Which roading project is the most important for the Wellington region?
OPINION: Somewhere north of Wellington in the not-too-distant future, public servants will come face to face with bankers wearing Armani suits and polished leather shoes. The encounter will determine the fate of Transmission Gully.
Ninety-three years after the idea of constructing an alternative route out of the capital was first mooted in the Evening Post, Transmission Gully is within touching distance.
The Cabinet has given the NZ Transport Agency permission to borrow the funds needed to build and operate the highway using a public-private partnership. Construction is scheduled to begin in 2014 and to finish in 2020.
Once the road is built, freight and people will move in and out of the capital more smoothly, motorists will no longer be subject to long delays or be brought to a complete halt by a single accident blocking the existing coastal highway. Most importantly, the prospect of Wellington being cut off from the rest of the North Island by a major natural disaster will be reduced.
However, the project brings with it risk as well as opportunity.
Under the Government's preferred funding arrangements the private sector will be responsible for financing, designing, building and maintaining the highway and the Transport Agency will pay for it through annual payments that will begin once the road has been completed and continue for about 25 years.
Structured properly, the deal will shift the risk of construction delays and cost over-runs from the public to the private sector. The Transport Agency says the structural and geotechnical challenges involved in pushing a four-lane highway 27km through rugged, fractured country lend themselves to private-sector innovation.
The devil will be in the detail, however. Overseas experience of public-private partnerships has been mixed. In 2003, a study by the National Audit Office in Britain found that public-private partnership projects were much less likely than traditionally managed projects to exceed their budgets or run over time.
However, there have also been many instances of these partnerships going bust and leaving tax and ratepayers to pick up the pieces as well as instances of governments and councils locking themselves into long-term contracts for services they no longer require.
The public servants deemed incapable of managing budgets, meeting deadlines and coming up with innovative solutions to technical challenges will need to prove a whole lot better at negotiating contracts. The investment banks that typically put together these consortiums are not charitable institutions.
New Zealand has been slow to jump on the "PPP" bandwagon. So far these partnerships have been used only twice – to build two schools in Hobsonville, in Auckland, and the new prison at Wiri. The delay has provided an opportunity to learn from overseas experience.
The lesson is that every twist and turn in the road must be nailed down and all eventualities anticipated. Hopefully, the Transport Agency and the Treasury have learned it. Otherwise taxpayers will take a bath.
- © Fairfax NZ News