The New Zealand Transport Agency has announced it is making an advance payment of $14 million to the builder of Transmission Gully to reflect the costs of the Covid-19 work shutdown.

The money is a lifeline for the 27km stretch of motorway which has blown its budget, been previously bailed out by NZTA, suffered significant delays and faced criticism for being run like a circus.

It's being built through a public-private partnership, the Wellington Gateway Partnership (WGP), with CPB Contractors and HEB Construction sub-contracted to carry out the design and construction.

In a statement, NZTA said it was continuing to negotiate the full cost of the Covid-19 shutdown with the joint venture.


The $14m is an interim payment, which will form part of any final settlement agreement.

The contractor and the builder have agreed to carry out a winter construction programme over the next six weeks while a new completion date is thrashed out and agreed on.

"We understand that people are keen to know when the road will be finished, and we are committed to seeing it open at the earliest possible date, and the winter works programme will help minimise further delays. However, Waka Kotahi must take a considered approach to making any decisions that involve taxpayer money and that is why an agreement on the new opening date and associated costs is taking time," NZTA Transport Services general manager Brett Gliddon said.

"The Covid-19 stand-down period and subsequent work restrictions have caused longer delays than the five weeks of level 4 due to the loss of valuable summer construction, and some of that work can't be resumed until the weather improves again," he said.

Earlier this year it was revealed the cost of the project blew out to more than $1 billion after NZTA agreed to pay the contractor another $190.6m in a settlement over delays caused by the 2016 Kaikoura earthquake, and flooding around the same time.

Today's $14m is separate from that $190.6m payment, which NZTA has confirmed has been paid in full.

During the winter works programme the contractor and the builder will also investigate a new design for a different road surface to improve the ongoing quality of the project and potentially allow it to be built more quickly.

Earlier this month the Transport Agency has admitted that sections of the road needed to be re-laid after an error.


NZTA noted in its announcement today that under the PPP contract all operational decisions related to construction, including materials and the size of the workforce, sit solely with the contractor and the builder.

It considered it inappropriate to make any further comment on these issues until negotiations were completed.

"We understand the public interest in Transmission Gully and we will announce the new agreed completion date and further information when negotiations are complete," Gliddon said.

Julie Anne Genter yesterday said the writing was on the wall for Transmission Gully as tensions between contractor CPB and the NZ Transport Agency appeared to have reached boiling point.

Speaking in her capacity as Green Party transport spokeswoman, Genter told the Herald that National should have seen the "expensive legal quagmire" coming.

Genter said PPPs could be compared with hire purchase agreements.


"You pay little or nothing up front, but tend to pay a lot more down the track because of high interest rates and legal wrangling."

She said the private investor in a PPP has an advantage in any legal negotiations with the government.

"They can always threaten to walk away from the project, whereas the government can't do that, leaving a motorway half-built. So, predictably, governments end up having to amend contracts, delay and pay more.

"So now we're also having to pay extra legal costs for variations to National's PPP contracts, and this is making the motorways even more expensive."

Transport Minister Phil Twyford previously said the transport agency has made assurances it is committed to seeing the Transmission Gully project completed as quickly as possible.

"They are still negotiating a new completion date and working through other issues with the contractors. I am regularly briefed by NZTA on progress and I expect them to update the public with a new completion date as soon as they are able."


National's transport spokesman Chris Bishop said yesterday that PPPs had a place, but only if they were managed effectively by the government.

"What we've seen with the NZTA is utter mismanagement of the Transmission Gully contract."

Bishop pointed to NZTA's annual report for the year ended June 30, 2019, as one example of this.

In the report, the transport agency said its view was there was no liability in relation to the settlement claim from the contractor over delays, yet it later paid out $190.6m anyway.

At the time, NZTA interim chief executive Mark Ratcliffe said the settlement would ensure Transmission Gully was completed to a high standard, met the needs of customers, and still achieved good value for money for New Zealanders.

NZTA reported that as part of the settlement, CPB Contractors and HEB Construction's historic claims against WGP and the transport agency were resolved, without resorting to court action which "would have resulted in further costs and delays to the project".


Bishop also said the recent tumultuous period for NZTA's top brass had resulted in the loss of commercial expertise and governance experience, and that could not be divorced from some of the problems at Transmission Gully.