Alliance report: QLDC oversight 'weaker than it needed to be'

An external review of the alliance model delivering key roading projects in Queenstown has found the governance oversight from the council lacking.

The newly released report reveals not enough information flowed through to Queenstown Lakes District Councillors about the potential for things to go wrong with the programme of works being delivered, and as a result they were left "blindsided" by cost increases.

The report has also found the work of the council's chief executive and infrastructure boss not up to scratch in that neither reviewed project progress or budgets regularly enough nor had sufficient systems in place to escalate issues related to these aspects up the chain ending with the council's elected members.

Its author is recommending immediate changes to benefit what remains of the delivery of stage one of Queenstown's arterial road as well as that the council generally up its game to ensure governance arrangements at senior management levels and within the council "better reflect the risk profile of large infrastructure projects" in the future.

The report also reveals the degree to which Queenstown ratepayers and others have been burnt by the alliance in regards to the problem-plagued and budget-blown first stage of the arterial road is unique.

"Historically, most alliances in New Zealand have come within five percent of original cost estimates," the report says.

"It is very rare for a project to consume all the 'pain' component, and thus all the Non Owner Particpants overhead and profit margin, as has happened for the arterial project."

The report demanded by elected members of the Queenstown Lakes District Council more than a year ago presents "lessons learnt" from a review of Kā Huanui a Tāhuna, the Whakatipu Transport Programme Alliance.

Written by consultant Dave Brash, the report has been made public ahead of being discussed at an open-door council workshop being held at the Gorge Road Chambers Tuesday morning.

In it, Mr Brash outlines "large and complex" projects that were not necessarily well-thought-through prior to being rushed into, particularly with the offer of "free money" from the government on the table in a heady peak-Covid environment.

The alliance has delivered or, in some cases, is delivering Queenstown's town centre street upgrades, preparations for the Lakeview development, the first stage of the arterial road, and the BP roundabout and State Highway 6 and 6A upgrades. While the later project is led by the New Zealand Transport Agency, it is included in the review, although Mr Brash says his work has been conducted "primarily through a QLDC lens".

Mr Brash acknowledges in the report there were always plenty of things that could go wrong on all the projects - including the potential for cost overruns and unknowns due to a lack of investigation and design work early on - yet he says, "there appears to have been little discussion around the council table of the nature and scale of risks of the investment arrangements and the programme itself, and especially and how best to manage them".

"There appears to have been an early assumption that procuring via an alliance would be sufficient to manage this risk (alongside having experienced staff and traditional QLDC approach to infrastructure delivery).

"Alliances do provide good tools and approaches to managing a range of risks (not available via traditional procurement), but they also need to be well executed and the inherent investment and programme risks still need to be well monitored and managed."

Councillors left 'blindsided'

Mr Brash says the oversight and resourcing of the alliance projects by the council's senior management team "was weaker than it needed to be".

"Specifically, the council did not resource itself up sufficiently to reflect the complexities of the alliance, or the reporting requirements back to council.

"It principally relied on a general manager property and infrastructure, one other senior manager and an owner interface manager, who all also had very big day jobs, to manage everything."

The report confirms councillors were often left in the dark on alliance projects, or filled-in last minute when the alliance came, hand out, asking for more money.

Mr Brash says, "in practice the councillors did not receive regular or comprehensive risk reporting on the programme".

"Reports were very operational, eg: road closures, and did not focus on cost overruns until funding requests came forward.

"Feedback from councillors and senior staff was that they felt 'blindsided' by the cost increases, especially on the arterial project.

"With hindsight, and in light of the inherent risk profile, a different approach to risk could have been considered and may have avoided some of the issues or at least avoid the surprises – and given councillors more confidence in the programme.

"That approach would involve regular reporting of financial risk, greater oversight at council level and at senior management level."

Immediate changes needed

He is recommending a council committee - either its Infrastructure Committee or its Audit, Finance and Risk Committee - be delegated an oversight role in "large and complex investment programmes which are above and beyond business as usual".

He thinks something as simple as "a monthly risk dashboard" presented to councillors could also be useful.

He thinks the remainder of stage one of the arterial road project stage one could also benefit from these recommendations.

To write his report, Mr Brash says he reviewed relevant documents, undertook a site visit to Queenstown and interviewed key people, including the mayor, the council chief executive, procurement manager, infrastructure manager, and chief financial officer, and alliance board members and the alliance programme manager.

Interviewees listed by report writer Dave Brash.

The list of interviewees does not appear to include any of the contractors or consultants involved in any of the projects.

The report notes, when the council and NZTA went to the open market to find private players to form an alliance with they ended up with no choice - there was just the one bid.

Engineering consultant companies Beca and WSP and contractors Downer and Fulton Hogan were appointed, and the alliance "was set up and began operating very quickly in late 2020/early 2021".

But there is a suggestion in the report councillors themselves were not well-briefed on this process, with Mr Brash recommending the council's chief executive provides more transparency for councillors on the outcome of the procurement plan process for major high-risk projects in the future.

'The magic didn't really happen'

As for the performance of the alliance in terms of project delivery, Mr Brash reaches some conclusions, none of them damning.

He says, "Overall the quality of the final build looks to be mostly with industry norms" - although, Crux notes, to date, snag lists for completed projects remain ongoing, while other projects, like the arterial road, are incomplete.

Mr Brash references feedback from interviewees regarding community and business relations as being a "mixed bag", with some examples of good practice and some, problematic.

"There have also been some ongoing issues with communications and engagement with effected businesses and property owners. And with the handover of some aspects of the final construction," the report says.

In regards to the relationship between partners and the capability of staff in the alliance, Mr Brash references an interviewee summing up that "the magic didn't really happen".

Key factors contributing to the lack of "magic": the loss of key people and "project champions", Covid-19 delays and distractions, the difficulty off recruiting people to live and work in Queenstown, and NZTA's "lack of skin in the game" early on in the alliance, the report says.

Read all of Mr Brash's report here.