Wood may U-turn on part of project pledge

The Government’s flagship infrastructure programme, the most expensive in modern history, is in danger of collapse, with Transport Minister Michael Wood now refusing to say whether all the 22 projects promised nearly a year ago will actually be built in the way they were announced.

That puts the fate of $6.8 billion worth of road and rail infrastructure up in the air, and could lead to projects like Auckland’s $1.3b Mill Rd, ¯or Wellington’s $817 million Otaki to north of Levin and $258m Melling interchange either pared back or dropped entirely.

In January last year, the Government announced the NZ Upgrade Programme, a $12b infrastructure package which included upgrades to schools and hospitals and infrastructure needed to combat climate change. The centrepiece of the project was $6.8b for transport projects of which $5.3b was to be spent on roads. The $5.3b cost of those projects was taken from the best estimates of Waka Kotahi-NZTA at the time. After the projects were green lit, Waka Kotahi went back and did a more detailed costing of the roads, a practice known as baselining.

Documents released to Stuff under the Official Information Act show this took almost a year.

Each month, officials provided an update to then Transport Minister Phil Twyford and later

Michael Wood. Some of these briefings warned the baselines were facing pressures that could push costs significantly higher than those forecast in January 2020. They also warned there was no contingency fund built into the Upgrade funding for transport, meaning any overruns would force Wood to go back to the finance minister for more money.

Wood has finally received advice based on those baselines.

When asked by Stuff about the cost pressures mentioned in the

documents, Wood said the baselines responded to post-Covid cost escalations. When asked specifically whether he could commit to delivering all the projects announced back in January 2020, Wood declined to answer. Instead, he said the Government was weighing up its options.

Stuff has already seen early snippets of the advice provided to Wood, in heavily redacted papers from the Ministry of Transport.

Requests to see the finished baselines have been rebuffed. One briefing warned of a ‘‘significant increase in [the] volume of property transactions required’’ by projects in the programme and said ‘‘unplanned cost increases are an emerging issue’’.

Another said Wood would be advised in March of this year about the ‘‘total set of choices or trade-offs that may be required to deliver the programme’’.

Another paper said Crown financed projects, including the upgrade programme, had ‘‘incorporated risk normally measured through separate pre-implementation steps’’. That means the Crown wore the risk of any cost overruns when it took on the projects in January, knowing the cost estimates were fairly highlevel and did not give a detailed picture of the programme. ‘‘[A]s a result, these projects may face a likelihood of increased cost and time pressures, causing possible delays and cost overruns,’’ the briefing said. Some projects are already under way.

‘‘Already 13 projects are in construction . . . like the third main rail line in Auckland and road upgrades in Hawke’s Bay, West Coast and Northland,’’ Wood said.

Other projects, including in Ashburton and Tauranga, are expected to start this year.

‘‘Already 13 projects are in construction.’’ Michael Wood Minister of Transport