$10b gold mine
for Auckland Council contractors
The Super City has become a $10 billion gold mine for multinational corporations and big local companies, a Weekend Herald investigation has found.
The model of contracting out most of the work of Auckland Council has fed about $10b of ratepayers’ money to 20 companies since the inception of the Super City in 2010.
Mayor Phil Goff and finance bosses said the big contracts represent value for money to ratepayers, but former councillor Mike Lee said they show the “monster” Super City was set up for the interests of big, mainly foreign corporates.
The top 20 contractors include construction, waste and park maintenance firms, public transport operators, KiwiRail, NZ Transport Agency and Madison Recruitment.
Construction firms Downer and Fulton Hogan top the list of 20 companies with $3b of work on mostly transport projects. Downer has clipped the ticket on the $4.4b City Rail Link and waterfront projects, and Fulton Hogan is involved in building the Eastern Busway.
Transport operators New Zealand Bus, Transdev, Ritchies, Howick & Eastern Buses and Go Bus have been paid about $2.7b to run the city’s buses and trains, although about 40 per cent of that is money from fares.
A spokesman for bus operator Ritchies said it was the only New Zealand-owned public transport operator and any funds it received stayed in the country. However, the family-owned business, estimated to be worth $500m, could go offshore after reports it is for sale through investment bankers Cameron Partners.
Other transport contracts worth $650m went to government-owned KiwiRail and the NZ Transport Agency for rail and construction work.
Auckland Council’s decision in 2017 to amalgamate the maintenance of parks to a handful of contractors has resulted in Australian companies, such as Ventia, muscling in at the expense of Kiwi operators. In late 2017, Ventia issued a public apology for delays in its mowing and gardening work after a string of complaints.
The city’s waste is a $400m business for foreign-owned Waste Management and Enviro Waste, and locally owned Madison Recruitment has a virtual monopoly worth $149m providing temporary and contract staff to the council.
The figures, provided by the council group under the Official Information Act, show Auckland Transport accounts for about $7b of the $10b spend, Auckland Council $2b and Watercare $1b. About two-thirds of the 20 firms are foreign-owned.
Mayor Phil Goff said most of the $10b of contracts were for the delivery of essential services, such as the construction of critical infrastructure, maintenance of roads and city assets, and waste management and disposal.
“This is work best undertaken by companies already equipped with the expensive plant equipment and machinery, resources, and specialist staff needed to deliver such projects, and which have a demonstrable history of delivering work of this nature.”
Goff said the council regularly assessed its services to ensure they were delivered as efficiently as possible and provide maximum value for money to ratepayers.
“Decisions about whether or not to outsource council activities are made on the basis of whether doing so will achieve these objectives and provide the level of services and infrastructure our communities need,” he said.
Council finance committee chairwoman Desley Simpson echoed the mayor, saying the guiding principle behind outsourcing work and doing work in-house was to deliver the best value for ratepayers. She said the dial moved both ways, citing the example of regulatory services being outsourced and brought back into the council because it was cheaper.
A review of the council’s procurement of contracts in 2018 showed savings of more than $100m, she said, saying the reviews would be ongoing.
AT finance general manager Mark Laing said regular improvement reviews had been commissioned by the board of the council-controlled organisation (CCO) to assess the cost effectiveness of big contracts for public transport and asset management.
“Road maintenance contracts and the rail operator contract are currently subject to new procurement processes,” Laing said.
Lee, a longtime critic of contracting out council services, said the spending was “scandalous”.
“There is a saying ‘follow the money’. Now we see revealed the inner workings of the Super City and AT and the reason why the monster was set up.
“As many of us long suspected, the Super City works not in the interests of Auckland ratepayers but for big, mainly foreign corporates. The bigger the contracts, the bigger the profits,” he said.
Lee, a key player in the railservices renaissance in the 1990s when he chaired the Auckland Regional Council, said the privatisation of rail services was loudly argued to be more cost efficient but resulted in dramatically higher costs and the private operator Transdev sending profits back to France.
“Auckland’s public transport fares are some of the highest in the world,” he said.