Damning report on Auckland port's automation project finds multiple failures

Ports of Auckland is owned by the Auckland Council. Photo / Michael Craig

An independent review of the Ports of Auckland's disastrous container terminal automation project has identified multiple failures in company governance, management and accountability during the long and costly failure to implement it.

The project was recently abandoned by the Auckland Council-owned port after six-years, with an associated write-off of $65 million and more costs to come.

At the council's request, the board appointed experienced company director Mark Binns to review the governance process relating to the decision to partially automate the Fergusson container terminal. The project started in 2016.

It was under the watch of former chief executive Tony Gibson, who quit suddenly last year. The board of directors has also been largely replaced in the past year. Binns is a former lawyer and former chief executive of Meridian and Fletcher Building's infrastructure division.

Binns' report finds governance at the country's main imports port failed on multiple levels.

Among the damning findings were that the vendor selection process was not sufficiently well-structured, clashes of personality and working styles within the company led to development of an unsatisfactory culture around the project, and the business case presented to the port board for the approval of the project was unsatisfactory.

Binns said there was inadequate senior management input into the procurement of automation software, in part resulting in the contract being negotiated without any adequate software performance guarantees and with any integration risks with the company's own operation systems falling on the company. The chosen vendor had been working with the company as a consultant since 2012 and "had a material role in establishing the assumptions around the proposed solution".

"A legal opinion from the company's lawyers should have been sought as well as potentially independent advice regarding the integration risks associated with the software. The fact that there were no adequate performance guarantees, despite comments that there would be a business case, appears not to have been reported to the board."

Options to address the port's capacity constraints had been considered in detail for more than a decade before the company committed to the project in 2016, but there was a lack of formal re-evaluation on the potential options.

The project team was not established in a manner which encouraged input from senior management and as a result it operated in a silo, with minimal buy-in from across the business.

There was a failure to ensure the project team's organisational design, accountabilities and dynamics were appropriate. The project team did not include sufficient, trusted senior subject experts from within the business, who would have provided a practical lens when reviewing the business case assumptions, the risks associated with the solution and development of the implementation plan, the review report said.

Governance around key contractual milestones was also lacking, Binns found.

"At all times, the responsibility for decisions relating to the evaluation of options for automation and procurement of vendors to deliver the solution and the monitoring of their performance lay with the board.

"While the board had KPMG as internal auditor report on issues, there was insufficient detailed reporting to the board from internal management and concerns of senior management as to organisation readiness and issues with the project were not escalated despite a clear need to do so.

"Given the transformational nature of the project and the extremely significant consequences of failure, it was incumbent on the board to fully understand the risks that the company was assuming, to ensure the senior management was engaged, that the organisation was capable of the change required and that the project team was appropriately resourced with employees with expert knowledge in key areas.

"On balance it is apparent that the board did not take the steps necessary to ensure that this was the case."

Binns said the project was a highly complex undertaking that aimed to provide additional capacity to allow the port company to increase productivity and reduce costs.

It was transformational in nature and required a high degree of cooperation and planning from across the business.

Auckland mayor Phil Goff said the report "strongly justifies Auckland Council's decision to put in place new leadership" at the port company.

"While the council as sole shareholder for the Ports of Auckland is restricted from involving itself in operational and commercial decisions made by the Port company, we were clearly concerned about the performance of POAL," he said.

At the height of concern about the ongoing implementation failure, senior councillor Chris Darby said the council had been "a lazy port owner" and could not duck responsibility for lack of oversight and policing of the automation project.

Goff said the port's new board and new chief executive had addressed the issues identified in Binns' report "and the health and safety record of the previous port management and governance".

"There were and are clear lessons to be learned from both inquiries, and the new board and chief executive are committed to following through with all of the recommendations from both," Goff said.

"[Binns'] report identifies serious issues regarding the process followed in the management of this project."