Scoop Election 08: edited by Gordon Campbell

Gordon Campbell on the $200 million bill for roading consultants

July 16th, 2012

In this time of fiscal austerity, some people are being asked to be more austere than others. Thus, the news on RNZ this morning that transport consultants have been paid over $200 million since 2009 for investigation and design work on five of New Zealand’s seven roads “of national significance.” (Just how a road can be nationally significant when there seems to be no national economic plan to which they can make a nationally significant contribution is probably a story for another day.)

For the record, the nationally significant roads in question are the Puhoi to Wellsford road, Auckland’s western ring route, the Waikato expressway, Wellington’s northern corridor and Christchurch motorways. According to Radio New Zealand’s Official Information Act inquiry, nearly half the money in question – $92 million – was paid out for planning work on the northern corridor.

In a previous lifetime of course, almost all this work would have been done under virtually one roof, at the Ministry of Works. Centralised planning of that sort has long since fallen into disfavour. Supposedly, a de-centralised process of competitive tendering and the precise identification of costs at every stage of planning and construction will deliver the taxpayer greater value for money. It is hard to see much evidence to support that claim. One can only wonder at the logic of the current model whereby huge sums are paid for single projects, with those costs replicated again and again, across the entire network. Cost detailing seems to be less about delivering value for money than it is about manufacturing imaginative new forms of cost opportunity for the consultants involved.

This roading example has become a familiar story, across the entire public service. In the past, the centralised Ministry model readily lent itself to the Gliding On stereotypes of tea trolleys, morning crossword puzzles and general slackness. Some of that criticism was valid. Even so, and even adjusting for inflation, it is hard to imagine the Ministry of Works spending $92 million merely on planning how to build a single road.

In place of the model that managed to build the bulk of the country’s transport infrastructure, we are now stuck with the shiny new model of contracting out, which has left us at the mercy of a predatory consultancy class – since, in a country of only four million, only a limited number of skilled practitioners exists, and this elite has been virtually invited to charge the earth for their services. Cost capture rather than effective competition has become the norm. This was only to be expected, given a market model that doesn’t deliver effective competition as promised within a country of 300 million, let alone in one of only four million people. Here’s how it works in the US, and (increasingly) here as well:

In sector after sector of our political economy, there are still many sellers: many of us. But every day, there are fewer buyers: fewer of them. Hence, they enjoy more and more liberty to dictate terms—or simply to dictate.

It is worth setting aside the hymnbook of the Treasury economists and reading the above article, which describes how corporate monopolies are exerting their control over almost every aspect of the American economy from Silicon Valley to poultry farming in the Alleghanies, to the book trade in Manhattan, to the craft beer industry. The capacity of consultants to virtually dictate the price for their services is a symptom of the same disease. That prospect was one reason why we had the likes of a Ministry of Works in the first place, to retain the best available expertise in-house, and thus keep the cost-plus temptations under control.

No doubt, we now know a lot more about how to build better roads, and safer ones. That’s good. Yet all up, the seven roads of national significance will cost more than $10 billion over the next decade or so. That’s an incredible sum, when other services are being cut back or abolished. For starters, it would be interesting to know what the cost of coming up with the concept of a ‘road of national significance’ has been. Turn to this page for instance, and you will learn to your considerable astonishment that “The RoNS are ‘lead infrastructure’ projects – that is, they enable economic growth rather than simply responding to it.” Gosh, an active, go getting road that leads economic growth rather than a road that simply lies back and smells the daisies! C’mon taxpayers. Do you want New Zealand to have brawny entrepreneurial roads – or do you want to foster a network of passive roads that wimpily allow you to drive back and forth on them to little or no national economic advantage? Surely, we want gold medal winning roads that only gold plated consultants can deliver.


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