Wellington Scoop
Network

Transmission Gully contractor suing NZTA for $352million

Report from BusinessDesk
Transmission Gully contractor Wellington Gateway Partnership is seeking $352 million from the New Zealand Transport Agency over delays in starting the work.

The claim would increase the $850 million construction cost to almost $1.2 billion, amounting to a 41 percent increase. The government’s 2019 accounts noted the size of the claim as a contingent liability, and said it “relates to the delays in the commencement of work.”

NZTA’s contractual disputes in total are tagged as carrying a potential $385 million bill, the bulk of which relates to the Transmission Gully dispute.

The transport agency and Wellington Gateway have been tight-lipped over the claim, which was lodged in February, although NZTA noted it as a contingent liability in its second-quarter report. Despite the reference as a potential liability, NZTA assumed there was “no liability in relation to this claim.” At the same time, it said the project was on time and on budget.

The construction of the 27-kilometre stretch of highway is getting into the final leg, with the road scheduled to open in April next year. In August, NZTA decided tolling the new road would not be suitable and wouldn’t make a meaningful contribution to the cost.

Wellington Gateway won the contract to design and build Transmission Gully and maintain it for 25 years. The venture consists of Cimic Group’s PPP unit Pacific Partnerships, Accident Compensation Corp’s investment arm, and global investment manager InfraRed Capital Partners. ACC valued its 45 percent stake at $107.3 million as at June 30, 2019, up from $97.4 million a year earlier.

The PPP contract, signed in 2014, defines a claim as any claim, action, demand or suit for a payment of money, an extension of time, or relief from obligations.

An 80/20 joint venture between Cimic’s CPB Contractors and HEB Construction was sub-contracted to build the four-lane highway and expects to complete the task next year. The JV sought relief after work was delayed by the 2016 Kaikoura quake and flooding around the same time. It was granted a 20-working day extension last year.

Public private partnerships were pitched as a means of reducing the Crown’s risk on major infrastructure projects, while providing investors certainty of work.

When awarding the contract in 2014, NZTA estimated the $850 million net cost of the construction and design was about $25 million less than what it would have been under a traditional procurement process.

The price tag has shifted over the years, including a $985 million estimate in 2004, $1.025 billion in 2008, and $1.3 billion around 2012. After adjusting for inflation, the current $850 million figure would be $895 million in 2019 dollars, and the earlier estimates $1.33 billion, $1.22 billion, and $1.4 billion respectively.

The government valued the Transmission Gully PPP assets and liabilities at $854 million as at June 30, up from $603 million a year earlier.

15 comments:

  1. David J, 9. October 2019, 8:38

    This constantly changing price tag for a road we didn’t even need!!! Will we learn the evils of PPPs from it?
    Transgression Gully.

     
  2. D.W., 9. October 2019, 9:02

    The cost of constructing Transmission Gully is NOT $850 million. It is $3 billion including costs to NZTA. The $850 million is the present value of the payments to the consortium discounted to 2014 (or some other now irrelevant year) at 8% a year (compare and contrast with the near zero cost of borrowing from a bank). It;s an economist’s number not a real number that the rest of humanity understands as THE COST OF BUILDING SOMETHING. Lies, damn lies and the Dominion Post & Business Desk!

     
  3. Dave B, 9. October 2019, 11:02

    And NZTA have decided not to charge a toll for use of this road, neither a realistic toll nor even a token one, out of concern that potential users will be deterred from using it. This begs the question, Of just how much value is it, if users are not prepared to pay for the supposed benefits?
    Those people who love to complain about subsidies for public transport should pause to look at what is going on here.

     
  4. CC, 9. October 2019, 22:53

    Get rid of the profiteers and re-establish the Ministry of Works! Problems of this nature solved. Incidentally, how often did the MOW have to redo their work because of substandard workmanship?

     
  5. D.W., 10. October 2019, 7:55

    Who in NZTA decided that Transmission Gully was not to be tolled and on what advice? [Here is the NZTA’s announcement.]

     
  6. Zoe Cleese, 10. October 2019, 8:53

    DW Probably the exact same group that decided we needed the unneeded billion dollar Transgression Gully.
    These blunderheads will probably eventually toll it as that was the original plan.

     
  7. Chris Horne, 10. October 2019, 10:18

    Yes David J, “Transgression Gully” is an appropriate name for the monster motorway, foisted on our beautiful landscape and water bodies. It cuts across our Battle Hill Farm Forest Park and Belmont Regional Park. Its poorly-controlled eight-million cubic metres of earthworks have poured thousands of tonnes of silt into Porirua Harbour’s Pauatahanui Inlet, a wetland of international wildlife importance.

    So much for the “evidence” given by “experts” to the Environment Court hearings’ panel that the impacts of the construction would be “no more than minor”. All too often such “experts” get paid to tell courts what the employers of those “experts” want them to say, not the whole truth and nothing but the truth.

    “Transgression Gully Motorway” adds to NZTA’s reputation for incompetence. It follows the agency’s debacles of poor performances monitoring of work on truck-trailer towing fittings, Warrants of Fitness on motor vehicles, and the quality of asphalt used on the Kapiti Expressway. Hundreds of NZTA staff each paid over $150K p.a. should provide NZ with top quality work in all spheres of NZTA’s activity.

     
  8. Dave B, 10. October 2019, 17:03

    Transmission Folly!
    That $3bn would have gone a long way towards extending our highly-effective, environmentally-sound, electrified regional rail system to the southern suburbs and airport. The area that is chronically short of adequate transport-options to connect it with the rest of the region, particularly public transport options.
    The misguided legacy of the Hon Steven Joyce.

     
  9. Magdelena, 10. October 2019, 21:40

    Yes, give that $300million to rail instead – walk away walk away! It’s extortion.

     
  10. glenn, 11. October 2019, 6:28

    Hope all the doomsayers wont consider using it, once complete.

     
  11. Pam, 11. October 2019, 17:07

    When in their right mind decided no tolls? A Toll on this highway would have soon contributed to payment for the next one such as Otaki to Levin. Every other new motorway in the country such as Tauranga has a toll and people still use it.

     
  12. Ross Clark, 11. October 2019, 23:27

    If Transmission Gully was all about attending to the commuter woes of the Kapiti Coast, even I doubt that it would have been built. I very much doubt that there will be significant time savings to am. peak flow traffic, as the congestion will be shifted from north of Plimmerton to south of Linden. It could have much more effect in the pm peak, esp where south of Mana is concerned. People like their cars and they like to use them; why else would drivers be prepared to put up with current levels of congestion and delay? This is why significant investment in the rail system, like an extension of the heavy rail network (Dave B – as much as I would like to see this), would not have made overmuch difference at this point in the traffic network.

    The point is that much of the benefit from the project will be to non-peak traffic, which in a New Zealand context is notoriously difficult to shift to public transport, and to short-haul road freight (notoriously difficult to shift to rail). I agree that NZTA missed several tricks in deciding not to toll the road.

     
  13. Fergie Gamalang, 12. October 2019, 8:58

    Ross – car commuters will use TG to queue jump (they’ll still end up in a queue from Ngauranga south). In the off-peak many fewer will use it since TG is longer than the coastal road and much steeper. Indeed very few heavily loaded trucks will use it because of the gradients. They will crawl up the two hills which have the same gradient at Ngauranga Gorge but are twice the length. TG really needed some tunnels to be competitive. That’s why there will be no tolls on TG. Its very much an expensive white elephant of a road.

     
  14. Parematagal, 13. October 2019, 7:55

    If / when the predicted Wellington earthquake shakes the region, people might be very thankful for Transmission Gully.
    The road and rail around the Pukerua to Paekakriki coast will cease to exist; the Remutaka Hill Road will be compromised.
    That equates to no access to or from Wellington.
    Is that what these critics want?

     
  15. Robert Fox, 13. October 2019, 10:13

    What wild and unscientific claims of the soft sandy bridged Transgression Gully that is situated on and near fault lines being safe in an earthquake.
    Paramata gal I don’t know what geography you studied at school but Transgression Folly does not go anywhere near or replace the Remutaka Hill Road!

     

Write a comment: