Infrastructure

PPP may dump stricken project back on Govt

Fear is growing the privately-run project managers of Wellington’s $1b Transmission Gully project could walk away and dump it back on the Government, Dileepa Fonseka reports.

The previous National Government’s much-vaunted flagship for Public Private Partnerships (PPPs) is dissolving in front of the current Labour-led Government’s eyes just as it needs the $1 billion project to be employing hundreds of workers and opening a key transport corridor to the lower North Island.

Kapiti Coast residents will be distraught by the news, given many of whom have bought and valued homes on the basis the slick new motorway would cut commuting times to Wellington for workers and holiday homers by 15 minutes.

Officials acknowledged on Sunday the already-delayed Transmission Gully project would be delayed until 2021. This has the potential to blow out costs by yet-more hundreds of millions of dollars. NZTA said in February the project’s estimated costs would over-run by $190m to $1b and the completion date had been extended from May to December this year. 

An NZTA spokesman said on Sunday the project would now not be completed until some time in 2021 and the agency was in urgent negotiations again with the PPP’s contractor CPB HEB about the project. He would not comment on the fears of those close to the project that the contractor was days away from pulling out completely and dumping the project uncompleted back on the taxpayer. The project was suspended during the Level 4 lockdown, but failed to resume with all its workers as expected last week.

Several sources told Newsroom large numbers of subcontractors were permanently let go last week. One source said over 600 people had been cut from the project's workforce and a large amount of construction equipment had been removed from the site.

"All of a sudden to be off-hired. It's been unreal."

One subcontractor who was let go this week spoke to Newsroom on condition of anonymity and said the whole situation was "unreal". 

"It looked like we were going to be one of the first to be inducted and then by Friday we were rung up and off-hired."

"All of a sudden to be off-hired. It's been unreal."

Max Rashbrooke, author of Government for the Public Good and a vocal critic of PPPs, said private-sector pull-outs from such arrangements were rare, but not unprecedented.

They often emerged in situations like the London Underground project where costs rose far above what was contracted for.

"The private partner can always walk away in the end and the Government will always be left holding the baby."

Major changes on the cards

Transport Minister Phil Twyford said the Government was committed to completing Transmission Gully "as soon as possible,” but would not comment on a potential collapse of the PPP. 

"NZTA are still negotiating a new completion date and other issues with the contractors," Twyford said in comments emailed to Newsroom by a spokesman.

"I expect them to update the public with a new completion date as soon as they are able," Twyford said. 

Wellington Gateway Partnership CEO Sergio Mejía said he could not comment on layoffs of subcontractors or a potential break-up of the CPB HEB Joint Venture. He redirected all queries to NZTA. 

A spokeswoman for CIMIC, CPB's parent company, also declined to comment.

The onset of winter means there will have to be major changes to how Transmission Gully work proceeds. Photo: Mark Tantrum

NZTA senior manager project delivery Andrew Thackwray said the agency was currently negotiating with CPB HEB and was working to a new completion date of 2021.

He said staff were being "progressively re-inducted" to ensure compliance with Covid-19 safety protocols.

"We understand that the builder has made adjustments to the programme of work in line with the change of season. Typically these changes would be more gradual as we go through the seasons,” Thackwray said in emailed comments.

"However all work was suspended during the lockdown and we are now heading into winter so we expect changes need to be made to reflect that."

"Many of the activities due to be completed were not scheduled to be worked on at the onset of winter so this requires a major change in how work on Transmission Gully will need to be delivered."

He said 182 people were working on site under level 3 conditions with another 59 working from home, but couldn't provide details on the number of staff who were operating on-site before the lockdown.

Work resumed on Wednesday April 29. However, many staff employed by the project remained overseas with no immediate prospects for their return. Some remain in the Philipines and Australia.

"A significant portion of the site engineering and supervision team (approximately 80 roles) and some of the operations personnel are still at home overseas, including slope stabilisation crew members and paver operators, and are unable to return to site with current border restrictions," Thackwray said.

"Work is currently underway to develop a new delivery plan as quickly as possible, utilising local resources. Some people and equipment are unable to be utilised until this revised plan is finalised."

The $1b road

Wellington Gateway Partnership signed a public private partnership deal with NZTA in 2014 to design, construct, finance, operate and maintain the Transmission Gully motorway project for 25 years. A joint venture of CPB construction and HEB is contracted to build the road.

Originally scheduled to open in early 2020 the road has been marred by legal disputes and delays that saw its likely final price tag blow out by $190m to over $1b this year

Road Transport Forum Chief Executive Nick Leggett confirmed he had heard "rumours" of lay-offs and lockdown-related delays, but not of a potential pull-out by the project's JV partners. 

Leggett was told some parts of the project's budget had been cut, construction equipment taken off-site, and its timeline extended by two years.

He said the rumours raised questions about the Government's ability to deliver on other shovel-ready projects. 

"In the final straight of construction of such a large project, which was due to be completed by the end of this year, it is a worry to hear that contracts for supply and equipment have been cut, and workforce numbers reduced."

National sees delay as excessive

National Transport spokesman Chris Bishop accepted that the project would be delayed by the Covid-19 lockdown.

"However, a two year extension to the timeline would be excessive and is extremely concerning at a time when we need to invest and build in vital pieces of infrastructure to get the economy going again."

Twyford said there were hundreds of construction workers working hard on Government projects all around the country.

"The implication that they aren’t getting on with it and can’t deliver because of unsubstantiated rumours about one project is ridiculous."

(Corrected from an earlier version which cited an NZTA spokesman saying it would be delayed for at least a year. The spokesman said it would be delayed until 2021. The error was made in editing)

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