By way of explanation, the term "consenting risk" relates to the designation and resource consents required under New Zealand legislation and regulations (including the Resource Management Act [RMA] 1991) required to deliver a major infrastructure project. In other jurisdictions, this process is often called, in simple terms, the planning and approvals pathway.
To design, construct, operate and maintain the state highway network, Waka Kotahi often requires permissions (designations, consents, concessions and authorities) from those with regulatory responsibilities for the natural and built environments such as local authorities, Environmental Protection Authority (EPA), Environment Court, culture and heritage (Historic Places Trust) and the conservation estate (Department of Conservation)4.
From the review documents we identified the following facts regarding TGP's consenting strategy:
• In June 2012, regulatory consent applications for the TGP were heard and approved by the BOI;
• The TG risk allocation matrix seen in several review documents (e.g. the DBC, EOI and RFP documents) transfers all consenting risk to the PPP proponent;
• The PSC used in the DBC was based on the consented scheme design, which was for a non-PPP developed project. As the project progressed into the ROI and RFP development phases, changes were then made to the PSC in mid-August 2013 to reflect the impact of consent conditions;
• The review documents provided show that the only "Consenting Strategy" document is the one-page Appendix N to the DBC. A more structured and detailed consenting strategy document was not able to be located for this Review, with only various drafts available (some from WGP and some from Waka Kotahi);
• In March 2013, the review documents show that the DMT received a draft discussion paper with information on the Consent Conditions Matrix developed for inclusion within the RFP schedule to the project agreement. Key information relevant to this Review and discussed in this paper include:
- There were a total of 355 designation and resource consent conditions for the TGP, covering: (i) the Waka Kotahi consented scheme design designations and resource consents for the Main Alignment (Motorway) and Kenepuru Link Road (State Highway); (ii) the Porirua City Council designation and resource consents for the Whitby and Waitangirua Link Roads; and (iii) the Transpower resource consents for the required electricity transmission line relocations;
- Wherever possible the matrix assigned responsibility for the TGP conditions to the PPP Special Purpose Vehicle (SPV);
- Some of the designation conditions were appropriate to remain the responsibility of Waka Kotahi such as securing enduring legal protection on covenants on land required for retirement and revegetation planting. Due to timeframes, some of the condition requirements (such as baseline environmental monitoring) had been started by Waka Kotahi and became the responsibility of the PPP SPV at the time of financial close;
- Some conditions were necessarily allocated to the joint responsibility of Waka Kotahi and the PPP SPV, such as the requirement to shrink the designation area following the completion of construction. Also, there are conditions that are necessarily assigned to the Preferred PPP Bidder for them to commence before financial close, such as fish passage and land stabilisation trials, which informed the development of management plans and the construction methodology; and
- All outline and management plans required to be in place to commence construction were the responsibility of the PPP SPV and although not specifically identified within the matrix these needed to be progressed by the Preferred Bidder (PB) prior to financial close to provide for a construction start in July 2014.
• An April 2014 letter to Waka Kotahi from the five councils discussed the matter of whether the WGP scheme is in general accordance with the BOI's decision, The covering page of this letter contains the following views by councils about the BOI approval and how it could be implemented:
- "...General accordance has been an important matter to assess and form a view on, as conditions NZTA.1 and G.1 of the Board's decision require the following:
NZTA.1 Except as modified by the conditions below, and subject to final design, the Project shall be undertaken in general accordance with the information provided by the Requiring Authority in the Notice of Requirement dated August 2011 and supporting documents [these include all the outline plan documents]
G.1 The Project shall be undertaken in general accordance with the plans and information submitted with the application as documented as consent numbers RC 1-14 subject to such amendments as may be required by the following conditions of consent.
These conditions require that the WGP scheme must be generally within the parameters approved by the Board of Inquiry. An important corollary is the phrase "subject to final design".
Councils understand that "in general accordance" does not mean 'exactly the same' and that they must have regard to "final design", the Board's expectation that detailed design may raise consenting issues to be resolved at a later date, and that design uncertainty was inherent in the scheme put before the Board. In this context, the Board recognised that an adaptive response to design was appropriate, and that the conditions and management plans set suitable parameters within which that adaptation could take place..".
• Guidance on the consented scheme design was provided in the May 2013 RFP documents issued to the two RFP Respondents. Specifically, paragraph 1.4.5 of Volume One of the RFP documents provides the following instructions/guidance:
- ".Respondents must note that the consented scheme design is not considered to be the optimised design for the TG Project and each Respondent is required to propose an optimised design that meets all of the NZTA's requirements as set out in this RFP within the Affordability Threshold.".
• The review documents covering the PB phase show progress reporting to the relevant project governance fora and to the Board raising the project team's increasing concerns regarding the performance of the PB in preparing for, and managing their, consent and RMA-designation obligations under the PPP contract. These concerns were occurring close to Financial Close; for example, in July 2014 the Board was advised that WGP was unable to accept consenting risk associated with Bridges 25 and 27.
• The review documents also showed that the Project Team's response (for example, as reflected in the minutes to the June 2014 Governance Group meeting) was to maintain adherence to the risk allocation position that all consenting risk was to be transferred to the PPP consortium.
• A key finding from KPMG's 2014 Lessons Learnt Report was that the consenting process between PB selection and Financial Close was particularly challenging and a key factor behind the protracted PB phase. In particular, there was concern that there was insufficient engagement with councils prior to the bid stage by both sides, which may be due to concerns about loss of intellectual property to the other bidder.
• The 2014 KPMG report also highlighted the importance of getting the consenting strategy right in order to expediate the PB phase and enable Financial Close/project commencement. That review noted that ".NZTA should engage early with the relevant councils to explain the PPP process and manage expectations around the level of detail that will be provided at the various stages. It should be made clear to bidders that there is an expectation to have a clear plan and advance the consenting process prior to submission.".
• The April 2015 P2W Detailed Business Case provides a dedicated summary of the lesson learnt from the TGP regarding managing consenting risk, Specifically, Section 12.5.2.1 advises:
- ".Consenting risk, in its various forms is a major issue for roading projects under any procurement method. However, the TGP process has identified that, although consenting risk may be allocated to the private sector, where the private sector does not come well prepared to manage this risk it creates a significant issue for the Transport Agency. Three mitigation approaches would be applied for P2W:
- Firstly, the intent, with the benefit of the TGP experience, would be to remove as much consenting uncertainty prior to issuing the RFP to bidders.
- Secondly, the designation for the P-Wk. (Puhoi to Warkworth) route is relatively wide. This provides bidders with the flexibility to achieve an optimal design without the need to encroach on land that is outside the designation.
- Thirdly, following from the first issue, the RFP would be very explicit and clear about what will be required from bidders when completing the design component of their bids and the process they have to undertake to ensure that consenting.".
• Section 10.2 of the P2W Detailed Business Case also explains the difference in consenting strategy and management approach compared to TGP:
- ".The Transport Agency began the consenting process for P-Wk in April 2012. The Agency created a Planning Alliance, known as the Further North Alliance (FNA), made up of three professional services firms and the Agency, to manage the process. The Alliance's objectives were to achieve consents that could support best outcomes for the project and to provide value for money for the Agency in the consenting process. Consents were successfully achieved in September 2014 following a Board of Inquiry process.
- The consenting strategy aimed to achieve consent conditions that would enable the highest level of flexibility for design and construction of the motorway so as to support innovation and value for money in delivery. Furthermore, the strategy identified that detailed geotechnical analysis and specimen design was not a requirement for achieving consents.
- The Alliance successfully attained a set of consent conditions that enable a degree of flexibility not seen on a New Zealand roading project in recent times. This flexibility both enables and encourages innovation in the delivery of the project outcomes, including by allowing broad scope for alignment optimisation, freedom of structural solutions, and reduced constraints to earthworks activities. Furthermore, the consents are written with an outcomes focus rather than specifying inputs or outputs. This was a deliberate aim of the Agency's consenting team to align the consents with an outcomes-focussed procurement and to prepare in case the road was procured as a PPP.
- The designation and consenting situation for P2W is significantly different to that on the Transmission Gully PPP project. TGP faced a narrow designation and challenging consent conditions, particularly in relation to erosion and sediment control and open-area restrictions during earth works. TGP was not consented with PPP in mind. However, TGP also had a well-developed specimen design.".
_________________________________________________________________
4 Excerpt from Waka Kotahi Guidelines (July 2013), “Consenting Strategy Approvals and Pathways Guide”.