‘Learning lessons’ from overspend

Queenstown council planning and development GM Tony Avery. PHOTO: ARCHIVE
Queenstown council planning and development GM Tony Avery. PHOTO: ARCHIVE
Queenstown council’s planning and infrastructure boss Tony Avery has slapped down any suggestion the Alliance should be given any more carrots to finish the controversial arterial road.

This week an independent report, prepared by Dave Brash, was presented to council’s Audit, Finance & Risk committee, looking at lessons learnt from council’s experience with the Alliance in constructing what’s colloquially dubbed the ‘road to nowhere’ and other projects, including the CBD upgrades.

Brash came up with short- and long-term lessons — in the former he suggested council consider negotiating a "risk-sharing arrangement" with non-owner participants for the remainder of the project, where there’s "enough time to make a difference".

For example, Brash suggests creating a "risk pool" with some of the contingency budget to incentivise completion of the road on, or ahead of, time and budget.

Ironically, earlier in his report Avery notes the arterial’s 10 months behind schedule.

However, he says council’s already increased funding to achieve the current timeline and there’s been "sufficient funds provided to complete the works".

"The other partners are already well incentivised to complete the work so that they can move on from their current pain sharing position, and therefore no risk sharing arrangement is appropriate," his report says.

Brash’s report was requested by councillors in February after the Alliance came with its hand out again, seeking an additional $17.65million to complete the road, taking the revised total budget to $128.02m, up from the initial cost estimate of $66m, and the initial budget of $88.23m.

His report comments at the time councillors decided to proceed with an Alliance approach, there seemed to be little discussion of the nature and scale of risks of the investment arrangements, and the programme itself, and especially how best to manage them.

"There appears to have been an early assumption that procuring via an Alliance would be sufficient to manage this risk."

Included in Brash’s long-term recommendations are that governance arrangements at council and senior management levels should better reflect the risk profile of large infrastructure projects, and ensure there’s adequate capability to support it, and the Audit & Risk or Infrastructure committee be delegated an oversight role.

He’s also recommended the chief executive and property and infrastructure GM regularly review progress and budget — and escalate to council as appropriate — and the CEO report back to council on the outcome of a procurement plan process, including pros and cons of options and rationale for preferring an Alliance.

He also says "greater effort" is needed to ensure councillors and key council staff "fully understand the Alliance model and how to implement it successfully", and any future Alliance agreement consider what happens when "pain" exceeds the overheads and profit margin and there are no longer risk-sharing incentives.