Infrastructure

PPP critic appointed to Infrastructure Commission

He represents workers caught up in New Zealand's largest public-private partnership and Cabinet have just appointed him to the Infrastructure Commission

The Public-Private Partnership concept could be in for a rough ride with the appointment of Amalgamated Workers Union National Secretary Maurice Davis to the Infrastructure Commission. 

Davis is a vocal critic of Public-Private Partnerships and his union represents workers caught up in the biggest PPP of all - Transmission Gully - that has seen jobs restructured and major delays

"Our union's highlighted the issues we have in there all related to the contract arrangements that just happen to fall under the public-private partnership. I think we've definitely got to look at it because at the end of the day if the model's not delivering what it was supposed to deliver, you know, nothing's sacrosanct."

"We've asked for an inquiry into PPPs: do they actually work for the betterment of the taxpayers in terms of protection? Up to today I don't think they have."

Cabinet officially appointed Davis to the board on Monday and there have been other changes to InfraCom's leadership too. 

The most significant appointment was made two weeks ago when Ross Copland was selected to replace InfraCom's founding CEO Jon Grayson on the back of a bizarre incident - first reported by Politik - where the latter's move to Australia went unnoticed by some of the country's top infrastructure players. 

"[It] shows that Zoom calls can only achieve accountability outcomes to a certain extent. I didn't know he was on the same call as me, but in another country." 

Infrastructure Minister Shane Jones told Newsroom in May he was completely unaware Grayson had quietly moved countries while continuing to operate in his role via Zoom.

"I had lots of Zoom calls with him which shows that Zoom calls can only achieve accountability outcomes to a certain extent. I didn't know he was on the same call as me, but in another country.

"Obviously you can't be the CEO of the Infrastructure Commission credibly if you're not in the same country.

"The board and the chair of the Infrastructure Commission realise that the Government is expecting big things of them. We don't want any more surprising developments."

'What's the point?'

Transmission Gully's original price tag for building the road has ballooned out past the $1b mark thanks to payments from NZTA of $190m and $14m over and above its original $880m cost.

The $880m will be paid out after the road is built and the consortium building the road secures a 25-year maintenance contract for it.

Proponents of PPPs argue that tying builders to these long-term contracts means construction and financial risks are distributed and firms have more of an incentive to build a high-quality piece of infrastructure.

Opponents argue taxpayers pay a premium to fund PPPs but still shoulder the ultimate risk for these projects.  It is often easier for a private party to leave a PPP arrangement than a public one because it is politically difficult for a Government to walk away from an unfinished infrastructure project

Detailed legal arrangements also make PPPs highly vulnerable to unexpected events. Davis said NZ firms traditionally relied on being able to renegotiate variations of conditions.

PPP arrangements like those behind Transmission Gully went against this and involved detailed agreements that were hard to change. 

NZTA had shown how difficult it was to keep to those arrangements by veering outside its strict contractual obligations during the Transmission Gully dispute and making advance payments.

"What's the point of negotiating a PPP when you've got to pay a variation within five years of the PPP and it's still under construction? You might as well go for design and build."

Newsroom has reported CPB Contractors - who are part of the joint venture building Transmission Gully and represented by Davis' union - have laid a 'take it or leave it' deal at NZTA's feet that could inflate the road's final price by $500m.

Covid-19 lockdown unlocked a provision in the contract that gave CPB the ability to walk away from the whole project because they weren't able to access the site during lockdown.

The 30-year plan

Former Reserve Bank Governor Alan Bollard chairs InfraCom and Davis will be the only Māori member of the seven-person board.

He will join deputy chair Sue Tindal, Simpson Grierson lawyer David Cochrane, Watercare CE Raveen Jaduram, former Infrastructure NZ CE Stephen Selwood and MinterEllison construction lawyer Sarah Sinclair. 

Infracom's focus is a 30-year infrastructure strategy that will be published at the end of 2021 and revised every five years afterwards.

For Davis, that focus needs to include a narrower one on the next three years and what might be needed to stimulate employment and support the country's construction industry after Covid-19. 

"You'd have the long-term view, but I think at the moment we need to have a shorter-term view about engaging construction and having a plan for those jobs."

Along with his connections and long history in the construction industry he is expected to provide a Māori perspective on key issues like the environment and water during his one-year term on the board.

"I've got to balance up with the high unemployment of our people too because those 1000 a day registering for the unemployment benefit you can pretty much guarantee the majority of them will be Māori or Pasifika.

"It's the balance between not wrecking the environment you live in, but also offering opportunity for people to be gainfully employed on real wages and that for me is Tino Rangitiratanga."

"If you can sit at your table and make decisions about your family and not rely on anybody else other than yourself or your family. That to me is independence."

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