Three Waters' IT system now expected to cost $659 million

Wednesday, 14 December 2022

Local Government Minister Nanaia Mahuta says the Government will create four new public water entities, with local councils taking non-financial shareholdings. (First published on April 29, 2022)

The Treasury has forecast it will cost $659 million to build and operate a new computer system for the four entities that will manage the country’s drinking and waste water after the Three Waters reforms.

It estimated in its half-year economic and fiscal update (Hyefu) on Wednesday that the system would require $75m in capital expenditure and $582m in operational expenditure.

It said there was a risk “additional funding may be required” and that the actual split between operating and capital expenditure could also differ from its forecast.

Finance Minister Grant Robertson said funding at about that level had been factored into the Government’s fiscal plans for “quite some time”.

* Fluoridation of five largest Tasman water supplies tipped to cost $1.3m

* Government slammed over tech policy inaction in wake of CTO debacle

Internal Affairs deputy chief executive Michael Lovett told Parliament’s Governance and Administration select committee at the end of June that it would need an enterprise resource planning (ERP) system of a size that would cost “in the order of $300m to $500m”.

He said then that the department was “at a point where we’re in some commercial conversations with vendors”.

Don Christie, managing director of Wellington-based software firm Catalyst IT and a board member of technology industry body NZRise, said the computer system should be built in New Zealand and could make use of open-source software.

Catalyst IT managing director Don Christie says the Government should shop locally for the technology systems needed to support Three Waters.

“If water is a national resource and treasure that we need to keep New Zealand ownership over and control over, then it behoves the procurement strategy for its IT to be regarded as a ‘strategic project’ that would build New Zealand capability,” he said.

“The Government would really undermine its Three Waters policy if it were to pick overseas companies to do this work,” he said.

Heather Shotter, executive director of the Three Waters National Transition Unit, said it had been conducting a process to identify a preferred supplier of the core IT systems the four new entities would need to manage their finances, assets, supply chain, workflow, people and customer management.

She did not comment on whether any suppliers had been contracted or shortlisted so far.

Integrating multiple existing IT systems onto one platform would be critical to realising the “longer-term transformational benefits” of the Three Waters reform, she said.

Trade agreements normally make it difficult for the Government to favour local suppliers in such procurement processes.

But Christie said it was “allowed to make strategic procurement decisions as a country”.

A $1.3b ticketing system for public transport should also have been given such status, but the Three Waters IT system was “probably even more critical”, he said.

Christie said he did not know exactly what functions the new IT system would need to support, but he assumed they would mainly concern monitoring water quality.

“There's a huge amount of open-source software and capability in New Zealand already working on these sorts of problems.”

Catalyst IT and “many other companies” would potentially be interested in the work, Christie said.

Christie said Catalyst IT had for example developed a system for Meridian Energy that monitors hydro schemes and lakes in New Zealand and overseas, “so there's definitely capability here and has been since 1991,” he said.