Transmission Gully ‘reset’ likely

Transport Minister Phil Twyford says he's asked NZTA to strike a deal that will reset the clock and give Transmission Gully a clear path to completion

NZTA and the private consortium building Transmission Gully are close to a new agreement that could remove or alter warranty obligations on the road. 

Transport Minister Phil Twyford told reporters at Parliament on Thursday a project announcement to "reset the clock" on Transmission Gully was not far away.

"[A reset would] restart the project well and truly and have a clear run through to completion ... [the road is] 83 percent completed and obviously people who live in this region, they want to see the road open as soon as possible.

"It's an amazing piece of engineering. People have been waiting decades and decades for it.

"We'll have something to announce before too long ... NZTA Waka Kotahi has been negotiating intensively with the alliance - with the builder particularly - to reset the clock."

Sources have told Newsroom a key part of this agreement will be the removal of a warranty attached to Transmission Gully guaranteeing the workmanship for a 25-year period. A new warranty with limited conditions could be attached instead. 

The warranty had made the road's completion uneconomic for the consortium due to errors made during construction that reportedly extend right down to the drainage in the subsoil

Transmission Gully is being constructed through a public private partnership (PPP) between NZTA and a private consortium called the Wellington Gateway Partnership (WGP). A joint venture between CPB Contractors and HEB Construction is tasked with building the road.

CIMIC - who own CPB - declined to comment on the warranty issue as did the Wellington Gateway Partnership. NZTA would not comment either.

The only expectations Twyford had in terms of a warranty for the road were that it would be warranted to the "normal standard that Waka Kotahi [NZTA] expects". 

"I haven't been down the weeds to that level of detail, but I trust Waka Kotahi to do a good job and to make sure they strike a deal with the alliance that will be satisfactory for everybody."

Although the 83 percent figure might make the project sound close to completion it likely does not represent the full length of time the builders will need to complete the project.

NZTA has openly admitted construction on the project will stretch well into 2021. Newsroom has reported CPB Contractors - which owns 80 percent of a joint venture with HEB construction tasked with building the road - asked for the expected completion date to be extended to 2023. Both of these are a far cry from the earlier expected completion date of April 2020. 

Lockdown leads to deadlock

Work on the $1 billion road ground to a halt under lockdown. A clause in the original PPP agreement allowed private partners to walk away from the contract if they were locked out of the site for a period of time.

Sources connected to the project earlier told Newsroom that many of the reasons CPB had for trying to walk away from the contract were not directly related to Covid-19.

They alleged errors were made during construction. In the subsoil there were issues with drainage that wasn't laid to specification. At a later stage, stabiliser meant to bind the road base together was reportedly spread unevenly through it.

Transmission Gully was scheduled to open in April. Photo: Lynn Grieveson

Newsroom has been told all of these factors would have killed the financial viability of the project for CPB who had a contract to design, build and then maintain the road for 25 years.

When lockdown hit, CPB decided to exercise its rights to back out of the contract and the parties have been locked in negotiations ever since. NZTA has made two advance payments on it to keep work going as negotiations progressed.

Typically these advance payments shouldn't be needed in a Public Private Partnership (PPP) because private partners earn a premium through carrying all of the financial and construction risk of a project.

'We won't be held ransom'

NZTA isn't the only Australasian government agency locked in a battle with CPB.

Across the Tasman, a multi-billion dollar roading project sealed with a 1,465-page PPP agreement in Melbourne has seen workers served redundancy notices, its deadline extended out by a year, a force majeure clause exercised, and CPB try to walk away.

Last month, Victoria's Minister for Transport Infrastructure, Jacinta Allan, told Newsroom the state had A$70b worth of construction work in the pipeline and firms like CPB could face consequences down the line when it applied for those future contracts.

"While businesses across Australia are going to extraordinary lengths to keep staff on - here in Victoria we’ve seen Transurban’s builders CPB and John Holland sacking people over a petty dispute - it’s disgraceful.

"We won’t be held ransom by construction companies especially when we have a lot of work here on offer."

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