a carpark building on a site it owns in Harington St. There was no business case or overall procurement plan for the project.
2016
The council seeks tenders.
March 2017
An architect and structural engineers are contracted.
July 2017
Council staff present four design options to elected members. Council approves Option 3, which had two basement levels and nine levels above ground. Estimated cost: $31.6m.
August 2017
Council revokes that decision and approves Option 1, which had two basement levels and seven levels above ground. Estimated cost: $27.1m.
June 2018
Construction begins.
September 2018
Elected members ask council staff to consider alternative uses for the site. Council seeks advice on the costs of terminating the main contract and is advised against it.
June 2020
Council decides to abandon construction after expert engineering advice informed them of serious seismic design issues with the building. Cost to date: $19m.
March 2021
The council decided not to demolish the building and sold the site to the lead contractor for $1.
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