Officials looked at significantly trimming back the $1.5 billion Ōtaki-to-North of Levin (O2NL) Expressway as costs continued to escalate last year.
Options considered including shortening the expressway so that it ended south of Levin, rather than north, trimming the length of the road. They also looked at only building half of the road, the southbound section, rather than both south and northbound, saying it was “not viable” to deliver the full road within the $1.5b budget - despite the fact this budget was already double the money the Government had set aside in 2020.
A briefing released under the Official Information Act said Waka Kotahi New Zealand Transport Agency officials did not think trimming the scope of the road and building it in stages was a good idea either.
They said either the full four-lane version of the road should be funded, or if that were not possible, then the whole project should be put on ice until funding was found.
“Waka Kotahi consider that it is not viable to deliver the preferred option within $1.5b. We consider that it is possible to deliver the south-only staged option within the existing $1.5b cost envelope, and that this option represents value for money.
“We acknowledge that there would be significant reduction in scope (and outcomes) compared to the current preferred option. Waka Kotahi does not recommend a staged approach, and rather that either the preferred option is funded or, if this is not possible, then pre-implementation is progressed, and the funding decision is deferred,” officials said.
Transport Minister David Parker told the Herald the Government remained committed to the “full scope” of the road as announced.
“The Government is providing funding as needed to progress the project,” he said.
The four-lane road spans a particularly deadly stretch of State Highway 1, linking up with a string of expressways that eventually end at Transmission Gully. However, it has seen intense cost escalation since being greenlit.
In 2020, the Government costed the road at $850 million and greenlit its construction as part of the NZ Upgrade infrastructure programme.
A little over a year later, the cost of the transport package had escalated from $6.8b to $8.7b, requiring the Government to tip in even more money - the O2NL road alone had doubled in cost from $850m to $1.5m.
A cost summary from August 2, 2022 showed that just over a year after the road had its budget increased by $650m, officials were forecasting yet another cost increase, this time to $1.673b - an increase of $173m.
The Government tipped an additional $252m into the New Zealand Upgrade transport programme in the 2023 Budget.
Other briefings show four methods of cutting costs were considered: building only the southbound section, only building two of the four lanes, and two options that were a mix of the first two.
It appears the Ministry of Transport, Waka Kotahi and the Beehive were divided on what to progress with, with transport officials looking at rescoping the road and Waka Kotahi and the Beehive keen to build the whole thing.
“We recommend that you approve a staged alternative, progressing with a four-lane offline expressway from Ōtaki to South of Levin,” transport officials said.
“This alternative provides substantive benefits relative to the do-nothing scenario, presents an indicative benefit-cost ratio greater than 1.0, and we expect can be delivered within the existing funding envelope based on the indicative P50 cost of $1.1b – $1.35b.”
National’s transport spokesman Simeon Brown said the costs would not have escalated so dramatically had Labour simply progressed with the road when it took office, rather than effectively cancelling it in 2018, only to un-cancel it two years later as a result of public outcry.
“This is the cost of delay. This is a project the Government cancelled and failed to progress until recently. It demonstrates why it is so important to maintain a pipeline of transport projects to deliver for New Zealanders,” Brown said.
He said the road should be built.
Green Party transport spokeswoman Julie Anne Genter, a long-time critic of the road, said she wanted to ensure “the majority of our new transport investment goes into making it easier for people to get around in low-emissions ways”.
One of the reasons the expressway was greenlit is because the current road is one of the most deadly stretches of state highway in the country. Genter said safety improvements could be made to the existing road at much a lower cost than the current proposal.
“We do acknowledge that the safety of the road needs to be addressed and have argued for improving the safety of the existing road, or something more appropriate like a two-lane road with passing opportunities and median barriers and a simple bypass of Levin,” she said.
Multiple briefings warned the whole NZ Upgrade programme was under cost pressure.
When the projects were “baselined” in 2021, officials reckoned there would be cost escalation of 2-3 per cent per annum.
This was woefully incorrect, with significant cost escalation occurring since that time.
“The outlook for cost escalation has changed significantly since mid-2021, and consequently, there are ongoing cost pressures on the reprioritised programme,” officials warned.
“Global resource and supply chain constraints have further exacerbated these pressures both in magnitude and duration,” they said.
“Escalation costs based on the latest expected forecast would be $600m to $1,000m higher than at baselining,” officials warned.
Officials from Waka Kotahi, including chief executive Nicole Rosie, told a select committee they were rescoping the road last year.
Then-Transport Minister Michael Wood said at the time no major changes were on the table.
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.