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.

ENDS

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    1. 11 Responses to “Gordon Campbell on the $200 million bill for roading consultants”

    2. By Draco T Bastard on Jul 16, 2012 | Reply

      The market works only with perfect competition. As we don’t have that then market capture and manipulation is the only possible outcome of putting market policies in place. I’m sure that some of the more vocal proponents of the market knew that – the massive increase in incomes that they’ve seen over the last few decades while everyone else stayed the same or went backwards would tend to indicate this anyway.

    3. By donna on Jul 16, 2012 | Reply

      The roads of national significance are a total scam. Every area except Taranaki got one, but who really thinks a highway between Puhoi and Wellsford will improve the nation’s productivity, as claimed? In combination with the likely closure of the North Auckland rail line, the only ones to benefit from this folly will be National party bulk funders, the road transport industry (presently logs are bought down to Auckland by rail).
      I don’t know about the other RoNs, but the Labour government commissioned a report on the Puhoi-Wellsford RoN. This concluded SH1 would need upgrading but since most of the congestion was at holiday time it wasn’t a priority. The report also noted that it would be preferable not to have people commuting by road from that area north of Auckland into Auckland, and a whizz-bang new highway would work against that. The report was re-written for the new National government in 2009, and – oddly – came to the completely opposite conclusion. In other words, these consultants are clearly tailoring their reports for the government of the day. If Stephen Joyce has a brain fart and deems something to be a road of national significance, a consultant will, for a considerable fee, provide a justification for it. So much for the ‘transparency’ Gerry Brownlee was blathering about on the radio this morning.
      In the meantime, these roads are bleeding us dry (costings have a habit of disappearing off the transport agencies website). Still, when the energy crunch comes, it will be nice to have some expensive tarmac highways to ride our bikes on.

    4. By timbo on Jul 16, 2012 | Reply

      We keep being told that the public service must be downsized in order to reduce government costs – however replacing civil servants with contracted private consultants will cost twice any achieved savings – the use of consultants in NZ amounts to nothing more than an attack on the PSA members – union busting

    5. By Kat on Jul 16, 2012 | Reply

      Federated Farmers through natural National party affiliations coupled with the Transport Agency set the scene for roading. Has anyone wondered why the rail link from Whangarei to Marsden Point has never progressed? It will get worse before it gets better.

    6. By Dave on Jul 16, 2012 | Reply

      We would be better with the Ministry of Works to build our roads – that’s very funny.

      If it was famous for one thing, the MoW was famous for being inefficient.

      But more specifically is was also known for it’s massive time and cost over-runs for pretty much every project it took on.

      Until it was privatised, it was unheard of for a major project to come in on time and on budget – something that is almost normal now.

      Gordon – if you’re going to write another article about roading, do youself and your readers a favour and at least get an elementary knowledge on road construction (i.e. typical design and investigation costs for $10b of roading will be 500-800% more than what’s been spent so far).

      10-15% is normal, and you complain 1% is excessive.

      Then you rant against infrastructure projects leading economic development when it’s obvious you don’t even know what it means.

      (Clue – research the why it’s so much better for governments to spend on infrastructure in recesions, than at other times).

      But well done on backing the MoW to build our roads. I haven’t laughed so much in ages.

    7. By Plan B on Jul 17, 2012 | Reply

      The trouble for me is that I actually think that the MOW did get the job done. It is all around us. Nearly everything was built by them. So maybe they did not do so bad a job after all. As for the cost overruns, who knows, costs are now accounting tricks. Trust is lost in so many professions and institutions it is simply too hard to know who or what to believe.
      The Killing competition item in Harpers was simply the most chilling article I have read on what is happening to our society.

    8. By Kent Duston on Jul 17, 2012 | Reply

      Dave – If the private sector and their consultants are so crash-hot, how come the cost of the Basin Reserve flyover has risen from $27 million in 2009 to $109 million today for a design that hasn’t changed one iota? Because it would seem that on the surface of it, the consultants concerned are entirely rubbish at effective estimation – rather like the MoW you’re so keen to disparage.

    9. By peterlepaysan on Jul 17, 2012 | Reply

      Presumably these rons have cycleways attached as great revenue earners.

    10. By Joe Blow on Jul 17, 2012 | Reply

      The flipside to this story and what makes this story even sadder is that planning roads (not even building them) is probably the only government investment in infrastructure and government stimulation of economic growth under this government….

    11. By Nathan B on Jul 18, 2012 | Reply

      Gordon,

      Following up on Dave’s factcheck, you completely misrepresent that there is no competition in the market vis-a-vis, consultants charging what they like. That iutter bollocks.

      Fact: consultants cut each others lunch via discounting charge-out rates to win the tender. THAT is competitio.

    12. By Ingolfson on Jul 18, 2012 | Reply

      As one of those consultants you seem so fond of blaming – hey, if there were any jobs IN government doing that work, and said government wasn’t so crazily set on wasting our nation’s remaining wealth on more motorways, I might work for them.

      @peterlepaysan

      This government sh##ts on cycling. Don’t let a few tourist cycleways fool you. Cycling is a cost-effective transport mode, Joyce and Brownlee never wanted anything to do with it, which is why cycling infrastructure funding remains at less than 1%, i.e. below actual use even.

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