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Auditor General John Ryan has delivered a strong rebuke to the government for its handling of the Auckland light rail project, noting that it is unclear whether the procurement rules were followed and suggesting that this could damage New Zealand’s international reputation.
He said he will keep an eye on the project in the future.
Ryan criticized the “unusual” process the government went through to decide between the two organizations that would eventually build and execute the project: the government’s own transportation agency, Waka Kotahi NZTA, and another group, NZ Infra, a joint venture between the Super Fund and CDPQ. Infra, a Canadian pension fund.
His main concern was that there were “mixed messages” about the type of process the government was carrying out to choose between the two bidders; it was part of the policy development process designed to create the best kind of light rail scheme for Auckland, but it was also part of the procurement process, designed to choose who would build and operate the light rail network.
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This confusion meant that it was unclear whether procurement rules, designed to ensure fair and transparent bidding for large government contracts, were followed.
The report also noted that this unusual process was not the one recommended by officials from the Ministry of Transportation and Finance.
This preferred process, said the Auditor General, would mean “higher levels of innovative ideas being considered for the delivery of light rail in Auckland.”
Instead, yielding to time constraints, Minister Phil Twyford went ahead with a process that pitted NZTA against NZ Infra, blocking any other organization that wanted to submit a proposal to build a light rail.
This “unusual” process, culminating in something called the “parallel” or “dual track process”, essentially meant that NZTA and NZ Infra were developing policies for their light rail schemes, while simultaneously applying to be the organization. who got to build and run the schematic.
Normally, those two processes would be separate. Policy work would be done to determine what was wanted from the government and then a hiring would take place to see who would decide what would be built.
Auckland Transport / Supplied
An artist’s interpretation of what Auckland’s light rail system might look like.
“We saw some mixed messages about whether this process involved procurement activity, and whether the rules were enforced, or whether the process was about policy development (that is, what form could light rail take in Auckland),” Ryan said.
He said the Ministry has publicly maintained that it “did not participate in a hiring process,” which would force it to consider the government’s hiring rules, but noted that this seemed to contradict other statements by the ministry, which said the end of the process would be “Select a delivery partner for light rail”, in essence, a procurement process.
The Ministry of Transport, for its part, said that “it was not appropriate to consider the NZ Infra proposal solely through the lens of [procurement] rules or guidelines ”.
He also said that even if the Cabinet decided not to follow the rules, it would expect some sort of discussion as to why it was appropriate to do so.
“If the view had been reached that the government was justified in not following its own rules in the circumstances, we would still have expected to see clear advice from Cabinet on how to best effect the principles of good procurement,” Ryan said.
Ryan noted that the Government’s hiring rules do not have the force of law and the Cabinet may, if it so wishes, choose not to follow them, as failure to do so “puts New Zealand’s reputation, nationally and internationally, at risk” .
“We expected officials to ensure that the Cabinet was attentive to the principles of good acquisitions, legal risk and the risk to New Zealand’s reputation if the government was found to be not following the rules (that is, applying the rules and relevant guidance alike) and not being transparent, ”Ryan said.
The whole process started on the wrong foot. In February 2019, the government, against the advice of officials, asked NZTA to halt market share in light rail while the Ministry of Transport and Treasury examined NZ Infra’s proposal more closely.
The Treasury’s Infrastructure Transactions Unit “cautioned against considering a single proposal outside of a competitive procurement process and in the absence of a detailed business case.”
They said that “there was considerable interest from foreign investors and contractors and that there was a risk that market participants would withdraw from their commitment to NZTA if exclusive negotiations were to take place with NZ Infra.”
Treasury documents warned that the exclusive discussion with NZ Infra could result in a “strongly negative” response from the market and could damage the government’s ability to negotiate when it comes to resolving contracts for light rail.
In january Things reported that a complaint had been made to the Auditor General about the process that the Government was carrying out to choose between NZTA and NZ Infra.
In a letter sent to the Transportation Ministry on Wednesday, Ryan said he had decided not to open a full investigation on the basis of that complaint, but said he was left with a “series of unanswered questions.”
He decided that instead of initiating an investigation, he would list his views and concerns about that process in a letter.
Ryan’s letter ends with a warning that he would be on the lookout for what happens this quarter.
“I intend to keep an observation report on the progress of this project. The way the government conducts that process will not only affect the confidence and assurance that the process is being carried out properly, but it will also affect the assurance provided to the public that the outcome will deliver the outcome for the that the public is paying, ”he said. .
