Transmission Gully - what went wrong?

october 2021 - January 2022 Transmission Gully - what went wrong?

With an initial opening date of April 2020 at an estimated cost of $850m, the now $1.25b project is still unfinished with no clear opening date in sight, the Dominion Post's Josh MacManus and Sophie Cornish report

After more than a billion dollars and a century of waiting, drivers should now be saving a precious 11 minutes on trips to or from Wellington. Instead, communities have again been left in the lurch. The coastal highway continues to back up with traffic, creating crash risks and resilience issues for the capital and surrounding regions. The opening day has been delayed indefinitely, with no clear indication of when a new date might be announced. It is the fifth time the deadline has been pushed back. Delays, cost blowouts, and construction issues have dominated headlines about the project for decades.

The opening date for Wellington’s Transmission Gully has been delayed due to Covid-19, with a new date yet to be confirmed.

Waka Kotahi NZTA says it is working with the Transmission Gully Public Private Partnership contractor, Wellington Gateway Partnership (WGP), and its subcontractor, CPB HEB Joint Venture, to confirm a new opening date for the motorway.

Costs for the project blew out from $850 million to $1.25 billion after missing the initially planned opening date of April 2020.

“WGP and CPB HEB have advised Waka Kotahi that the recent Covid-19 lockdown, alert level 3 restrictions, and supply chain constraints as a result of the extended lockdown in

A timeline

1919

The Evening Post reports on a proposal by Otaki MP William Field for an inland motorway from Paekākāriki to Paremata – the earliest known record of a proposal roughly resembling the road today.

1924

A 110,000 volt transmission line is laid between Wellington and Mangahao Power Station in Shannon, giving the gully its name.

1995

The Wellington Automobile Association suggests Transmission Gully should be built as a toll road. Transit New Zealand estimates construction costs at $160m.

1999

In an updated estimate, Transit New Zealand puts construction costs at $245m.

2009

Transport Minister Stephen Joyce announces Transmission Gully as part of the roads of national significance strategy.

2012

Transport Minister Gerry Brownlee tells the NZTA to consider a public-private partnership. This was largely due to the Christchurch earthquake, which put funding pressure on the Government’s balance sheet. By now, the cost estimate was $850m.

July 2014

NZTA signs a PPP contract with Wellington Gateway Partnership (WGP) to design, construct, finance, and then operate and maintain the new motorway for 25 years. WGP hired a series of contractors to complete each part of the project. CPB HEB is hired as the road builder.

October 2015

Works begin on-site with a massive earthmoving operation, which will eventually dig up enough dirt to fill the Sky Stadium 2.7 times.

November 2016

The Kaikōura earthquake hits, followed by a season of torrential rain. CPB HEB warns the opening date of April 2020 could be pushed as late as August 2020.

June 2019

Waka Kotahi agrees to a one-month extension due to delays from the earthquake, moving opening day from April 2020 to May 2020.

September 2019

The opening date is pushed back again, from May 2020 to November 2020. NZTA admits there have been more issues than it previously let on – storms had caused slips on some cut slopes and damaged a stream diversion project. In some areas the damage was so severe they needed to redesign the slopes entirely.

February 2020

Costs officially blow out to more than $1b after Waka Kotahi agrees to pay another $191m to Wellington Gateway Partnership due to the delays. A press release quietly abandons the November 2020 date, instead noting the builder is “working very hard to complete the motorway by Christmas”.

March 2020

New Zealand enters a level 4 lockdown. All construction on the road stops.

April 29, 2020

Work is able to restart, albeit without 80 staff, who are stuck overseas. The lockdown costs valuable time during peak paving season.

August 2020

After months of negotiations, Waka Kotahi agrees to pay WGP an extra $208 million. It brings the total cost to $1.25b – $400m more than originally agreed. The opening date is moved to September 27, 2021. As part of the deal, builder CPB HEB will face a penalty of $7.5m and $250,000 per day it opens late.

November 2020

Media are invited on a drive-through of the road. All major bridges are completed, but much of the road is still an unsurfaced, bumpy ride. Sergio Mejia, chief executive of Wellington Gateway Partnership, says the only thing that could delay the project again would be an earthquake or an unprecedented flood. What he didn't see coming, however, was another Level 4 lockdown.

July 2021

Paving is reported as 94 per cent complete. Waka Kotahi puts out a cryptic press release reminding WGP of the consequences if the road doesn’t open on time – but there is no official word that the opening day is at risk.

August 14, 2021

Greater Wellington Regional Council chair Daran Ponter warns that dozens of outstanding resource consents could put opening day at risk.

August 18, 2021

New Zealand enters a Covid-19 level 4 lockdown. Workers are given essential permits to access Transmission Gully for security, safety and environmental protection.

September 18, 2021

Waka Kotahi confirms Transmission Gully will not open by its September 27 deadline. No new opening date has been announced.

Auckland have impacted on their ability to meet the contractually agreed opening date of 27 September 2021,” Waka Kotahi general manager of transport services Brett Gliddon says. It has faced hurdle after hurdle since construction began in 2015, with re-laid section, Covid-19, environmental breaches, and corporate conflicts all plaguing the project.

Work has resumed on the project under the appropriate health and safety protocols since the move to alert level 3, then alert level 2, in Wellington.

However, these new delays, on top of the risk that already existed around achieving the contractually agreed opening date, mean it is clear that the motorway will not be ready to open on September 27.

The partners are working together to understand the full impacts of the lockdown and restrictions on the

Interim review reveals weaknesses in PPP procurement process

Transmission Gully has long been a dog of a project, says Greater Auckland’s Matt Lowrie.

“From it’s poor initial business case, to it being made a Public Private Partnership (PPP) that would see taxpayers forking out over $3 billion over the coming decades and then having cost blow out after cost blowout and a range of other issues,” he says.

“In August last year, then Ministers of Transport (Phil Twyford) and Infrastructure (Shane Jones) announced an urgent review of the project. That review was released and it’s damning for both the previous government and Waka Kotahi.”

The review recommends updating aspects of the national Public Private Partnership (PPP) Guidance and that Waka Kotahi implement changes related primarily to the management of future PPP projects.

A PPP is a long term contract between a client and a private sector consortium to design, build, finance and maintain an asset, with the client retaining full ownership of the asset, explains former Infrastructure New Zealand Policy Director, Hamish Glenn.

“Bundling all these activities in one package for an asset lasting 30 years is extremely complex, so PPPs tend to be used for large projects where the benefits can be shown to outweigh the costs.

Seven PPPs have been signed in New Zealand. Each of the five operational contracts was delivered on budget for the Crown.

“The Government launched this review following concerns that the PPP model used to procure Transmission Gully had not performed as intended,” Glenn says.

“It’s important to note that Transmission Gully successfully passed all the value for money tests designed to protect the taxpayer from project time and cost overruns, or assets which do not meet essential community needs.

“But what the interim review shows is that there were several issues in the process, including that original cost estimates for the project were too low, encouraging bidders to seek out ways to reduce costs which did not necessarily provide best value, and that PPP project governance can be strengthened.

“It is important that these recommendations are quickly implemented to maintain confidence across the general public and industry that the model provides a viable infrastructure procurement option.

“New Zealand has a very large nation-building investment programme ahead. Use of private capital to manage public cashflows, inject innovation, attract international expertise and better allocate risk is critical to successful delivery.

“PPP is one such way to leverage private investment to achieve public outcomes. The review recommendations ensure that PPPs continue to provide decision makers with a genuine option to deliver major infrastructure,” Glenn says.

Chief Executive of the New Zealand Infrastructure Commission, Ross Copland says they will implement the recommendations directed by the Minister for Infrastructure.

“The lessons learned from the Transmission Gully Interim Review will be valuable for future PPP projects and other major project procurement,” says Copland.

project, and confirm a new opening date.

“We know that people are keen to see the road open as soon as possible, and everyone is working as fast as they can to get the road open to the public.”

As well as finishing works, there are other critical requirements which also need to be met by WGP and CPB HEB before the motorway can legally be opened for public use, including safety and asset quality assurance work, and compliance with environmental consent conditions.

During level 4 lockdown, workers on the project were given essential work permits to protect the state highway during alert level 4 lockdown and ensure security, safety and environmental protection.

Minister of Transport Michael Wood had expected the Covid-19 lockdown would affect the project’s completion date.

It was also revealed there are several ‘’black spots’’ on Transmission Gully with no radio or mobile coverage which could pose a risk for emergency services.

CPB Contractors is seeking $75 million in losses and damages it claims were caused by errors in engineering design, claiming the errors led it to incorrectly forecast the project cost and profits, resulting in losses and damages of $75.2m.

Transmission Gully will become part of State Highway 1

“It was noted in the review that Waka Kotahi had already proactively captured lessons learnt from Transmission Gully and applied those lessons to the Puhoi to Warkworth PPP project.

“The Major Projects and PPP Guidance, which we are currently updating as a result of the review, will allow us to give better advice on when the PPP model should be applied and provide tools on how to set up major projects for success.”

The review recommends that improvements be made in PPP procurement, including the setting of the price through the Affordability Threshold, the management of consenting risk, and the project governance structure.

“By international standards, Transmission Gully was always going to be a large and complex road project to both plan and deliver successfully,” says the review team.

“While we found there were good aspects of how the project had been managed at the planning stage, several aspects of PPP management during that stage could have been done better and addressing those identified issues earlier may have minimised or avoided some of the delivery issues that have been reported.”

Lowrie says it’s not surprising errors were made, given the PPP model was hurriedly pushed through for ideological reasons by then Transport Minister Stephen Joyce.

The report notes Waka Kotahi had just one month to convert a nonPPP project, with an existing consented scheme design into a design that could be compared against a PPP option. This meant they had to use a design that was less developed than what they would normally include in a procurement process.

“I recall speaking to a Waka Kotahi procurement manager at a conference at around the time this was all being set up,” says Lowrie.

“He told me that essentially all of the ‘innovation’ benefits PPPs are said to deliver can just as easily be achieved through an alliance model, like those used on projects such as Waterview and the City Rail Link.

“Ultimately the only thing PPPs seem to deliver is a more expensive way of delivering infrastructure and great returns for the financial institutions lending the money to pay for it.

“It’s scary to think that despite all of the known issues with PPP’s, the current government were extremely close to pushing ahead with another one with the Light Rail in Auckland.

“One thing that really concerns me about this whole saga is that many of those involved in creating these issues, and cost blowouts on other projects, are still in the organisation and in many cases now in even more senior positions.

“Worse still, the organisational structure means there is a ‘fox guarding the henhouse’ situation as those tasked with reviewing and approving funding for projects actually report to the people who create and design the projects.

“So while local government projects get put through the wringer, Waka Kotahi projects often get rubber stamped, both to keep colleagues happy but also so as not to annoy the boss.

“I do wonder if we need to go back to having transport funding decisions made by an independent agency,” concludes Lowrie.