Auckland mayor Wayne Brown on why public sector contracts go over budget and over time

Inside the City Rail Link construction at Te Waihorotiu Station (Aotea). Photo / Sylvie Whinray

OPINION

Inevitably all construction projects in the public sector take longer to finish and cost way more than expected and always way more than private sector to do these things.

Since I became Auckland mayor, council has had to deal with a billion-dollar blow out on the already late and expensive City Rail Link and there is a current debate over ludicrously expensive pedestrian crossings. On top of that the recently opened “gold-plated” Holiday Highway from Puhoi to Warkworth, while much appreciated, could and should have been done way quicker and at least $400m cheaper which would have meant that it got way further north past Wellsford.

There are two main reasons for this: Wrong people and wrong procurement processes.

Auckland Transport spent $490,000 for a new raised pedestrian crossing on Williamson Ave in Grey Lynn. Photo / Jason Oxenham

Decision-making on these projects usually sits with boards that reflect NZ’s obsessive focus on governance and diversity rather than a range of skills directly useful for the sector involved. Our boards are full of people who in my opinion have managed to get onto more boards than sensible and in most cases without any experience of the industry for which they are responsible. The boards of Waka Kotahi, ( NZTA) and Auckland Transport have almost nobody who has built a road or even driven a truck but instead I believe they reflect diversity of race and gender without experience of spending their own money building the things they control and the public want.

I build and own roads and commercial buildings and have heavy traffic licenses and my projects just don’t have the cost and time blowouts that plague the public sector and which add to our rates and taxes, so I feel better qualified to offer my opinion than even the overpaid consultants that the public sector love to support.

Process drives behaviour and current processes are driving the bad results we get.

What is missing is that right from the start there is no focus on value for money. In the private sector the very first question is what is the value to be extracted from this projected capital spend. It might be the maximum rent, the value of savings in travel time, the value even of whatever public benefits may accrue but there needs to be a financial measure for the project before any money is committed.

Once this value is known than that will determine what the maximum sensible capital spend should be. If the expected cost exceeds this figure then either the project is shelved or reduced.

Once the maximum sum to be spent is determined it is locked in and a plan of the main features to be delivered is agreed. No detailed design or drawings are needed at this stage, just enough information to explain what is wanted and the maximum sum to be spent.

The recently opened "gold-plated" Holiday Highway from Puhoi to Warkworth could and should have been done way quicker, Wayne Brown says. Photo / NZME

Then the project goes to the market to see what contractors will supply for that amount of money and the best value offer is chosen.

In my view, what happens under public works programs is detailed design work is commissioned and there is always scope creep as people who aren’t actually paying for it want more than originally needed. Then it goes to tender and the price comes back way over the budget.

To make matters worse, current tender rules require the council or government department to publish their expected cost which is usually way in excess of the sum derived from the value for money approach. This signals to the tenderers that they have plenty of room for profits provided they come in under the published figure, resulting in everyone patting themselves on the back, the contractor for a big profit and the council for apparently saving money when in fact they have squandered public funds that never should have been spent.

Wait till you see the elaborate City Rail Link stations. They are more like cathedrals than places when all you want to do is catch a train!

City Rail Link stations are more like cathedrals, says Auckland mayor Wayne Brown. Photo / Grimshaw Architects

Have a look at the Holiday Highway to Warkworth. If you compare what we got with the section of the same motorway between Albany and Silverdale which carries way more traffic you will note that the Holiday Highway is much wider than the Albany section, it has much wider central strip and shoulders which instead of cheap grass have hot mix seal on bits that nobody drives on, it has guard rails everywhere, and even the bridges are much wider than the bit you actually drive on, meaning very expensive elevated bridge works that will never be used. There are huge cuts through hills that had no reason to be so wide and the extra unneeded cuts cost hundreds of millions that could have been better spent elsewhere.

As a result of this waste of money, there are now huge budgetary pressures on roading so just watch out for cuts to road maintenance budgets which have a much better impact on safety than the millions squandered on this project alone.

I believe we need a complete change to the decision-makers and the way they make their decisions or these flash bits of road will just be stranded things to show your grandchildren what we could have had everywhere if we had treated public money like our own.

Wayne Brown is Auckland’s mayor. He co-founded engineering consultancy Brown and Thomson in 1976, has held leadership positions at organisations including TVNZ, Māori TV, Transpower, Vector Ltd, and was chair of the Land Transport Safety Authority. He chaired the Northland District Health Board and Tairāwhiti District Health Board, the Auckland District Health Board and was previously a mayor of the Far North District.