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Council to look at using PPPs

Len Brown has announced that the city will be looking at using Public Private Partnerships (PPPs) to help fund building some of Auckland’s infrastructure. Here’s the press release.

Public-private partnerships an option for Auckland

Auckland needs to take a good hard look at public-private partnership models for funding infrastructure says Mayor Len Brown, to relieve the financial burden on ratepayers and taxpayers.

Len Brown today released a position paper on PPPs that may be suitable for civic projects in Auckland.

“As the country’s largest and fastest growing city, we have the need for both major investment in infrastructure and finding new, innovative and fiscally responsible ways for this to be delivered,” says Len Brown.

“Every dollar we invest in capital projects – and there will be many billions – needs to make economic sense and be backed by a robust business case. But the traditional procurement and delivery models cannot deliver the infrastructure Auckland needs, which is why I am not inclined to rule out any options that will help us.”

The Mayor says one of the benefits of the Auckland amalgamation was creating the scale to make PPPs at a civic level possible for the first time, and with the Government pursuing greater private sector involvement in infrastructure and services, the public also have a better understanding of PPPs, and why they are distinct from privatisation.

“We have a large and growing body of international experience to draw from – many successful, some not so successful. While PPPs seek to take advantage of private sector expertise and efficiency, a key difference – and a lesson learned early on in the UK’s experience – is that in most successful PPP models, ownership is retained by the public sector, while the risk falls to the private sector.

“That is important for a city like Auckland, where we are seeking to deliver on social as well as economic aspirations through our infrastructure investments.”

Len Brown says with his position paper he aims to kick-start a process of looking at options that might work for Auckland, that would clearly define PPP models and what they can – and can’t – deliver.

“I wanted a realistic, warts-and-all assessment of PPP models. I wanted to know exactly what value PPPs can deliver – both so that we don’t miss opportunities, but also so we don’t trip up.

“PPPs will seldom if ever deliver lower capital costs. We can borrow money at least as cheaply as the private sector. For a PPP to make sense, the prerequisite equation is the value that it delivers – whether it be through applied expertise, commercial synergy, improved service delivery or risk allocation – is greater than any additional cost of finance.

“If Auckland is to be ambitious and prudent, we need to be smart too. While our balance sheet is strong, it cannot sustain the pressure of the magnitude of investment Auckland needs. And the same is true of the Government.”

The position paper includes international examples of where PPPs have or haven’t worked and why. It also lists dozens of projects in Auckland as large as the City Rail Link and as small as the upgrading Auckland’s parking meters that might benefit from PPPs.

Len Brown will now ask council staff to use the framework presented in his position paper to create a work programme through which the council and wider community can have a good hard look at all the options and apply the ones that will deliver real benefits for Aucklanders.

And the position paper is here.

Now I obviously haven’t had time to go through the entire position paper however here are just some initial thoughts on it and the press release.

1. Work out what we actually need

Yes if Auckland is to grow as expected then it will obviously need to invest in more infrastructure and I don’t think anyone doubts that. This isn’t just from a transport point of view but also covers other infrastructure like water and community facilities. However on the issue of transport I think that before we start rushing ahead and working out how to pay for the massive wish list the council is proposing we first need to actually work out what projects re needed.

The list of projects and in the Auckland Plan and their priorities were largely decided at the political level and the modelling in the ITP showed that despite spending $68 billion that measures like congestion would still get worse. So let’s start by actually working out what projects and priorities will deliver the best outcomes for the city. I’m almost certain that if we did that, there would be some substantial changes to what is current planned and of course this is one of the key ideas behind the Congestion Free Network.

2. Different types of PPP

While we work out what is needed in 1. we can of course have a discussion about funding options and I guess that is where this release from Len Brown comes in. The press release does at least acknowledge a couple of key points in that building with PPPs will almost always be more expensive and risky. The question really becomes if the private operator is able to deliver other benefits that would not normally be available to the council/government.

Further not all PPPs are the same and there are different types and it’s important to marry the right type to the right project. The main types of PPP are shown in the chart below.

PPP Types

I have had a number of people from within different parts of the industry tell me that when it comes to just building infrastructure, that pretty much all of the benefits associated with a PPP from private sector innovation can be obtained through an alliance that sees risks shared. That type of model is already used in New Zealand on a number of projects including the likes of Waterview. An example of the type of innovation often talked about is that with more traditional contracts the client (e.g. council) may award a contract to a company that offers the cheapest price. As the project goes one and cost pressures come in they may substitute some materials for cheaper ones but that have higher maintenance costs. By comparison the alliance model apparently allows the builder and client to work though the longer term implications as issues invariably come up.

In short it’s incredibly important that if we go for a PPP that we get the right model for the right project (or part of the project).There may be opportunities for PPPs in some specific parts of projects but if it is just to build infrastructure then our existing contracting methods can likely do that much better.

As an example with the City Rail Link you might find that the council/government pay for the tunnel portion and the basic station box but do a PPP for actual station construction and operations. That might allow for the private partner to buy surrounding properties and integrate that with the station itself to maximise its use through the likes of providing retail and office space, similar to what is done in places like Hong Kong. If that were an option and the council structures the deal right it could significantly reduce the long term costs of building that part of the CRL.

Of course the council or government could do that itself however over the last few decades we have them shift away from these kinds of activities.

3. Demand Risk

Of course when it comes to transport the biggest issue of all is that of demand risk. In Australia the high profile failure of numerous toll roads due to woefully wrong projections on traffic volumes – especially when a toll is involved – has burnt the PPP sector strongly and now it seems they aren’t prepared to take on the demand risk. As such they have ingeniously worked out that they can push that risk back to the public sector which is why we are now seeing projects like Transmission Gully about to be built using an availability contract. That effectively means the private company builds it and the client (NZTA in this case) pays a fee to use it providing it is up to a certain standard. This kind of project is almost certainly a waste of time and money as it presents virtually no risk to the private sector yet is being paid for by more expensive private sector debt. The table below shows where the risk would site under a PPP with the council

PPP Risk Matrix

It’s also worth considering what the shifting of the demand risk says about various projects. It basically confirms that we are in a period of change and we can no longer just assume traffic growth will always happen. If the private sector isn’t prepared to take on the risk on motorway projects themselves then perhaps it’s a good indication the government shouldn’t be either.

4. Deal Structure 

When a PPP deal is put together the banks financing it will go through each aspect and work out how much risk it creates. Just like insurance the more risky you are to the company, the higher they charge you just in-case something goes wrong.

That means if we put out to tender vague documentation, we could end up paying a lot more over a 30+ year period compared to if we had just used more traditional methods. Any variations to the contract along the way can also lead to much higher costs. It also needs to be noted that the private sector can be incredibly tricky and will do anything to find loop holes to get out of deals. The paper notes the case of the Araat Prison in Australia where there were two building companies who set up a joint venture to build the project. However as the project hit difficulty the joint venture split up leaving little opportunity to tie any recourse back to the two parent companies.

Lastly it will be really important for the council to consider the reputational risks and its citizens expectations. For example if we were to build the CRL as a PPP and that involved the operation of the trains too then if something were to go wrong the trains would likely stop running. That could have serious impacts for the economy until the issue is resolved.

 

I think that in conclusion there might be some specific cases where a PPP might actually work for some projects but we are going to have to be extremely careful about how we do them. I have to imagine the NZCID has been pushing extremely hard for this announcement behind the scenes. Their members list contains most, if not all of the organisations involved in PPP industry in NZ. There is probably a lot more to talk about but I’ll end it with this.

At the end of the day PPPs are just another form of debt which is a way of spreading the costs out over a long period of time. It means those that get benefit in the future also contribute towards the cost. The millennials (1980-2000) like myself are the generation that will still primarily be paying for this infrastructure in 30 years-time. So perhaps we should also be considering a focus on the projects that enable the kind of city this group wants to be living in, not the infrastructure that reinforces the ideals of their parents.

The realities of Puhoi to Wellsford

The sheer stupidity of the Puhoi to Wellsford project might be starting to hit home for some of the residents of Warkworth and surrounding areas as the exact route of the motorway starts to be understood.

Warkworth residents hoping for a link from the Woodcocks Rd industrial area to the new motorway proposed from Puhoi appear to have had their hopes dashed.

The latest version of the route finalised by the New Zealand Transport Agency (NZTA) shows the new motorway would bypass Warkworth completely, forcing residents to drive almost as far north as Kaipara Flats Rd to access the new route.

Concerns have been raised that many residents in Warkworth, Sandspit and Snells Beach are unlikely to travel north in order to head south, and will therefore not benefit from the new motorway.

NZTA staff told a meeting of the Warkworth Area Liaison Group this month that Mahurangi College had opposed any access along Woodcocks Rd. Staff also stressed that the main purpose of the motorway was to improve access to Northland.

However, they have confirmed the motorway would almost certainly join up with a new link road to Matakana, via a large roundabout, which is highly likely to push development to the north of Warkworth, and towards the coast.
It is understood Auckland Council planners are already redrawing the rural urban boundary proposed for Warkworth, to reflect the same changes.

While Puhoi residents have won their battle to get access to the motorway, the latest route shows there will only be a northbound off-ramp, and a southbound on-ramp, meaning anyone heading north would not be able to hop off, and then back on, the motorway.

The NZTA is planning to lodge an application to secure the designation within the next month as the first step in the process towards getting the road built. Once that has been completed it is expected that construction could start sometime between late next year and 2019. Here is a map of the confirmed designation they are seeking

Confirmed route

One of the biggest issues I have with this project is that it does absolutely nothing to improve the existing road which as a result of the motorway completely bypassing Warkworth will still be used by a lot of Warkworth residents as well as people wanting to avoid paying the tolls that are likely to be on the road. It means that the safety issues on that stretch of road won’t get addressed as why would they spend any serious money on a road that is about to be bypassed. Further it will end up becoming Auckland Transports problem to deal with as the NZTA will almost certainly hand the road over to AT as they would no longer need it – just as they have done with the old state highway that acts as the free route for those wanting to avoid the toll road.

The new route will likely need to be tolled too. For starters it hooks directly into the existing toll road with no north facing ramps at Puhoi so it means that unless the NZTA plan to remove the existing toll and wipe the $100m+ debt from the books, there will be no way for someone using the Warkworth to Puhoi section to avoid paying to use this new road. However the Governments roading binge is also putting a lot of pressure on our transport funds which is one of the reasons for the 3c per litre increase in petrol that occurred at the start of the month and which will happen again in at least the next two years. I think it is quite likely that the toll will be increased to help cover some of the costs of the new section – although not by a level which would be in proportion to the length or cost of the project.

The existing toll road between Orewa and Puhoi is about 7km long and saves drivers about 10 minutes as well as 5km of windy and suburban roads yet even so the NZTA have said in the past that only 70-80% of  all vehicles travelling between the two points use the toll road. By comparison the route proposed above only saves about 1km over the existing road and even with having to go through Warkworth, people generally average about 80km/h over the distance. Assuming you would travel at 100km/h for the entirety of the slightly shorter new road the time saving would only be approximately 3-4 minutes. That isn’t bad but when compared to the expected cost of $760 million as well as how many people are actually using the road it simply doesn’t seem feasible. The South facing ramps at Puhoi also mean that it will be easy for travellers to avoid any toll imposed on the new section as they could still drive the existing road to Puhoi then get on the motorway and travel the existing toll road (and depending on where they are coming from this could be just as fast)

It’s also worth pointing out again just how stupid the travel time savings promoted by the government are with comments made by Gerry Brownlee suggesting vehicles would need to be travelling at over 250km/h to be achieved.

One key issue is that the existing road is only really busy at holiday times when Aucklanders are flocking to the beaches to the east of Warkworth or further north which is why the term “Holiday Highway” was coined. Of course the NZTA, the government and Northland keep telling us, this project is more about connecting Northland to Auckland. So let’s look at those two claims a bit closer. Handily the NZTA release monthly data on traffic volumes at a number of sites around the country. The sites measured aren’t as exhaustive as their annual numbers but there are two very useful ones. One is the traffic volumes on ALPURT – the name for the toll road – and is useful for indicating how many people might use the new motorway while the second is from a site just north of Wellsford which is helpful for showing just how much traffic is moving between Auckland and Northland. The graph below shows the monthly average daily traffic volumes recorded at these two sites along with the 12 month rolling average.

P2W Monthly Traffic Volumes

As you can see both sites have extremely strong peaks in January as well as smaller peaks in October and April which just so happen to coincide with public holidays. In saying that ALPURT has seen its annual average start to rise with it increasing by about 900 vehicles per day over the past few years but what is unclear is if that is a result of more vehicles doing the overall journey or more people shifting off the old windy road and onto the new shorter and much faster toll road. North of Wellsford however traffic volumes are falling, not at an alarming rate but they have fallen by about 300 vehicles per day over the last few years. In all there are about 8600 vehicles per day (over the course of the year) being counted north of Wellsford. That is certainly not a number to justify spending billions of dollars on. One thing to note is that other state highway sites do see seasonal variation but nowhere near to the extent that these two do (at least of those I have looked at).

Now remembering that the ALPURT numbers don’t include the traffic that bypasses the toll road what it suggests to me is two things. The first is that there simply isn’t that much interregional traffic movement occurring. Even during holiday periods the average amount of daily traffic is less than what many single lane roads within Auckland carry. Even many of our rail network level crossings – which will suffer increasing delays as we put more train services on – carry more daily traffic than what occurs even during the busiest month of the year on this section of the state highway network. With the vast majority of the traffic originating from Warkworth or the surrounding areas, it suggests that if you are going to spend money on the area – and the road does need some improving – then doing so in a way that allows the majority of people using the road would be a smarter move.

In the past we have suggested what is dubbed Operation Lifesaver. Like many of the roading projects in the Integrated Transport Plan we believe that the vast majority of then benefits can be achieved by cheaper solutions. The idea for this road is fairly simple, instead of building a fully offline motorway fix the key issues that exist with the road at present. That means bypassing Warkworth (that alone would deliver a lot of benefits), easing corners and installing additional passing lanes. It also means that the projects could start sooner as most of them would take place within the existing road corridor plus the benefits can be felt immediately compared to there being no benefits from the motorway until the entire road has been completed. We have suggested in the past that a the NZTA should consider an upgrade and link from Perry Rd to the new motorway as a way of allowing the project to be staged by building the bypass of Warkworth first then seeing if there is still the need to do the full project.

One other interesting comment from the article on the first link,

Meanwhile, investigation of the Warkworth to Wellsford leg has been postponed indefinitely, due to tests that have shown land in the area is so unstable, it would be uneconomic to build a motorway on top of it. It is the poorest possible soil seen in New Zealand.

I’m guessing the only reason the government hasn’t announced officially that this section has been cut back as it – combined with the proposed road from the end of the project across to Matakana Rd – would play even more into to suggestions that the road is primarily about getting people to their holiday homes in Omaha. It would definitely remove one of the arguments that the road is about connecting Northland. It is also worth noting that as the majority of traffic heading north of Albany is going to Warkworth or the surrounding areas, not further north, then without that link to Matakana Rd that traffic is still going to have to be forced back to Warkworth and through the busy Hill St intersection.

One of the recent OIA requests I had back also suggests that the NZTA are going to consider building this motorway as a PPP, like they are doing with Transmission Gully. I wouldn’t mind quite so much if the private sector was actually taking a risk on building these roads but the financial institutions have learned from the mistakes in Australia and so the NZTA get left holding almost all of the risk (including the risk that predicted traffic volumes won’t materialise). While we don’t pay the massive upfront cost of building the road, we will end up paying a huge amount more over a 25 year period. The payment structure is illustrated quite will in this graph which is for Transmission Gully. Note: the OIA request I mentioned has quite a bit of detail about how the contracts will be structured. I will try and get a more detailed post up about it in the next few days.

PPP Payment profile

And just to make things even worse it appears that Auckland Transport are trying to shoehorn Penlink into the same contract.

Auckland Transport is working with the NZTA on a business case to progress Penlink as a possible joint public private partnership – to be constructed/tendered along with their Puhoi to Warkworth project.

“This is still under development and is expected to be completed in December,” Auckland Transport communications general manager Wally Thomas says.

My issue with the Transmission Gully PPP

Whether or not transport public-private partnerships (PPPs) are a good idea has once again reared its head in recent times – due to discussion about the Transmission Gully project near Wellington. The Transmission Gully project (which is a decidedly dodgy project regardless of how it’s funded) will cost around $1 billion to build, but because the construction will be done through a PPP the amount of money that will eventually be paid by NZTA is more like $3 billion.

This is what the Green Party noted, after a Select Committee meeting where the figures were discussed:

NZTA head Geoff Dangerfield conceded at the Transport and Industrial Relation Select Committee that it would cost the Government $1 billion to build the Transmission Gully motorway, but that service payments under the preferred PPP approach will be triple that over a twenty five year timeframe.

“The Government is locking tax payers into long-term payments for an expensive and unnecessary motorway that will be very profitable for the private consortium building it,” said Green Party transport spokesperson Julie Anne Genter.

“Public-Private Partnerships are just an expensive form of borrowing, and borrowing to build an uneconomic highway is an irresponsible use of taxpayer money.

In response, the NZ Council for Infrastructure Development last week highlighted that the much larger figure needs to be taken in context to reflect the inclusion of financing costs and maintenance of the motorway, as well as the level of risk taken on by the private partner:

The benefit under a PPP contract is that, in so far as possible, risk is assessed up front and allocated to the party that is in the best position to manage the risk. When risk is not assessed correctly the party making a mistake is the party that pays for it.

“This is exactly what we have seen in Australia, where several PPPs have underestimated the risk that traffic demand will not be as good as expected. A common misconception is that these PPPs have failed. In fact the opposite is true. In passing demand risk onto private parties, the government, and the tax payer, have not had to carry this cost. It has almost fully fallen on the investors and the financiers who have put their money at risk. Under conventional procurement, we often don’t see these sorts of failures accounted for because the tax payer’s deep pockets keep poorly designed projects afloat and hide the real costs to taxpayers.

“Limited Knowledge also plagues understanding about the total costs of PPPs. In the case of Transmission Gully, it is easy to make headlines by saying the total cost of the project will be three times its $1billion construction cost.

“Again, what is poorly understood is what that $3 billion represents. It includes the cost of construction plus the operation and maintenance of the motorway over 30 years plus repayment of debt plus interest and transfer of construction and operating risk to the private sector. Cost blow-outs or failures do not sit with tax payers and if the road is not open and to standard every day for 30 years, the public withholds payments. The PPP will only proceed if a successful private sector bid to design, build, finance, maintain and operate the new road provides a better overall outcome than more traditional procurement methods.

“This will require bidders to develop innovative solutions to constructing and maintaining the road for the duration of the 30 year concession period, and beyond, maximising the value for every dollar spent.

“Although debt funding will incur capital and interest repayments into the future, the benefit is that people using the corridor in the future will also contribute to its cost.

“The purchase of a home provides a helpful analogy to understanding the structure of a PPP. Before you even bid at an auction or build a home, you may well spend several thousand dollars on lawyers, builders reports, designers, bank loan applications and engineers. These are comparable to the $60 million on Transmission Gully, with the notable exception that the upfront costs for Transmission Gully include sophisticated analyses which must always show that the public is getting best value for money, or the project does not proceed as a PPP.

“After you’ve bought your house, as any homeowner knows, the spending doesn’t stop. Sometimes you find there’s something wrong that needs fixing. That risk sits with you, which is why smart buyers pay for builders and inspections before they buy. Then there are the lawns that need mowing, the drains that need clearing, the repaint, the new roof, a replacement hot water cylinder and all that sort of thing.

“Once you collate all these expenses and add them to the debt repayment over 30 years, whatever you have in total paid for your house looks nothing like the figure you paid for the home. This is the equivalent of the $3 billion figure associated with the Transmission Gully project.

I understand the logic behind borrowing for infrastructure investment – even if it means that you end up paying much more for the project in the form of long-term repayments. This means that those who benefit from the project end up paying for it and can smooth out the cost of paying for large pieces of infrastructure. It’s essentially a larger form of buying your house with a mortgage.

However, it’s pretty easy to borrow money without needing to involve a private partner. Furthermore public agencies are generally able to borrow at lower interest rates than the private sector so there’s actually a disadvantage from the beginning from going with a private partner – if you set the issue of risk aside. And it is that issue of risk that becomes clearly the important issue here: as NZCID note the failed Australian PPPs aren’t actually failures in terms of the public partner, they have actually been quite successful in getting the piece of infrastructure built and it’s the private sector which has worn the messy results of terrible demand risk estimates.

The failure of Australian PPPs on the demand risk issue (i.e. projecting far higher traffic demand than what actually eventuated – a familiar story!) has had a huge impact on the structure of transport PPPs, with the Transmission Gully PPP being structured in a way that doesn’t actually transfer any of the demand risk onto the private sector. In effect, it sounds like NZTA will pay the private partner a set fee each year regardless of how many people actually use the road.

In effect this leaves the only risk for the private partner to take on being related to standard things like construction and maintenance. As far as I know these are things which NZTA already undertakes a lot of ‘risk-sharing’ on – which might sit behind why it’s incredibly rare for motorway projects these days to go over budget.

So to summarise I can’t actually understand what the advantage is from having Transmission Gully as a PPP if there isn’t going to be any demand risk in the deal allocated to the private sector. NZTA might as well just borrow the money themselves at a much lower rate, cut out the middle-man of the PPP’s private partner and undertake a normal risk-sharing arrangement in the construction and operation of the road itself. Of course an even better thing to do would be to simply not build the road because it’s a stupid waste of money – but the PPP arrangement seems to be turning a stupid waste of money into a REALLY BIG stupid waste of money, for pretty much no gain whatsoever (except to the private partner who basically gets a risk-free investment at the taxpayer’s cost).

Transmission Gully PPP discussed in Parliament

Yesterday in Parliament Julie Anne Genter asked Bill English about the PPP that is going to be used for Transmission Gully. I think the thing I am most concerned about from the answers is just how little he appears to know about the deal, something you would think he would have a good understanding of due to being the minister of finance.

Did the NZTA just admit they are incompetent

Last week the NZTA and government announced that they were going to build Transmission Gully using a PPP and in the process seem to either shovelled a whole pile of ideological crap or admitted they are completely incompetent at the one thing we thought they seemed good at, building roads. To see why that is the case, first you need to look at the details of the project and the PPP so lets start with those. The project according to the NZTA:

Transmission Gully, which links MacKays Crossing in the north with Linden in the south, is a 27km section of the 110-km Wellington Northern Corridor Road of National Signficance, which is being developed as a four-lane expressway from Wellington Airport to Levin to enable economic growth, improve road safety and reduce traffic congestion.

Now they make it sound like its a great project but it isn’t all pretty flowers and butterflies. The reality is that despite being talked about for decades, there is a reason it hasn’t been built up until now and that is because it will be incredibly difficult to do due to things like the terrain and geological conditions, as such the project isn’t going to be cheap with this section alone coming in at around $1 billion. It also hasn’t performed well in economic tests with the last BCR seen for it having a result of 0.6 although I have heard rumours that it is even less than that. The short version is that section is clearly in the c”we should not be building this” category. But the NZTA are of course proceeding with it, most likely because their political masters told them to.

So what about the PPP, heres what the NZTA has to say:

The NZTA will use an availability and performance-based contract, which means the PPP consortium will be paid for making the road available to traffic when they have achieved specified performance levels. Payments are not linked to the volume of traffic using the road. An availability PPP contract is more attractive to potential consortium partners as it removes demand risk. As a result, availability contracts offer greater potential of delivering value for money for the government.

What that effectively means is the private company will finance, build and maintain the road and the NZTA will pay them an annual fee for doing so. In other words it is just a form of lending that allows them to keep the debt off the books. Currently all roads are paid for using PayGo where we pay for the project in full up front. Now I don’t mind using debt to pay for projects as in many ways the benefits of particularly these large projects will be felt more in the future than now however it is the use of a PPP for the debt that I do have an issue with. That is because there is simply no way that the private companies can lend the money at rates as cheap as the government can so in an effort to keep debt off the governments books, we as a society end up paying more.

Even the NZTA seem to acknowledge this but give this answer, which seems straight out of the Act party, to the issue,

Although the cost of capital is higher for the private sector than for the government, this cost differential can be offset through private sector innovation and efficiencies in design, construction, operation and risk management. In other words, private sector efficiencies can outweigh the higher private sector cost of capital.

Putting private sector capital at risk is an incentive for the PPP consortium to deliver optimal whole-of-life performance and innovation. Typically, the larger the project the greater the ability for private sector innovation and efficiencies to offset the capital cost differential.

They also say

The NZTA will only proceed with a PPP if it offers a value for money proposition that betters the cost of traditional public sector procurement.

The additional private sector finance costs on a $1 billion project over 25 years are going to add up to hundreds of millions of dollars. It seems to me that they are suggesting that their traditional competitive tendering processes are so bad that we are paying hundreds of millions extra for projects than we need to. If so then those running these tender processes should be shown the door this afternoon. Personally I don’t believe they could be that bad and as such think that the agency is effectively shovelling a load of of ideological crap. It is the crap that says the private sector is always better and more efficient at everything.

This isn’t the only thing with this issue though. One of the points of financing this project through debt is that it reduces the current demands on the NLTF by $1b. We already know that the NZTA has been struggling to pay its bills and even had to get some temporary financial help from Auckland a while ago so what are they going to do with the money that had previously been earmarked for Transmission Gully? Well they will pour it into other state highway projects, including other parts of the Wellington RoNS, to get them going faster.

Really this PPP decision is about the government trying to load up as many road projects as possible to prevent them from being stopped in the future. Further by doing this, all transport capital will be so tied up for so long into the future it will help to make it difficult for any future government to really do much. You really have to wonder if this is the part of last hurrah when it comes to motorway building.