Interviews - Whether the AT was sufficient, and how it was set and approved

During interviews we noted the following comments about the AT for procurement of the TGP:

•  Several interviewees noted that the PSC and AT may not have been an accurate reflection of the whole-of-life costs associated with delivering the Service Need Specification. As a result, bidders were struggling to meet the AT;

•  One interviewee noted that changes were made to the PSC during the procurement phase because one of the two shortlisted bidders advised Waka Kotahi that they could not meet the AT;

•  One interviewee recalled there was a governance decision to set the AT less than the PSC on the basis that efficiency of cost could be achieved through that additional scrutiny;

•  One interviewee recalled that the Project Team made the decision to set the AT. However, several other interviewees commented that the AT decision was set with guidance from New Zealand Treasury;

•  No Crown-related interviewees could recall/identify which specific project governance forum was responsible for the decision to set the AT based on a P75 value of the risk-adjusted PSC;

•  An interviewee representing the PPP market noted that the AT was quite low and the only way it could be achieved by the consortium was to set up an early completion bonus of six months for the builder. Similarly, another interviewee commented that there were a number of financial modelling techniques that were used to get under the AT and whether this achieved value for money for the Crown was dubious;

•  An interviewee remarked that they felt that the price agreed for TG at Financial Close was 'demonstrably unrealistic' for such a substantial and complex project;

•  Another interviewee commented on the impact of a low AT on their bidding strategy. They noted that a number of designs were developed but, in reality, none of them would be able to achieve the AT. Ultimately, they tried to show how they could demonstrate additional value for money to Waka Kotahi above the AT; and

•  One interviewee commented that the AT started on the wrong foot with Waka Kotahi driving the AT with an optimistic view of a low price. It made the procurement process quite difficult and required bidders to find scope and technical/design savings. For some of these changes this risk/cost would come back around in some form or another.