The Upgrade projects have had a chequered history. Photo / Alex Burton
The Upgrade projects have had a chequered history. Photo / Alex Burton
The Government's $8.7 billion NZ Upgrade transport package is flashing red according to Waka Kotahi - NZ Transport Agency, which now registers significant risks it may not be delivered on time and on budget.
The NZ Upgrade was a $12b package of infrastructure investment announced in 2019, with about halfallocated to transport.
The package funded roads like Papakura to Drury, Penlink and Ōtaki to north of Levin and the Melling Interchange. The cost of the package exploded in its first year, causing the Government to cut some of the most expensive projects and tip in an additional $1.9b last year.
Monthly reports from Waka Kotahi to Transport Minister Michael Wood show the package has been getting more delayed and more expensive since at least January.
Each month, individual projects are assigned a green, amber, or red colour, which indicates the "health" of the project. Each project has a cost, time and "overall health" rating.
These reports were released under the Official Information Act to the Act Party.
In January, the overall health rating for the programme was "amber". Of the projects, seven were amber, four were red, four were green, and three had no rating.
By May, the number of amber projects had dropped to six, the number of green projects had fallen to one, and the number of red projects had more than doubled to 10.
Waka Kotahi warned this was trending in the wrong direction.
"Last month we advised that the overall health rating for the programme was trending towards red and this worsening trend continues," the report said.
Waka Kotahi's report of the NZ Upgrade projects. Photo / Supplied
The report said the "red" rating reflected "programme-wide cost pressures" and other issues, although these other issues were redacted. Elsewhere in the briefing, it warned cost pressures were being driven by the war in Ukraine, oil and shipping costs and labour costs rising.
A Government spokesperson said they were "managing" the projects to ensure they would be delivered.
"Globally there is significant pressure on large-scale infrastructure projects such as these, due to rising costs and supply chain challenges. New Zealand is not immune from these issues," they said.
"The Government is confident that there is currently sufficient contingency built into the budgets of the projects, and there is no need or intention to change these. Appropriate processes are built into these projects to deal with cost escalations as they arise," they said.
Act Transport spokesman Simon Court said the documents showed Labour " failing to deliver anything other than inflated budgets and project delays".
"Labour's inability to deliver a project on time and under budget is a disaster for taxpayers. Inflation is caused by too much money chasing too few goods. When the Government throws around cash like this, it drives up the cost of everything," Court said.
He suggested the projects would be helped by Act's RMA replacement proposal which, he argued, would speed up the process of consenting.
Significant projects that are rated red include the $655m Papakura to Drury road, which was facing "budgetary pressure" and "schedule issues".
The project was specifically rated "red" for budget concerns.
Wellington projects appear to be particularly concerning. The $1.5b Ōtaki to the north of Levin road is amber although a heavily redacted sentence from the report warns that "detailed cost estimates" are likely to turn the "budget status from amber to red". At $1.5b the road is already one of the most expensive in New Zealand's history - $300m more expensive than nearby Transmission Gully.
It will be the second big cost blowout for the project, which in 2020 was costed at a comparatively affordable $817m.
The Hutt Valley's Melling Interchange also has financial risks attached to it. The project is rated "red" overall. The project, which is currently budgeted at $420m is facing an "affordability challenge" just a year after its budget was increased by $162m.
The challenge appears to be the complex nature of the project, which involves not just extensive roading, but urban development to open up parts of the Hutt River to the city.
Waka Kotahi said that a "project review" of Melling was underway. This would include "scope optioneering and a review of the procurement model".
"The emerging position is to change the procurement model and get early contractor involvement to gain robust cost certainty and the market price to deliver Melling improvements," it said.
The report struck a note of optimism noting that this review presented an opportunity to actually start work ahead of schedule.
Another problem project was a $115m package of Queenstown projects, which had an "updated interim cost estimate" above the baseline funding allocation.
