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Home / New Zealand

Wellington's Transmission Gully price too good to be true?

Georgina Campbell
By Georgina Campbell
Senior Multimedia Journalist·NZ Herald·
25 Aug, 2020 04:47 AM4 mins to read

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Transmission Gully construction. Photo / Mark Mitchell

Transmission Gully construction. Photo / Mark Mitchell

A review into Wellington's troubled Transmission Gully project will focus on whether the road was priced realistically to begin with.

NZTA has announced the opening of the 27-kilometre road will be delayed until September 2021 after the latest round of settlement negotiations concluded to the tune of $208.5 million.

While that gives some certainty after what has been a very uncertain few months, the Government is far from happy.

It has announced an urgent and wide-ranging review of Transmission Gully, which has been plagued with delays and budget blowouts.

The investigation will be overseen by the Infrastructure Commission and an independent expert reviewer will be appointed to do the work.

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Its scope will focus on how the Transmission Gully project was awarded for the agreed price and whether it was actually realistic.

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The probe will also consider whether identified risks were appropriate and properly taken into account.

Documents from Treasury, NZTA and the Ministry of Transport will be made available for the Transmission Gully review.

Key individuals involved in the procurement and delivery of the project will also be interviewed.

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NZTA transport services general manager Brett Gliddon was asked whether he thought the project was priced too low in an interview with the Herald last week.

He replied: "It was a very competitive price and it's an incredibly complex project."

The taxpayer got a good deal even with the additional settlement payments, he said.

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

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The road's funding model was approved under the then National Government in 2012.

Transport Minister Phil Twyford said he wanted to ensure future governments were not left in the same predicament as the current one.

"It appears the agreement signed up to by the former Government was loose and failed to protect taxpayers' money. It seems to have been rushed through without the necessary due diligence being carried out.

Transport Minister Phil Twyford has ordered an urgent and wide-ranging review of Transmission Gully. Photo / Mark Tantrum
Transport Minister Phil Twyford has ordered an urgent and wide-ranging review of Transmission Gully. Photo / Mark Tantrum

Twyford said the uncertainty around the project has caused unnecessary grief.

"I think the public will certainly be wary of parties wanting to jump into PPPs without learning the lessons from Transmission Gully."

National's Transport spokesman Chris Bishop supported a review of the project but shoved blame back onto Twyford.

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"A lot depends on the management of the contract and a lot depends on the oversight and the simple reality is Phil Twyford has overseen a multi-million blowout in the cost of Transmission Gully and a significant delay to it."

Bishop has also previously raised questions about why money was paid out in another settlement earlier this year when NZTA said in its own annual report it considered there was no liability.

PPPs were just one tool in the toolbox and National was not ruling them out for future projects, he said.

Transmission Gully construction work on the Wainui Saddle. Photo / Mark Mitchell
Transmission Gully construction work on the Wainui Saddle. Photo / Mark Mitchell

Transmission Gully is the first motorway in New Zealand to be constructed under a PPP, which is a long- term contract.

In this case the private sector first designs, constructs and finances Transmission Gully, then operates and maintains it for 25 years after its built.

Full ownership of the public infrastructure remains with the public sector.

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PPPs are pitched as allowing large and complex projects to benefit from private sector innovation and funding- driving better value for money and increasing certainty of delivery.

But Green Party transport spokeswoman Julie Anne Genter said PPPs could be compared to hire purchase agreements.

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

National's Transport spokesman Chris Bishop said he would not be ruling out future Public Private Partnerships. Photo / Mark Mitchell
National's Transport spokesman Chris Bishop said he would not be ruling out future Public Private Partnerships. Photo / Mark Mitchell

Infrastructure Minister Shane Jones said both the Government and private sector needed to have confidence to carry out large complex infrastructure projects together.

"We can't have problems with Transmission Gully putting us off from using innovative procurement models to tackle our infrastructure deficit," he said when jointly announcing the review with Twyford.

Road Transport Forum chief executive Nick Leggett said Transmission Gully could have potentially shaken people's confidence in PPPs.

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"I don't know whether PPPs are right for New Zealand. I don't have an ideological view one way or the other. I want project models to work and this one clearly has struggled.

"Is that because it's a PPP? If so, what modifications need to be made? Or should we just bin the whole concept totally and go back to a more traditional construction model?"

He said the review ideally should answer those questions but he suspected it could instead turn the issue into an "ongoing political football".

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