Week in Review

Inside Transmission Gully’s PPP mess

Transmission Gully may not be completed for another two years as the PPP building it and NZTA are stuck in a legal standoff and the road surface needs redesigning, Dileepa Fonseka reports

A $1 billion road financed through a Public-Private Partnership (PPP) is going nowhere fast, despite another $14 million payout. Sources close to the project indicate its final completion date will stretch into 2022, which would make it two years late and at least $204m over budget.  

The New Zealand Transport Agency (NZTA) announced on Friday an advance payment of $14m to keep private parties working on Transmission Gully during winter after the Covid-19 lockdown. Officially they expect the road to be completed "well into 2021" which was already over a year after its original expected completion date of April 2020. NZTA announced as recently as February 14 it would pay an extra $190.6m for the road and that it would be ready for Christmas this year.

However, sources close to the project have told Newsroom an even longer completion date in 2022 is being discussed to allow builders an extra season of earthworks. That has caused alarm to some who have said more extensive earthworks should not be required to finish a project that, last year, was considered to be near completion.

The Transmission Gully project is a major one for the Wellington region. Residents along the Kāpiti Coast 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.

Porirua Mayor Anita Baker, whose city is one of several that stand to benefit from the project, said an opening date that stretched into 2022 would show there were major issues with the road.

"We know that people have left the site so it's all surmising until they actually tell us what's happened."

"It obviously indicates that there have been some kind of technical issues. I don't know what they are."

Mexican standoff in the Gully

Transmission Gully shouldn't require any extra payment in advance. It is a Public Private Partnership (PPP) which means a private consortium agrees to take on upfront financial risks associated with a project in return for a payout after the project is done. 

However, Newsroom earlier reported the Covid-19 pandemic and its associated lockdown has given the builders - a joint venture between CPB and HEB construction - the ability to pull out of the agreement based on contract provisions that guaranteed them access to the site. 

"... CPB want to be kicked off the job in the hope that means that's the end of any potential litigation, and NZTA want them to walk off the job so they can litigate them."

And last week a deadline associated with those provisions passed with no return to work for many subcontractors associated with the project. There were further reports the situation had worsened with construction staff directly employed by CPB being told they could be made redundant. A step beyond the normal practice of only letting subcontractors go during the winter months. 

National Secretary of the Amalgamated Workers Union Maurice Davis, whose union represents workers at CPB, said negotiations between the builders and NZTA were at an impasse.  

"It appears to me, with this stand-off that they're in, CPB want to be kicked off the job in the hope that means that's the end of any potential litigation, and NZTA want them to walk off the job so they can litigate them."

At Parliament, Transport Minister Phil Twyford faced questions from reporters about the project's rumoured collapse all week, but assigned blame to the National Government who signed the PPP. 

His opposite number National's Chris Bishop said Twyford was to blame for setting a bad precedent by paying out the partnership $190m in February - instead of suing them - and not giving the project enough attention.

Wellington Gateway Partnership CEO Sergio Mejia didn't rule out a 2022 completion date or deny it was being discussed, but he pushed back at allegations there were construction issues with the road.

"We remain committed to completing construction of a high quality motorway and getting it open for motorists at the earliest possible date."

Is the PPP itself the problem?

The Transmission Gully PPP project agreement is between NZTA and a private consortium called the Wellington Gateway Partnership (WGP).

WGP have subcontracted the design and construction to a joint venture between Australian-owned CPB construction and French-owned HEB ("the builders"). 

To some the PPP arrangement lies at the heart of the project's issues.

While proponents of this arrangement, such as Infrastructure NZ CEO Paul Blair, maintain the long contract terms take the financial risk of difficult projects like Transmission Gully off the shoulders of Government, critics of PPPs like Max Rashbrooke argue the taxpayer is always liable for problems with the project in the end. 

Famously, the Mangawhai wastewater PPP earned Kaipara District Council a scathing report from the Auditor-General who said they never fully grasped what they were getting into. When KDC signed the PPP contract for the project in 2005 the costs for one part of it (effluent disposal) were estimated at $361,000. They ended up totalling $14 million.

However, sources close to Transmission Gully have said the problems lie not just in its unique financing arrangement but deep below its surface too.

Or Is the problem with the road build itself?

Roads can be seen as comprising three layers: the surface, base course (or 'road base'), and the subsoil underneath. 

Issues with the project as it stands allegedly stretch right into its subsoil and make it difficult for a road surface like asphalt or chip seal to be laid on top of it in a way that would make it financially worthwhile for the builders to complete the project. 

At the subsoil level perforated pipes are laid to absorb water and drain it out through non-perforated pipes which carry it out to waterways and other areas. This is to prevent the subsoil underneath the road getting too moist and making the ground underneath it unstable. 

However, sources close to the project have alleged non-perforated pipes were used in some places where perforated pipes should have been, and in other instances pipes did not lead out into waterways. Both errors would allow water to keep building up beneath the subsoil and threaten the road's stability. 

Above the subsoil lies the road base, where rocks are mixed in with a stabiliser to provide a solid thick surface for the final road layer to be laid on top of.

Sources close to the project have said there are problems here too with rocks not up to specification and a stabiliser that was meant to bind those rocks together not having been spread evenly through the road base.

Stabiliser spread too thinly?

The change allegedly arose because a machine was altered to allow it to spread stabiliser over a wider area. That would make it possible to do the same job with the machine in fewer passes, saving time and money.

Altering the machine in that way meant the stabiliser was more concentrated in the middle of the road and made the outer parts of it - lanes that heavy vehicles and trucks were more likely to travel on - more prone to wear and tear.

The issues within the two layers beneath the road allegedly meant asphalt or chip seal laid on top would have to be heavily reworked within the 25-year period WGP was supposed to maintain the road. That would mean major ongoing costs for the builders of the project.

People close to the project have alleged NZTA was not made aware of many issues that had arisen during its construction. Quality control processes could have caught some of the matters above, but the structure of the PPP meant WGP were responsible for deciding how much of the testing associated with the project would be done. 

Porirua Mayor Anita Baker says a rumoured start date of 2022 would be disappointing. Photo: Mark Tantrum

WGP's Mejia was presented with details of the alleged problems with the road and said it was "inaccurate to conclude that the items you raise are engineering or design flaws".

"It is important to appreciate that the Transmission Gully motorway project is still under construction. This means that many aspects of the project are currently temporary or incomplete."

"It is also inaccurate to conclude that rework of structural layers of the pavement is an issue for the project. It is a necessary and fundamental part of the quality control processes employed on site."

‘We have tested the testers’

Mejia said robust quality control processes were in place. As layers were added they were tested to check they had been compacted to the right density. If the tests showed standards weren't being met the machines would be adjusted to the right level.

As an added check on those tests independent lab testers were invited on site to check the density, compaction and strength of each finished layer.

Then a surveyor checked the final layer levels were correct, and run those past an independent quality reviewer.

"At any point in this process if the checks detect a weaker spot that needs to be replaced, that rework is done right away," Mejia said.

"This is to make sure we will not need to dig through any of the overlying layers later and that traffic won’t be disrupted by any unplanned maintenance work after the motorway is opened."

"Please note that the rigour of the pavement quality control process is indicative of the broader quality control processes surrounding the Transmission Gully project"

'It's a start'

WGP has not provided details on how it planned to spend the $14m advance payment however an NZTA press release that accompanied the announcement on Friday said it would be for a "winter works programme" over six weeks. 

“The winter works programme will ensure the builder sources and brings onto site critical materials to allow the project to progress through the winter construction season."

"If materials, such as aggregate, are not sourced now there is a risk the materials may not be available later in the season and could cause further delays to the project’s completion.”

New design for road’s surface

NZTA has also said the CPB HEB JV will explore a new design for the road's service that will improve the quality of it and allow it to be built more quickly. 

"$14m in the scheme of things. If that's what held up this job I'm really amazed."

Some have said that could mean the JV have been given money to explore fixing some of the alleged structural issues within the road base with a new "experimental" method that would would involve digging up a lot of existing road and mixing in more aggregate. Mejia has described that claim as "inaccurate". 

Gravel transported from Huntly

Aggregate and Quarry Association Chief Executive Wayne Scott said Transmission Gully had encountered major problems sourcing aggregate locally and much of it had to be carted very long distances - sometimes hundreds of kilometres from Huntly - increasing its price substantially. 

"Aggregates vary in price and the cartage component is one of those unknowns. With transportation once you cart aggregate 30kms it doubles in price. The transport is the really critical part of it."

During a post-Covid construction downturn the project could find it easier to source that aggregate locally. The $14m could provide enough to make the road base 200mm thicker if transportation costs could be kept low.

Davis expressed scepticism that the payout would change anything around the impasse negotiators had found themselves in. He has asked CPB what the status was of a restructure notice served to its staff on May 16 that was paused last week while negotiations took place.

"$14m in the scheme of things. If that's what held up this job I'm really amazed."

New link roads sitting unused

Baker said a delay into 2022 would be disappointing because her cash-strapped council - which is already facing a $1.8b in water infrastructure repair bill - had already invested millions in a set of link roads that would arrive well before the motorway was built.

"We will have paid our $36m for our link roads at the end of this year. So we will have had that money sitting for a year and half for our roads that we've paid for but are not using."

"On the plus side I'm rapt that they've been given $14m to at least get the winter works done so at least it's a start."

"I'm guessing at some point we'll hear the whole story."

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