Off the rails
Another Labour flagship policy in trouble after billion-dollar budget blowout for airport link
Another flagship Labour policy, Auckland’s light rail, is in crisis as deep divisions are revealed over a potential cost blowout of billions of dollars amid delays. Firms involved in the project say the problems have cost them millions of dollars and are wrecking New Zealand’s business reputation.
Much of the finger-pointing is being directed at six PowerPoint slides submitted by the NZ Superannuation fund and which sources say effectively stopped the project in its tracks.
The light rail project from Auckland city to the airport was unveiled on the campaign trail in 2017 and was a cornerstone of Labour’s desperate bid to win back the Auckland vote after nine years in the wilderness. Newly elected Labour leader Jacinda Ardern labelled the plan ‘‘a game-changer’’ and said it would be partly funded by petrol taxes. She promised to have it built within four years of taking office.
As with the ailing KiwiBuild policy, the party was warned its light-rail plans were too ambitious.
Since the election, the project has been dogged by delays – delays that businesses say have cost them millions. Meanwhile, Treasury has warned the Government that getting it wrong could see the cost of the $6 billion project balloon like Edinburgh’s light rail, which took six years to build and cost twice its initial estimate. An NZTA source has confirmed this is still a possibility for Auckland’s light rail.
In August the Government said work wouldn’t even start in 2020, as it still had to weigh up who would build and run the scheme: NZTA, its own transport agency – or the NZ Super Fund, which made a surprise, unsolicited offer in April last year to build and run the project.
The Sunday Star-Times can reveal that Transport Minister Phil Twyford – previously at the centre of the Government’s KiwiBuild debacle – was warned by officials the unannounced NZ Super Fund bid wasn’t up to scratch. In fact, the initial bid was just six PowerPoint slides.
In the long letter to the minister by then board member Nick Rogers, the NZTA lashed the Government for dithering over whether to seriously look at the NZ Super Fund bid, which it made as NZ Infra, formed of the fund and another large Canadian fund.
According to another piece of correspondence from Rogers, the letter – obtained by the Sunday
Star-Times – was written after a fractious meeting with Twyford where it’s understood he blamed the agency for light-rail delays. The letter was written to outline the board’s position, after what was seen as an unfair smear.
Most observers had assumed the NZ Infra bid was something quite incredible, given it had made the Government rethink its own plans to let NZTA build the project. But the letter claims NZ Infra’s proposal was ‘‘little more than an idea set out on 6 pages of a PowerPoint presentation’’. It also claimed that the ‘‘details of the project were vague’’.
The bid came out of the blue in April last year, just as NZTA was embarking on a procurement round to find construction companies who would build its state-owned version of the light rail line on its behalf.
The letter from Rogers said some companies are now sceptical of bidding on whatever plan is chosen by the Government, for fear of wasting further time and money.
National’s transport spokesman, Chris Bishop, says the chaos is reminiscent of Twyford’s problems with KiwiBuild as housing minister.
‘‘Phil Twyford has gone back and forth about what the objectives for the project are,’’ he said.
‘‘I find it frankly astonishing that a six slide PowerPoint deck has derailed the prime minister’s flagship promise,’’ he said.
The revelations come from a large leak of communications and papers from the former NZTA board. The most scathing is a long letter from Rogers, written in frustration at claims made by Twyford that NZTA had ‘‘delayed the project by a year by not accepting the NZ Infra unsolicited bid into the engagement process’’.
It details a chaotic process, rubbishing the Super Fund bid as ‘‘vague’’ and ‘‘little more than an idea set out on six pages of PowerPoint presentation’’.
NZTA thought the proposal should have been left there. In December, after getting more information from NZ Infra, NZTA was asked to do an assessment of its proposal, essentially to see whether it was up to the standard expected of bids for Government contracts.
The assessment was scathing, comparing the NZ Infra bid to a similar unsolicited proposal made by a Chinese company to build the Penlink road at Whangaparaoa, north of Auckland.
‘‘Neither unsolicited bid had sufficient merit to warrant taking them to the next stage,’’ said Rogers in the letter.
But that assessment was done in December, and submitted to the minister in February. In the meantime, Twyford had told NZTA to get on with its own bid to build the light rail line.
On May 14, 2018, just days after media became aware of the Super Fund bid, Twyford wrote to the NZTA confirming it would lead development on two light-rail lines, one to the airport, the other to the north-west. According to Rogers, NZTA proceeded on the assumption that light rail was ‘‘the responsibility of NZTA’’.
The NZTA wasn’t the only one of Twyford’s government departments told to gear up for light rail. In September, he wrote to Hobsonville Land Corp, the government developer, telling it to get ready to redevelop government land along the route of the NZTA light rail.
Redeveloping land was key to what the Government initially wanted from light rail. NZTA
‘‘I find it frankly astonishing that a six slide PowerPoint deck has derailed the Prime Minister’s flagship promise.’’
National’s transport spokesman, Chris Bishop
‘‘Light rail will be a key piece of Auckland’s rapid transit network for decades and we have to take the time to get it right.’’ Transport Minister Phil Twyford
estimated the trip to downtown Auckland from the airport would take roughly 40 minutes, not a huge improvement on the current bus service.
Where the project is meant to come into its own is in the far greater numbers of people the light rail cars can carry. With 20 or so stops from the CBD to the airport, NZTA’s plan would have allowed the corridor to densify, allowing far larger numbers of people to live there.
Twyford, then also the Housing Minister, told HLC to get ready to build state houses and KiwiBuild homes along the route. If this development happened without light rail, it would likely create toxic levels of congestion, but with light rail, these new inner-city residents could commute to the city.
In November, Housing New Zealand and HLC wrote to NZTA saying they’d been working cooperatively on the project already, and to confirm their ‘‘ongoing support and assistance’’.
Despite having NZTA, HLC, and Housing NZ all working on the existing light-rail project, the Government hit the brakes in February, when it said it would consider the Super Fund bid as well.
NZTA chief executive Mark Ratcliffe sent an email to all stakeholders informing them of the halt, saying ‘‘further market engagement’’ had been deferred temporarily.
In February, the Government announced that it would consider the NZ Infra proposal. The Ministry of Transport would put the bids alongside each other and make a recommendation to the Cabinet, which would then pick its preferred bidder.
NZTA would also have to work with NZ Infra to share information for developing its bid. But the Sunday Star-Times understands the relationship between the two broke down to the point that NZ Infra had to use the Official Information Act to get information held by NZTA, causing months of delays.
The problem for NZTA is it had already gone to market looking for firms to build its rail line. Unsurprisingly, many of those firms are furious at money potentially wasted bidding for a project that may never be built.
Paul Evans, the chief executive of the Association of Consulting Engineers New Zealand, representing engineering firms, wrote to Twyford in July. He complained that ‘‘at every step [engineering firms] have answered the Government’s call, invested heavily in building light rail expertise within their firms’’, and spent considerable amounts of money bidding for work.
But Evans said work had now ‘‘ground to a halt’’, and engineers had ‘‘a distinct lack of clarity around, if and when [light rail] will proceed’’.
He said firms had spent ‘‘many millions of dollars’’ putting bids together – money that could be wasted if the Government backs down and goes with NZ Infra.
Evans gave a stark warning to the Government, saying that the messed-up process could stop firms from bidding for other Government projects in future, making it even more difficult for the Government to plug it’s infrastructure gap.
In his letter to the NZTA board, Rogers says that the goals of the initial light rail plan appear to have gone by the wayside in the NZ Infra proposal.
Instead of densification, the NZ Infra plan wants to get people to the airport as quickly as possible, meaning fewer stops and less intensification.
But it says this essentially doubles-up on another transport project to improve the connection between the existing rail line, ending at Puhinui station, to the airport. In future, this will be the fastest way to travel between the CBD and the airport. NZTA says building fast light rail essentially creates a double-up.
But it appears those concerns were not heeded. While the old board smarted at being blamed for the delay, it has largely disappeared. All but one of the board who received that letter are gone.
After frustrations with the old team, Twyford replaced them last month with what looks to be a far more enthusiastic board, including blogger Patrick Reynolds – a photographer – who wrote extensively online about the need for light rail.
NZTA now fears the game is already up. Rogers’ letter says despite the fact that work is already quite advanced on the NZTA proposal, it appears the NZ Infra plan is now ‘‘the benchmark against which the NZTA proposal will be considered’’.
The letter airs NZTA’s concerns that the Government’s indecision over whether it wanted fast or slow rail has meant it ‘‘no longer understands what the project objectives are’’.
But the old board is clearly angry that Twyford blamed NZTA for the long delays, and that it’s had to take heat from the construction industry for the stalled procurement.
‘‘It is the NZ Infra proposal that has delayed the project,’’ the letter said, saying it was not possible to start soliciting bids for work when the Government might look somewhere else.
It includes an ominous note, that the dramas now extend beyond just NZTA, having damaged New Zealand’s reputation for construction globally.
‘‘The market has advised NZTA that the current approach is seriously impacting the integrity of the New Zealand procurement process,’’ it said.
If that’s the case, picking which version of light rail to build might be just the beginning of the Government’s problems. Finding people to actually muck in and build it could be the real challenge.
Twyford said taking time is key to getting the project right.
‘‘Light rail will be a key piece of Auckland’s rapid transit network for decades and we have to take the time to get it right.’’