Transmission Gully to open by September 2021 after lengthy negotiations

Friday, 21 August 2020

The Wainui Saddle is the highest point on the new road and marks the boundary between Porirua City and Kāpiti Coast District.

Transmission Gully will now open by September 2021 but will cost another $208 million to build.

The Government has slammed the delays and increased costs, and has announced a “wide-ranging” review of the project.

The NZ Transport Agency (NZTA) has revealed the new opening date and costs after months of negotiations with the private partners building the billion-dollar road.

NZTA said it considered terminating its contract as part of those post-lockdown negotiations.

While the Gully road may decrease Kāpiti congestion, it will encourage more cars to whizz into town and wait even longer at the Terrace Tunnel bottleneck, says Dave Armstrong.

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The Transmission Gully route through the Wainui saddle.

The latest deal would see Transmission Gully’s cost pushed up to $1.25 billion – now $400m above an original expected $850m bill.

Transport Minister Phil Twyford said the Infrastructure Commission had been asked to oversee an urgent and wide-ranging review into the project.

“It appears the agreement signed up to by the former government was loose and failed to protect taxpayers’ money. It seems to have been rushed through without the necessary due diligence being carried out.”

He said Wellingtonians and taxpayers “deserve to know exactly what has happened”.

The Transmission Gully interchange with SH1 at Linden.

“We want to make sure future governments aren’t left in the same predicament our Government has been.”

He said while the settlement provided certainty about the cost and completion date, “it’s simply not good enough that this project has repeatedly had delays and increased costs”.

Infrastructure Minister Shane Jones said the review was important to learn the lessons for future projects.

“Both the Government and the private sector need to have the confidence to carry out large, complex infrastructure projects together.

Transmission Gully pre-paving work in the Horokiri Valley.

“We can’t have problems with Transmission Gully putting us off from using innovative procurement models to tackle our infrastructure deficit.”

NZTA transport services general manager Brett Gliddon said Covid-19 was classified as a “force majeure” event in the contract – triggering the new negotiations.

In 2014, the NZTA signed a public-private partnership deal with Wellington Gateway Partnership, which would front the costs to build the road itself, then receive annual repayments over 25 years.

The latest negotiations involved Wellington Gateway, its contracted builder CPB-HEB, the NZTA and highway maintenance company Ventia.

Kāpiti Coast mayor K Gurunathan says Wellington now needs to remain Covid-19 free.

On Friday, the NZTA said it would now make a compensation payment of $145.5m to CPB-HEB, as well as $12.5m to Gateway, and $5m to Ventia.

The NZTA also agreed to add $45.5m to the contract for a different type of pavement to be used on about nine unsealed kilometres of the road.

This would allow work to continue through winter, and could be done by New Zealand contractors, rather than the overseas contractors previously expected to do the work.

Under the new deal, the NZTA would have a monitor onsite to check on progress, and late penalties would kick in from September 27 of more than $250,000 per day.

As a mayor Anita Baker expects to receive criticism, but not abuse and threats.

“There’s quite a lot of incentive there for them to hit the date of September 27,” Gliddon said. “Which is one of the reasons why the negotiation has taken as long as it has. Obviously they wanted that date to be as far out as possible – we wanted it to be as soon as possible.”

Gliddon said under force majeure, all the parties had the option to terminate the contract.

“We – I’m sure they did as well – looked at all our options … what we ultimately decided as we continued is that this deal, with this money and the completion date, was giving the best value and delivering the road quickest out of all the options.”

He said the NZTA did an in-house examination of the costs of terminating. He said the private partners did not threaten to terminate as a negotiating tactic.

Works restarted slowly on Transmission Gully after the lockdown.

Gliddon said the agency worked hard to make sure the payment was a true reflection of the costs created by the impact of Covid-19.

“This number hasn’t just been plucked out of the air, there’s been a lot of science behind the scenes to make sure that is a true number.”

This covered the loss of five weeks of prime summer building time, complications around the high number of staff trapped overseas and changes to methodology for building the road.

Transmission Gully was first mentioned as a possibility in 1919 in The Evening Post.

Wellington City Mayor Andy Foster said city residents would welcome the new completion date.

Work started in 2015 on the four-lane, 27 kilometre road connecting Linden to Mckay's Crossing. It was meant to be completed in April, then May, then November.

Wellington Gateway Partnership chief executive Sergio Mejia said lockdown “had a severe impact on the project’s programme and capability”.

“There are a number of reasons for the severity of this impact, including the interruption to an intensive … summer works programme, material supply constraints … and the permanent loss of key personnel who had to leave New Zealand to return to their home countries at the onset of level 4 lockdown.”

He said the consortium was grateful for the patience and support of its workforce, suppliers, and the community.

“We’re very confident we can open a well-constructed and high-quality motorway to the revised timeline.”

Kāpiti Coast mayor K Gurunathan said it was a relief that a date had finally been set.

“A series of unfortunate things have happened, and the PPP [public private partnership] hasn’t helped … I know the money is huge, but the project needs to be done.” He said it was now vital that Wellington remain Covid-19 free.

Porirua mayor Anita Baker said she was pleased that there would only be a delay of a year – good news for Porirua.

“I’m very happy, obviously it’s government money which comes from taxpayers, but they’ve obviously got to spend more money to get it finished.”

She was keen to get a commitment from the NZTA about ensuring a roundabout connecting the Gully route at Kenepuru would be completed by the time the road opened.

Wellington mayor Andy Foster said Wellingtonians would welcome some certainty about the completion date.

“Particularly that the aim is next year, rather than the year after, which some people have expressed concerns might be the case.”

A spokeswoman for CIMIC, the parent company for CPB, part of the CPB-HEB joint venture, said the company declined to comment.

HEB referred questions to the Gateway Partnership.

Gliddon said the compensation payment to CPB-HEB would be paid in instalments and the final $7.5m would only be paid if the road opened on September 27.

In February, the NZTA announced it had settled “historic” claims by CPB-HEB, and would pay it $190m – but secured the previous November opening date.

Gliddon said the latest payments were separate from the $125m annual payments to the consortium for the 25 years of the contract. He said the road was now 85 per cent complete.

By the numbers

The new cost of building Transmission Gully is $1.25 billion – an increase of $400m from the original $850m expected cost.
This comes after “force majeure” clause in the public private partnership to build the road triggered new negotiations, following the lockdown.
It includes $145.5m for the builder CPB-HEB, $12.5m for the Wellington Gateway Partnership, and $5m for highway maintenance contractor Ventia.
Another $45m has been added to the contract to allow for a different type of pavement, which can be applied by New Zealand contractors, and during winter months.
In February, the NZ Transport Agency announced a $190m settlement for “historic claims” by CPB-HEB.