Damning Treasury report on why everything costs too much and takes too long

Finance Minister Nicola Willis Infrastructure Minister Chris Bishop released a damning infrastructure report. Photo / Mark Mitchell

Ministers in the new Government are unhappy with the amount of information they get on the $93.7 billion worth of infrastructure investment across 137 different projects the Government plans to do over the next few years.

Those planned projects are in addition to 171 projects currently in delivery with an approved delivery budget of $79.4b.

Finance Minister Nicola Willis and Associate Finance and Infrastructure Minister Chris Bishop released a Treasury report on Thursday showing that across multiple Government agencies there are 53 infrastructure projects that were delayed by 20% or more as of March this year.

This means 40% of all the projects currently in delivery by the Government are delayed. The figures showed there are cost escalations across the infrastructure programme of $1.2b or more. That figure would have escalated to $6b had the Government not effectively axed the iRex Interislander replacement project and a handful of other investments.

Since 2022, government agencies have been required to report to Treasury each quarter on their infrastructure investments they have in progress or investments they plan to do in the future (only investments worth $50 million or more are counted).

The reports were previously published with the Budget proactive release but Willis and Bishop have decided to release them quarterly. Both expressed frustration not just at the delays and cost overruns, but at the lack of transparency from some agencies that were feeding poor-quality data to Treasury.

“The report also highlights a lack of long-term planning, insufficient attention to the investment reporting process, and inconsistent application of the rules and requirements of the investment management system,” Willis said.

Dunedin's new hospital (pictured) is delayed. Photo / Te Whatu Ora

Willis said that both she and Bishop wrote to Ministers “setting out updated expectations in regards to investment discipline and agency submissions” for the next quarterly report, which they hoped would have more complete data.

Willis said Cabinet had “made its expectations clear around robust investment discipline”.

Bad news in: Health

Agencies criticised in the report included Health NZ, who submitted “poor” data that did not include all their investments and included out-of-date data. The report warned the new Dunedin Hospital was exceeding its budget by more than $50m or 20% of the original $1.59b.

There were also seven health projects that were delayed by 20% or more including a redevelopment at Christchurch Hospital, critical “keeping the lights on” infrastructure in Dunedin, and an acute mental health unit in the Hutt Valley which was delayed by 695%.

Another health project, known as HSAAP (Health Sector Agreements and Payments Programme) that aims to centralise the commissioning and payment of publicly-funded health services as part of the health reforms where those functions are split across a number of agencies. Treasury warned that a review of that project said delivery “appears to be unachievable”.

“There are major issues which at this stage do not appear to be manageable or resolvable. The programme may need re-baselining and/or its overall viability re-assessed,” Treasury said, recommending an updated business case.

… in Transport

The NZ Upgrade infrastructure programme announced by the last Government also came up for criticism with Treasury noting that even after repeated budget top-ups the programme was still at “ongoing risk of cost escalation”.

Treasury vented frustration that only $8.05b of the $8.978b programme had been reported back to Treasury.

… in Education

Education was slightly less worse off, due to the Government commissioning a separate review of cost overruns in the building of school property. In February, the Government commissioned a school property review citing concerns at cost overruns across the portfolio.

… in Foreign Affairs and Defence

MFAT came under fire for its management of the rebuild of Scott Base and the NZ Defence Force was warned that while it had an “an intention to request substantial levels of funding at upcoming Budget” many of its existing projects were heavily delayed including the procurement of “protected vehicles” which was delayed by 1886%.

Fixing it

The Government hopes that releasing the reports quarterly will force the public service to improve the quality of the data agencies provide to ministers.

A Cabinet Paper released with the March quarterly report showed Willis and Bishop’s critique of what they had received.

They said there was “inconsistent and immature data” across the system.

“Although visibility has improved, not all agencies are at the same level of maturity and there remain significant issues with the quality and completeness of data reported,” they said. They added this was despite a new requirement requiring departmental chief executives to sign off on the data provided to Treasury.

“Cabinet cannot make good investment decisions without visibility of what agencies are planning and delivering across the Government’s investment portfolio,” they said.

They complained that despite some projects being worth tens of millions of dollars, in some cases “business cases are not completed adequately, or at all, ahead of seeking funding” and that gateway reviews, which are done to ensure a project is ready to progress to the next stage, were not being undertaken.

“Inadequate application leads to poorly scoped investments, with cost overruns and delays,” they said.

New rules said they were changing the way infrastructure projects would get Cabinet approval.

Cabinet will now approve proposals to enter the investment pipeline on a quarterly basis in order to strengthen “investment discipline and improv[e] visibility”.

The paper said that Treasury’s investment panel has changed the way it deals with early-stage investment planning.

Five proposals managed to get through this process in the last quarter, including an interim ward expansion at Hawke’s Bay Fallen Soldiers’ Memorial Hospital.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.