Two of the former Government’s massive infrastructure programmes totalling $15 billion were rushed against the advice of officials leading to chaotic, costly blowouts just months after they were first announced.
A little over a year after a the ritzy unveiling of the first projects, the Government had to tip $1.9b in extra funding to keep them on track. Some projects, like the Mill Rd expressway, had to be culled entirely after doubling in cost in just a year.
A report by Auditor-General John Ryan into the NZ Upgrade Programme and the Shovel-Ready Projects, often abbreviated to NZUP and SRP, has today been tabled in the House. NZUP was originally given $12b and SRP was given $3b. The NZUP funded the likes of the Penlink, Mill Rd, and Ōtaki to North of Levin expressways, as well as the Melling interchange and a number of hospital and school upgrades.
Both projects date back to the first term of the last Government, when Labour was in office with the Greens and NZ First, the latter now being part of the new Government.
He found that ministers received ample warning from officials prior to NZUP projects being announced that some would struggle to be delivered on time and on budget.
Ryan was also critical of the poor bookkeeping, which in some cases was so dire that to this day it is “difficult to determine from publicly available information all the initiatives that have received funding from the NZUP”, meaning the public can’t see where all of the $12b had been spent.
The NZUP projects have weighed on the Government, and have gone over budget multiple times. Treasury warned prior to the election that many of the projects were at an “early stage” and had there was an “ongoing risk further funding may be required to deliver the programme”.
NZUP dates back to 2020, with the first projects being announced on January 29, prior to the pandemic, after the Government received briefings in 2019 that the economy was likely to experience a slowdown.
Later that year, after the pandemic arrived, the Government received further briefings about whether it could use infrastructure projects to lift the country out of the Covid-induced economic slump, these became the SRP.
“In both situations, the Government felt that, given the uncertainty, it needed to act quickly to strengthen economic conditions. It also considered that it needed to signal the plan as soon as possible to shore up economic confidence,” the report said.
The report found that both programmes were developed rapidly. This is perhaps more understandable for the Covid-era SRP projects, but less so for NZUP.
“The process to identify and announce funding for NZUP projects took only a few months. Setting up the application process for the SRP took only weeks,” the report found.
In the case of the NZUP projects, it appears officials were under pressure to provide a list of projects that ministers could announce.
Ministers were warned of the risks, by both officials and the Te Waihanga, the newly created NZ Infrastructure Commission.
“At several points, officials advised ministers of risks to value for money for both the NZUP and the SRP,” Ryan’s report said.
Te Waihanga even warned that the whole point of the two programmes - to stimulate the economy - would probably not be achieved by building infrastructure.
“[L]arge scale infrastructure projects are not effective mechanisms for economic stimulus due to the time needed for planning, design and procurement,” Te Waihanga said.
Ministers were advised, prior to the package being announced, that capacity constraints in the construction sector created a “real risk of cost overruns, both at a project and package level, as well as delays to projects”.
Also prior to the projects being unveiled, both the Ministry of Health and Treasury warned ministers that many of the proposed health projects under consideration for the NZUP were not ready to be announced.
Treasury warned it had “due to the time and information available”, they had “low confidence” the projects would be implemented quickly.
“On 29 January 2020, about one week after this advice was provided, the Minister of Health and Associate Minister of Health publicly announced several health projects. These included some projects that officials had advised were not ready to be announced,” the report said.
The Auditor-General found the Government appeared to be in a rush to announce the projects.
“The programme of investment was developed quickly. This appears to have been, at least in part, to enable public announcements to be made as soon as possible.
“We saw references to early announcements in briefings and Cabinet papers, and correspondence between ministers’ offices and agencies,” the report said.
The report was particularly critical of the lack of planning.
“Ministers made decisions to progress some NZUP projects even though those projects were not fully scoped or planned.
“Full business cases were not always available or up to date even when the project’s planning was more advanced,” the report said.
In some cases, key agencies only found out about NZUP through the media.
Despite billions of dollars being ploughed into Auckland transport projects, Auckland Transport told the Auditor-General it only found out about NZUP through the media.
“Auckland Transport was not asked for information about, or business cases for, projects that it was responsible for,” the report said.
The SRP programme appeared to begin better, with more groups providing better advice to ministers.
However, the report said that as was the case with NZUP, ministers had little information about whether the projects were “aligned with Government strategies” or “whether they represented value for money”.
The Auditor-General said that in the process of shortlisting projects for consideration, ministers made changes to the list of shovel-ready projects.
Worryingly, the Auditor-General’s staff “found it difficult to determine how or why these changes were made”.
The report said a “lack of documentation” about this part of the shortlisting process meant the Auditor-General was unable to establish whether projects added to the list at this stage were assessed consistently or fairly.
“In my view, to support transparency and accountability when spending public money, decision-makers are responsible for ensuring that there are adequate records of how and why decisions were made,” the report said.
The report found that in the case of both projects, a lack of documentation meant the public and Parliament would find it difficult to see whether the Government was getting value for money from the projects.
Ryan was particularly alarmed that the Government continued to spend large amounts of money without proper due process, despite a number of reports raising concerns about where this kind of rushed decision-making can lead.
“I have made similar observations about aspects of the Strategic Tourism Assets Protection Programme, the Cost of Living Payment, the Provincial Growth Fund, and – most recently – the re-prioritisation of the Provincial Growth Fund,” Ryan wrote, listing a number of other schemes he had investigated.
“It concerns me that significant spending of public money continues to occur without appropriate processes for ensuring value for money and transparent decision-making.”
He recommended the Treasury ensure there was “regular public reporting on the progress of all significant investments that have had or that require Cabinet-level consideration, including NZUP projects”.
He also recommended that Treasury get feedback from other agencies about how useful they found its new guidance on expediting decision-making. This guidance was not available when NZUP was put together.
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.
