Conclusions/Findings - Whether the project governance structure had the knowledge and experience of delivering PPP construction projects

The review documents and interviews all acknowledge that Waka Kotahi was implementing New Zealand's first road availability PPP project. The Waka Kotahi Project Team mobilised quickly after the November 2012 decision to proceed with a PPP to procure experienced resources, leverage existing Waka Kotahi capability and experience in PPPs, and set up an initial project governance structure. Waka Kotahi's ability to mobilise quickly and set up a project team management structure reflected its extensive capital works and project delivery experience.

We believe that the governance structure used for the TGP was an amalgam of how Waka Kotahi would traditionally deliver a major infrastructure project supplemented by PPP-specific advice. While we can appreciate that Waka Kotahi would want to put in place a governance model that could have the best interfaces/alignment with the rest of the Waka Kotahi business, we think for a first availability PPP project that Waka Kotahi should have relied more on a benchmark PPP governance structure.

The key issue, in our mind, about Waka Kotahi's PPP capability and experience is that it appears the project governance structure may have inadvertently led to some expert advice not being heard at some of the right forums, at the right time. This result can happen if (as reported in one of the Lessons Learnt reports) a governance structure is perceived as complex with multiple groups involved. Our best example is the role of the PAG, which we read in the formal project governance structure as having a significant PPP input role, but its actual role in the overall governance structure was effectively limited to being an "advisory group" to both the DMT and PPP Project Director.

While all members of the DMT and the PPP Director were experienced project delivery managers, most of these roles would not have had demonstrated availability PPP experience at that time of TGP's procurement. For a first time PPP project, this means the role of experienced PPP practitioners would have been critical resources for the Waka Kotahi Project Team. However, having a "hybrid" project governance structure (i.e. that combined a Waka Kotahi traditional project management structure supported by a PPP advisory group) may not have allowed the full potential of all advisers to be used by the Project Team, particularly to assist them make key decisions.

From considering both the review documents and interviews, we agree with the governance themes identified in the 2014 Lessons Learnt reports that the TGP governance structure was complicated with multiple groups established and the respective roles/distinction between them was not clear. To us, this suggests a governance structure that could have been tighter particularly around who was making and approving key PPP recommendations. As raised already, one example of this was the responsibility given to the Project Team to set the AT when the TGP decision matrix assigned that responsibility, in the first instance, to a governance body above the Project Team. Even if the setting of the AT was "assigned" to the Project Team, this was not, in our view, clearly reported to the Board - this means a basic governance control of separating the setting of recommendations and approval/endorsement was not followed.

Another example raised earlier in this Report is the level of detail recording the decision made by the Project Team to include a revised design speed of 110 km/hr in the RFP documents and that the PSC risk allocation was sufficient to cover this requirement. We would have expected to see more specific detail explaining the quantum of risk allocation, and independent assurance confirming this approach. Further, we would have also expected this was a decision that should have been endorsed by either the DMT or the Governance Group rather than just being made by the Project Team.

Our other key observations with the governance structure used for the procurement phase of TGP are:

•  We could not confirm if the Board had formally considered and endorsed a recommended PPP project governance structure, specifically when the project governance structure changed in March 2013;

•  The governance structure used appears to have multiple groups involved in key decisions (e.g. the DMT and PAG) but used a higher-level Governance Group that appears to be have had little or no involvement in key decisions during the procurement phase during 2013 (we only saw project documents showing the Governance Group receiving formal policy papers from February 2014);

•  We did not see any review documents that the Governance Group had reviewed and endorsed key decision papers during 2013 prior to the Board's consideration;

•  The Board did not appear to have its own independent PPP adviser but instead relied on briefings from Waka Kotahi's management, senior project team representatives, and experienced project team advisers (when invited to Board meetings for key decision papers). By appointing their own specialist and experienced PPP adviser, the Board would have had access to an independent view on PPP project matters presented by the project team. Importantly also, the role of an independent adviser would be to flag to the Board any PPP matters that it should be interested in; and

•  We also note that during the TGP procurement the Board would have been considering important PPP issues at the same time as normal Board matters. In our view, the Board may want to consider if a board sub-committee should be given the charter to deal with detailed PPP matters and report to the Board when key decisions are required.

Our other observation is the Lessons Learnt section in the P2W Detailed Business Case provides a good synopsis of what lessons from TGP informed the P2W project arrangements. While these Lessons Learnt actions are a positive sign of continuous improvements for which Waka Kotahi should be commended), what this information also does show is how much effort was involved by many parties to implement New Zealand's first road availability PPP project.

Our overarching recommendation is that we believe governance and decision structures should be improved for future PPP projects. Our specific recommendations are listed below.