Reference: 20240621
27 September 2024
Andrew Riddell
[FYI request #27887 email]
Dear Andrew
Thank you for your Official Information Act request, received on 2 August 2024. You
requested the following:
Please provide copies of the Quarterly Investment Reports for June 2023,
September 2023 and December 2023, being the reports missing from your web
page on quarterly investment reporting.
On the 13 August 2024, the Treasury extended the timeframe for working on your
request by 20 working days. This was due to the consultations necessary for
completing the request.
Information being released
Please find enclosed the following document:
Item Date
Document Description
Decision
Treasury Report T2023/1394:
1. 11 August 2023
Investment Management System
Release in part
Quarterly Update
I have decided to release the relevant parts of the document listed above, subject to
information being withheld under one or more of the following sections of the Act:
• section 9(2)(f)(iv) – to maintain the current constitutional conventions protecting
the confidentiality of advice tendered by Ministers and officials,
• section 9(2)(g)(i) – to maintain the effective conduct of public affairs through the
free and frank expression of opinions,
• section 9(2)(g)(ii) – to maintain the effective conduct of public affairs through
protecting Ministers, members of government organisations, officers and
employees from improper pressure or harassment,
• section 9(2)(i) – to enable the Crown to carry out commercial activities without
prejudice or disadvantage,
• section 9(2)(j) – to enable the Crown to negotiate without prejudice or
disadvantage and,
• section 9(2)(k) – to prevent the disclosure of information for improper gain or
improper advantage.
1 The Terrace
PO Box 3724
Wellington 6140
New Zealand
tel. +64-4-472-2733
https://treasury.govt.nz
Direct dial phone numbers of officials have been redacted under section 9(2)(k) in
order to reduce the possibility of staff being exposed to phishing, social engineering
and other scams. This is because information released under the OIA may end up in
the public domain, for example, on websites including Treasury’s website.
Information publicly available
The following information is also covered by your request and is publicly available on
the Budget 2024 website:
Item
Date
Document Description
Website Address
Treasury Report T2023/1967:
https://budget.govt.nz/informatio
2. 4 December 2023
Improved management of the
n-release/2024/finance.htm
capital investment portfolio
Treasury Report T2024/243:
https://budget.govt.nz/informatio
3. 21 February 2024
Ministerial Engagement on
n-release/2024/finance.htm
investment management
Accordingly, I have refused your request for the documents listed in the above table
under section 18(d) of the Official Information Act - the information requested is or will
soon be publicly available.
Some relevant information has been removed from documents listed in the above table
and should continue to be withheld under the Official Information Act, on the grounds
described in the documents.
Please note that this letter (with your personal details removed) and enclosed
documents may be published on the Treasury website.
This reply addresses the information you requested. You have the right to ask the
Ombudsman to investigate and review my decision.
Yours sincerely
Lucy Connell
Head of Investment Policy
2
link to page 4
Table of Contents
1.
Treasury Report T2024-1394 Investment Management System Quarterly Update
1
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IN-CONFIDENCE
Treasury Report: Investment Management System Quarterly Update
Date:
11 August 2023
Report No:
T2023/1394
File Number:
Action sought
Action sought
Deadline
Hon Grant Robertson
Refer this report to the Prime
21 August 2023
Minister of Finance
Minister, associate Ministers of
Finance and Ministers of capital-
intensive agencies.
Contact for telephone discussion (if required)
Name
Position
Telephone
1st Contact
Rebecca Wembri
Senior Analyst,
s9(2)(k)
N/A
Investment
(mob)
Management System
(IMS)
Erana Sitterle
Head of Investment
s9(2)(k)
s9(2)(g)(ii)
Management Policy,
Investment
Management System
(IMS)
Craig Murphy
Manager Investment
s9(2)(k)
s9(2)(g)(ii)
Management System
Minister’s Office actions (if required)
Return the signed report to Treasury.
Note any
feedback on
the quality of
the report
Enclosure:
Yes (attached)
Treasury:4836791v22
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Treasury Report: Investment Management System Quarterly Update
Executive Summary
There has been a significant al ocation of capital funding in recent years in response to a
range of issues, from economic headwinds before and after COVID to the recent extreme
weather events. This has led to an investment pipeline larger than the market has capacity to
deliver. While there may be fiscal headroom for increased capital investment, the operating
funding requirements for capital investments wil also make it challenging to achieve
increases in investment given the pressure on operating expenditure. System-level insights
from the March to June 2023 quarterly investment reporting period indicate that agency
intentions remain short term focused, and large-scale capital projects dominate in upcoming
budget years.
Given these challenges, there is a need for reprioritisation and sequencing of the investment
pipeline, to ensure we are focused on the highest priority investments and can deliver on
Government objectives. We are developing initial principles for prioritisation of capital
expenditure, structured around asset management, cost escalation, and de-risking projects.
This will be developed further as part of Budget 2024 design and strategy.
Recommended Action
We recommend that you:
a
refer to the Prime Minister, associate Ministers of Finance and Ministers of capital-
intensive agencies.
Refer/not
referred.
Craig Murphy
Manager, Investment Management System
Hon Grant Robertson
Minister of Finance
_____/_____/_______
T2023/1394 Investment Management System Quarterly Update
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Purpose of Report
1.
This report provides you with:
a
the macroeconomic and fiscal context and the market capacity considerations
that are impacting deliverability
b
proposed principles to guide reprioritisation and sequencing of investments to
inform Budget 24 design,
c
key system-level insights from the March to June 2023 quarterly investment
reporting period.
The investment pipeline is far larger than the capacity to deliver
The investment pipeline has grown significantly but agency investment intentions remain
short-term focused
2.
There has been a significant al ocation of capital and related operating funding in
recent years including the New Zealand Upgrade Programme, the Infrastructure
Reference Group projects, the Infrastructure Acceleration Fund, and more recently the
National Resilience Plan. These programmes have been in response to a range of
issues:
•
the impact to the construction market due to economic headwinds prior to COVID
and as a result of COVID;
•
improving housing affordability through the provision of funding for infrastructure
to support housing;
•
improving the resilience of infrastructure;
•
responding to regions severely hit by recent extreme weather events; and
•
responding to the long-run infrastructure gap in New Zealand.
3.
We have greater visibility over what agencies are planning through the Treasury’s
Quarterly Investment Reporting (QIR), including the backlog of asset maintenance and
renewals which are needed to continue delivering expected levels of service.
4.
There has also been a growth in ‘mega projects’ being planned by agencies, including
Auckland Light Rail, Let’s Get Wel ington Moving, New Zealand Battery Project and
Additional Waitemata Harbour Connections. These large-scale capital investments
dominate likely funding requests in upcoming Budgets over the forecast period.
5.
At the same time, however, investment intention (pre-business casing) reporting
remains short-term focused, with 40 of 56 investments expected to seek funding
between 2025-29. There also remain large gaps in this data; a third of agencies are not
submitting investment intentions data, with Te Whatu Ora being the most significant
gap at this stage.
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Market conditions constrain our ability to deliver the pipeline
6.
Although conditions are easing, the market continues to be challenging. Delivery of
large-scale investments is dependent on large Tier 1 firms which dominate the market
and are currently at capacity. System leaders highlight the slowdown in construction
activity over the last quarter, indicated by easing labour market conditions, slowing
price growth and the decline in the number of new construction consents. This is in line
with the wider economic slowdown. Although the labour market has eased, it remains
tight and post-COVID supply chains continue to be disrupted globally.
7.
Agencies’ ability to deliver funded investments is limited by market capacity as demand
remains significantly higher than supply. Actual capital expenditure over recent years
averages between $5 billion and $7 billion, which is far below what agencies are
forecasting to spend, as per Figure 1 below. Many of the projects within the investment
programmes mentioned in paragraph two above are only just commencing delivery,
and supply pressures are exacerbated by additional demand and regional market
capacity posed by the cyclone and flood responses.
Figure 1 – Investment capital expenditure
Delivery
Planning-Funded
Intentions-Funded
Planning-Unfunded
Intentions-Unfunded
25
)
20
ture ($b
endi
p 15
tal ex
10
capi
ised
5
nnual
A
-
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
FY32
FY33
FY34
FY35
The macroeconomic and fiscal context also makes the pipeline challenging
8.
While there may be fiscal headroom for increased capital investment to begin to
address some of New Zealand’s infrastructure gaps and investment needed to improve
public services, the binding constraint over recent years has been market capacity to
be able to deliver this investment. In addition, associated operating funding
requirements for capital investment (to service and maintain the asset over its life) will
make it challenging to achieve an actual increase in investment given the pressure on
operating expenditure. For digital investments there is also a trend towards ‘as a
service’ platforms, which moves capital expenditure into operating expenditure.
9.
The market has also driven increases in costs; while the market may be softening,
costs continue to rise due to high inflation, supply chain issues and high demand.
10. Alongside this advice, we are providing you advice on whether the Multi-Year Capital
Al owance should be increased given it is currently at $1.293 billion. This advice takes
into account the current market and economic context, as wel as the credibility of the
fiscal forecasts and signals to the market (T2023/1583 refers).
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Reprioritisation and sequencing is needed across the investment pipeline
11. In our previous quarterly reporting to you, we have highlighted the need to smooth the
investment pipeline to better match market capacity.1 Delivery delays are acting to
‘smooth’ the pipeline, but this is resulting in cost over runs and we do not see this as a
sustainable approach. A more structured pipeline of investments Cabinet has approved
and sequenced will support the market to invest in capability.
12. As part of our continued improvement to quarterly investment reporting, we are seeking
to build a better picture of market capacity (including working with Te Waihanga
Infrastructure Commission). We are looking to incorporate a wider analysis of market
capacity in the economy covering public and private activity to establish a more robust
understanding of market capacity.
It is instructive to look to Australia to compare the market context and approach to
prioritisation
13. In May 2023, the Australian Federal Government announced a 90-day review of the
Federal Government’s 10-year, $120 bil ion infrastructure pipeline to ensure it is
focused on projects which improve long-term productivity, supply chains and economic
growth in cities and regions. The New South Wales state government is also reviewing
its $88.4 billion pipeline (projects are currently running 9% behind schedule).
14. Australian commentators and experts are warning that the pipeline of projects is far
larger than the sector’s capacity to deliver given skil s shortages, input cost increases
and rising interest rates and there is a need to sequence to align with delivery capacity.
Preparing our approach to prioritisation to inform Budget 2024
15. While the recent rapid savings exercise was focused on operating expenditure, we
noted in this advice that there is a need for reprioritisation of capital expenditure
(T2023/1409 refers). 2 Budget 2024 provides an opportunity to ensure the investment
pipeline is focusing on the highest priority investments and can deliver on the
Government objectives.
16. This is needed to improve deliverability, reduce cost overrun risks and ensure we are
not creating future pressures by underfunding of critical asset maintenance and
remediation. We are developing initial principles for prioritisation structured around the
fol owing elements:
a
Asset management – prioritising the maintenance, renewal and remediation of
critical assets so agencies can continue to provide expected levels of service and
make more efficient use of assets we have (including rebuilding critical assets
fol owing the North Island Weather Events).
b
Cost escalation – as cost escalations are persisting across investments in
delivery, there may be a need to factor in fiscal space for these.
c
De-risking projects – this would involve Treasury, working with agencies and
system leaders, to review investments in planning to determine whether changes
can be made to reduce risk (including cost overrun risk) and improve
deliverability. Changes could relate to scope (designing alternative, lower risk,
solutions), scale or timing (i.e., phasing large projects into more discrete stages).
1 T2023/703 refers.
2 We note that the data reported by agencies for the June 2023 quarter does not capture changes agreed in the
recent rapid savings exercise, as agencies were asked to report on the period ending on June 30. The changes
created through the rapid savings exercise will be reported in the September QIR.
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Undertaking a prioritisation exercise capitalises on the wider programme of changes to the
investment management system
17. The system setting changes set out in the Cabinet paper
Resetting Cabinet’s
expectations for investment management, as well as improved data and analysis
through the Treasury’s QIR, will provide you and Cabinet with greater visibility of
investments and the ability to engage at each stage of the streamlined business case
process. This wil support any reprioritisation process that is undertaken as outlined
above.
18. These system setting changes are the start of wider changes to the investment system
to come (to the business case, assurance and reporting process), to support a more
disciplined approach to investment planning and improved deliverability of the
investment pipeline. We will provide a further update on these changes, as wel as
approaches to reprioritisation through the September 2023 IMS quarterly update advice
and Budget 2024 design and strategy advice to be developed post-election.
Key insights and actions from June 2023 quarterly investment reporting
19. As mentioned above,
intentions reporting remains short-term focused (see Table 1
below). The most significant absence in intentions data is Te Whatu Ora, which is not
yet able to provide intentions reporting. The current expectation is that Te Whatu Ora
will be in a position to submit a more fulsome return in the December 2023 quarter.
Table 1 – Summary of investment intentions reported
Estimated period when funding sought from Budget
2025-2029
2030-2034
2035+
Data and Digital
6
-
-
Infrastructure
24
6
2
Specialist Equipment
9
7
-
Organisational Change
1
1
-
Total
40
14
2
Estimated total value of funding (midpoint, $b)
59.4
29.5
4.8
20. Data on
planning highlights an uneven spread across the next couple of years, with a
significant dip for Budget 2026, as shown in figure 2. Large scale capital investments
dominate upcoming Budget years – five investments alone make up 77% of the value
of investments in planning.
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Figure 2 – Investments in planning – funding sought per Budget year
70
60
50
($b)
40
sought
ng
30
t fundi
20
udge
B
10
0
CAPEX
OPEX
CAPEX
OPEX
CAPEX
OPEX
CAPEX
OPEX
B24
B25
B26
B27+
B24
B25
B26
B27+
s9(2)(f)(iv)
s9(2)(f)(iv)
s9(2)(f)(iv)
s9(2)(f)(iv)
21. There are 148 investments reported as being in
delivery, a net increase of six
investments from the last quarter. Cost pressures and delays remain an issue and we
expect to see further funding requests for cost escalations come through in Budget
2024.
Table 2 – Summary of cost pressures and delivery delays
Total in delivery
Investments
Investments reporting cost
Delivery delays
signalling cost
pressures
pressures
No.
Approved No. Approved No. Approved Value of
No. Approved Av.
Budget
Budget
Budget
cost
Budget
delay
($b)
($b)
($b)
pressures
($b)
(years)
($b)
Infrastructure
84
45.5
44
31.3
16
14.0
3.1
38
14.8
1.5
Data and
37
6.6
11
2.0
10
0.6
0.1
18
1.9
1.5
Digital
Specialist
15
7.7
2
1.7
1
< 0.1
< 0.1
6
4.6
2.3
Equipment
Organisational
12
1.9
1
0.4
1
0.4
< 0.1
4
0.9
1.3
Change
Total
148
61.7
58
35.4
28
15.0
3.3
66
22.2
-
Note: signalled cost pressures refers to where an agency has indicated a cost pressure is likely but not
quantifiable at this stage; reported cost pressures refers to where an agency has indicated a cost pressure
is being realised and has been quantified.
22. For this quarter we introduced annual
benefit realisation reporting for investments
completing delivery in FY23. Nine agencies reported 38 investments that ful y or
partially completed delivery in the year to FY23. Building this data set wil give us a
better view of the ful lifecycle of investments and al ow us to better compare delivery
against international benchmarks (i.e., outturn costs compared to original budget at the
time of funding decision).
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Specific investment updates to note
23. The
first monthly reporting for the Scott Base redevelopment has been received.
The key points are:
a.
The tender from the main contractor Leighs Construction has been received and
is s9(2)(j) and
higher than anticipated. In the opinion of the appointed independent
s9(2)(i)
Quantity Surveyor who is providing cost analysis advice, proceeding with the
Cabinet agreed scope wil require additional funding.
b.
Overal , the project is behind schedule but is currently on track to meet major
milestones – mitigations are in place. However, if the project cannot commence
in a timely manner the shipping date may need to be rescheduled by a season.
24. We are working with the Ministry of Foreign Affairs and Trade and wil provide you with
a further update in the week commencing 14 August 2023.
25. Cost escalations for
Project iReX make up approximately 36% of the total reported
cost escalations. Following your commission, we will provide Ministers with a draft
Cabinet paper on 17 August which sets out options for Cabinet consideration on how
the project could proceed and what outcomes the Crown is most interested in securing
(T2023/1562 refers).
26. You are also taking a paper to Cabinet related to the cost of claims and continuation on
the
Parakiore Recreation and Sport Centre Project (T2023/1553 refers). This paper
is aiming for consideration at the Cabinet Economic Development Committee on 30
August and Cabinet on 4 September 2023.
27. Annex 1 provides key data analysis from June 2023 quarter.
Next Steps
28. Table 3 below sets out key areas of activity we will be undertaking:
Table 3: Key areas of activity
Activity
Timeframe
September 23 quarterly investment reporting
Requests to agencies mid-September
requests to agencies. This will focus on:
Advice to Ministers post-election
a cost escalations that may require
funding
b any funding requirements to support
critical asset renewals or remediation,
and
c improving investment intentions data
Advice on Budget 24 design and strategy, including Post-election
options on approaches to reprioritisation of capital
investment
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Annex 1: Quarterly Investment Report key insights (separate attachment)
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Investment Management System
June 2023 Quarterly Update
August 2023
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Purpose
• This slide deck provides:
– Investment context
– An Investment Lifecycle overview
– An indicative investment cashflow forecast
– Specific Fiscal Risks in an investment context
– Monthly Reporting for the redevelopment of Scott Base
2
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Investment context
•
Capital allocations continue to be large
– $17.4b capital allocated at B23
– As well as Budget allocations there are large capital programmes including NZUP and Infrastructure
Reference Group programme
– Growth in ‘mega projects’ are being planned by agencies, including ALR, LGWM, NZ Battery and
the additional Waitemata Harbour Connections.
•
Market conditions are changing, but constraints remain
– Overall inflation has slowed but pressure is broad-based across non-tradeables and services
– Manufacturing and services sectors are bearish on sales and lower selling prices
– Global disinflation is well underway, but renewed commodity price volatility is a risk
– Pressure across all areas of investment
•
System leader for service transformation: Public sector has capacity for one service
transformation
•
Replacing aging IT system across the public sector will be priority investment over next 5-10yrs.
3
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System Leader Update
•
Delivery of large scale investments is dependent on large Tier 1 firms which dominate the market and are
currently at capacity
•
Observed slowdown in construction activity over the last quarter, indicated by:
– Easing labour market conditions
– Slowing price growth
– Declining number of new construction consents
•
Cyclone and flood response will be impacted by regional market capacity constraints
•
The macro shift from capital to operating for data, digital and cyber security investments continues
Government Chief Data Steward
Government Chief Information Security Officer
Government Chief Digital Officer
Government Procurement and Property
Service Transformation Lead
Construction Accord
4
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Investment Lifecycle Overview
Investment
Investment
Investment
Investment
Intentions
Planning
Delivery
Realisation
Pre-business casing
Investments that have secured
Investments that are in the
Investments where agencies
investments that should be in
funding, have contracts signed
process of developing a Business
are evaluating benefits relative
the Strategic Plans of
and have entered the “build
Case.
to original business case
agencies.
phase”
Investment Pipeline
67
171
148
25
Investments in Intentions
Investments in Planning
Investments in Delivery
Investments in Realisation
14
18
24
9
Agencies
Agencies
Agencies
Agencies
Intentions
No.
Planning
No. Value
Delivery
No. Value
Realisation
No. Exceed/met
($b)
($b)
expectations
Infrastructure
39
Infrastructure
110
114
Infrastructure
84
46
Infrastructure
19
17
Data & Digital
8
Data & Digital
31
4
Data & Digital
37
7
Data & Digital
4
1
Specialist Equipment
16
Specialist Equipment
20
10
Specialist Equipment
15
8
Specialist Equipment
1
1
Organisational Change
4
Organisational Change
10
1
Organisational Change
12
2
Organisational Change
1
1
Total
67
Total
171
129
Total
148
62
Total
25
20
Midpoint value
New RPAs
RPA required
Cost pressures
Delays
$94b
14
8
$3.3b
66
5
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Investment Cashflow:
Scenarios
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Investment Portfolio: Modelled capex cash flows
Investment capital expenditure - estimated annual cash flows
Delivery
Planning-Funded
Intentions-Funded
Planning-Unfunded
Intentions-Unfunded
30
)
$b( 25
ure ti
nd 20
pe
ex 15
alti
10
cap
$7b p.a historical average –market capacity proxy
sed
5
il
ua -
nn
A
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
FY32
FY33
FY34
FY35
7
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+ Strategic Investment Programme (transport)
Investment capital expenditure - estimated annual cash flows
Delivery
Planning-Funded
Intentions-Funded
Planning-Unfunded
Intentions-Unfunded
Strategic Investment Programme
30
)
$b( 25
ure ti 20
nd
pe
ex 15
alti
10
cap
sed
5
il
ua -
nn
A
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
FY32
FY33
FY34
FY35
8
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+ International cost overrun benchmarks
Investment capital expenditure - estimated annual cash flows
Delivery
Planning-Funded
Intentions-Funded
Planning-Unfunded
Intentions-Unfunded
Strategic Investment Programme
Estimated cost overruns
30
)
$b( 25
ure ti
nd 20
pe
ex 15
alti
10
cap
sedi 5
l
ua
nn -
A
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
FY32
FY33
FY34
FY35
9
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Investment Portfolio: Modelled opex cash flows
• OPEX uplift from capital investment is expected to be gradual (c.$0.1b pa) over the coming 10 years as investments are delivered
• For digital investment there is a continuing trend towards ‘as a service’ platforms, resulting in a shift towards greater OPEX
• ANNEX 2: Investment detail
Investment operating expenditure - estimated annual cash flows
Delivery
Planning-Funded
Intentions-Funded
Planning-Unfunded
Intentions-Unfunded
5
$b)(
ure 4
t
pendi 3
ex
ngi
2
sed operati 1
nnual
A 0
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
FY32
FY33
FY34
FY35
10
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Specific Fiscal Risk:
Scenarios
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Specific Fiscal Risks
Intentions
Planning
Delivery
Realisation
• Data from international benchmarks (Oxford Global Projects) covering 16,000 projects provides information on average and cost
overruns across a vast range of investment projects (e.g. schools, roading projects, rail, hospitals etc).
• International themes:
•
The size and number of ‘megaprojects’ costing over US $1b is growing globally
•
Megaprojects consistently fail to be delivered on time or on budget
•
Megaprojects span all forms of large capital ventures from construction and infrastructure to national health systems
•
Based on a sample of projects: 27% were on budget, 3% were on budget and on time, 0.2% on budget/time/benefits
• Using this data we can run scenarios on investments reported in Quarterly Investment Reporting
International benchmarking
Examples
Scenario A: Assumes all reported investments experience average cost overrun rates
How Big Things Get Done by Bent Flyvbjerg and Dan Gardner (2023)
Scenario B: Assumes all reported investments experience tail/skew cost overrun rates
Average cost
% of projets in tail Average % cost overrun
Project type
Investment
Total Funding ($b) Scenario A ($b) Scenario B ($b)
overrun (%)
(50%+ overrun)
of projects in tail
s9(2)(g)(i)
Buildings
62
39
206
Second Harbour Crossing
ICT
73
18
447
AT Rail
Defence
53
21
253
NZ Battery
Hospitals
29
13
167
GWRC Rail
Ports
32
17
183
ALR
Rail
39
28
116
CHCH PT futures
Roads
16
11
102
LGWM
IREX
12
20240621 TOIA Binder
Item 1
Page 22 of 37
Specific Fiscal Risks
Intentions
Planning
Delivery
Realisation
• Oxford Global Projects cost overrun estimates provide a basis to extrapolate original approved budgets to:
• Identify investments that have the potential to exceed $100 in cost overruns over the next four years (SFRs)
• Benchmark international average cost overruns (>$100m) with approved cost escalations/revised budgets to date
• s9(2)(g)(i)
s9(2)(g)(i)
s9(2)(g)(i)
s9(2)(g)(i)
s9(2)(g)(i)
20240621 TOIA Binder
Item 1
Page 23 of 37
Specific Fiscal Risks
Intentions
Planning
Delivery
Realisation
• Planning SFR scenario:
• Applied Oxford Global average cost overrun rates to publicly announced or funded (budget/other) investments in planning
• s9(2)(g)(i)
•
• s9(2)(g)(i)
s9(2)(g)(i)
s9(2)(g)(i)
s9(2)(g)(i)
.
14
20240621 TOIA Binder
Item 1
Page 24 of 37
Monthly Reporting:
Redevelopment of Scott Base
20240621 TOIA Binder
Item 1
Page 25 of 37
Scott Base Redevelopment – Monthly Reporting
Background
Scott Base is where New Zealand researchers carry out their work to understand Antarctica and the Southern Ocean, collaborate with
other National Antarctic Programmes, protect the environment of Antarctica and strengthen the Antarctic Treaty System.
In 2021 Cabinet has approved an investment of
$344 million to redevelop Scott Base. In December 2022 Cabinet approved
additional
funding of $159 million as part of the cost escalation process. The Cabinet approved budget is currently
$503 million.
As part of the Cabinet approval for the additional $159 million, the appointment of an independent Quantity Surveyor was required to
support MFAT and the Treasury provide independent monthly reporting to the Minister of Finance and the Minister of Foreign
Affairs. Barnes Beagley Doherr Limited (BBD) was appointed and their first report was provide on 31 July 2023.
The highlights form the first BBD report are:
•
The tender from the main contractor Leighs Construction was received at end of April is approximately s9(2)(j) and s9(2)(i) higher than
anticipated. The project has been focused on trying to close this gap through negotiations with Leighs. BBD have indicated that the
contract negotiations are protracted. The current forecast cost to deliver the Investment is s9(2)(j) and s9(2)(i)
In the opinion of BBD
proceeding with the Cabinet agreed Scope will require additional funding.
•
The main contractor appointment, Leighs Construction, is two months behind schedule. This is delaying the programme however
there is still sufficient float within the project to meet overall milestones if issues can be resolved promptly. However, there
are material risks to the critical path that have substantial financial implications (i.e. if the project cannot commence in a timely
manner the shipping date may need to be reschedule by a season)
16
20240621 TOIA Binder
Item 1
Page 26 of 37
Annex
• Investment Planning Overview
• Investment Delivery Overview
17
20240621 TOIA Binder
Item 1
Page 27 of 37
Investment Planning Phase:
Investments that are in
the process of developing a Business Case.
20240621 TOIA Binder
Item 1
Page 28 of 37
Risk Profile Assessments and Gateway Review
Intentions
Planning
Delivery
Realisation
• Historically there is a general correlation between new high risk RPA’s entering the system and completed GW reviews
• Development of GW drivers and insights are challenging due to historical data management
New RPAs and completed Gateway reviews
Sep-23 upcoming Gateway reviews (7)
Rolling 12 months basis
Investment name
Investment phase
Gate Total funding ($b)
New High risk RPAs (GW entry)
Completed GW reviews
NZP MyPolice Programme
2 Planning
0 s9(2)(f)(iv)
MoE e-asTTLe (Assessment Tool)
2 Planning
1
70
WK Melling Interchange Project
2 Planning
3
60
NZDF Ohakea Infrastructure Programme
2 Planning
3
KO Eastern Porirua Regeneration Project
3 Delivery
0 0.4
50
NZDF ANZAC Frigate Systems Upgrade (FSU)
3 Delivery
4 0.6
WK Funding and Fees
3 Delivery
4 0.0
40
30
20
10
0
19
20240621 TOIA Binder
Item 1
Page 29 of 37
Investments in Planning – Risk Profile Assessment
Intentions
Planning
Delivery
Realisation
RPA
IBC
DBC
• Agencies are expected to complete/submit RPAs at the outset of business casing
• IMS received 15 RPA’s during the Jun-23 quarter – 5 RPAs for investments post indicative business casing (late)
• Waka Kotahi: Submitted 3 RPAs during the quarter, all of which were post IBC (2 committed to delivery)
stem leader Green bond
Agency
Project
Investment type
Final risk rating Value ($b)
volvement
potential
Te Whatu Ora
Tauranga Hospital Redevelopment
Infrastructure
High
s9(2)(f)(iv)
TW-M
Waka Kotahi
Melling Interchange
Infrastructure
High
TW-H
NZDF
Future Air Mobility Capability Project – Strategic (FAMC-S)
Specialist equipment Medium
Waka Kotahi
Takitimu North Link Stage 1
Infrastructure
High
TW-H
Waka Kotahi
Papakura to Drury
Infrastructure
High
TW-H
NZDF
Garrison and Training Support Vehicles (GATS)
Specialist equipment Medium
Department of Conservation
3 Waters Programme
Data and Digital
Medium
Te Whatu Ora
Integrated Cancer Service Programme
Specialist equipment High
Ministry for the Environment
Resource Management (RM) Digital Reform Programme
Data and Digital
High
Te Whatu Ora
Therapeutic regulatory regime
Specialist equipment High
New Zealand Police
SAP S/4HANA Upgrade
Data and Digital
Medium
Te Whatu Ora
Linear Accelerator (LINAC)
Specialist equipment Medium
Landcare Research
CRI science collaboration and co-location project
Infrastructure
Medium
Early
Te Whatu Ora
Burwood Radiation Oncology Centre
Infrastructure
Medium
Early
TW-M
Te Whatu Ora
Gisborne Hospital Electrical Infrastructure Upgrade
Infrastructure
Medium
Early
System leader involvement: H (High) - substantively engaged throughout business case process and/or integrated into its development
M (Medium) - substantively engaged but contact is irregular
20
L (Low) - Engaged but not substantively and are not in regular contact
20240621 TOIA Binder
Item 1
Page 30 of 37
Investments in Planning – Indicative Business Case
Intentions
Planning
Delivery
Realisation
RPA
IBC
DBC
• Sep-23: Agencies reported 7 investments will seek cabinet approval – unlikely given time remaining to 31 August 2023
• Other funding sources: Three investments funded via NLTF, MoJ Balance Sheet and 2021-24 Road Safety Partnership
Programme
System
Green
Budget
Total
Year funding Delivery Delivery
Other
Agency Name
Investment Name
Investment Type
RPA Rating
leader
bond
Funding ($b) Funding ($b)
sought
years
end FY
funding
involvement
potential
s9(2)(f)(iv)
KiwiRail
Northern Package - Marsden Point Rail Link
1 Infrastructure
RPA Not Required
5
FY30
TW-M
Auckland District Court, Hamilton District
MoJ
1 Infrastructure
Medium
4
FY28
TW-L
Court & Wellington High Court Seismic
Corrections
Modern Prisons (Digital) (Tranche 2-4)
2 Data and Digital
High
7
FY30
MoJ
Auckland District Court Infrastructure
1 Infrastructure
Medium
4
FY28
TW-L
New Zealand Driver Licensing Improvement
Waka Kotahi
4 Organisational Change
Medium
10
FY34
Programme
Addressing damage to Conservation sites
DoC
1 Infrastructure
RPA Required
1
FY24
TW-H
and assets caused by NIWE
NZ Police
Impaired Driver programme
3 Specialist Equipment
Medium
1
FY25
System leader involvement: H (High) - substantively engaged throughout business case process and/or integrated into its development
M (Medium) - substantively engaged but contact is irregular
L (Low) - Engaged but not substantively and are not in regular contact
21
20240621 TOIA Binder
Item 1
Page 31 of 37
Investments in Planning – Detailed Business Case
Intentions
Planning
Delivery
Realisation
RPA
IBC
DBC
• Sep-23: Agencies reported 11 investments will seek cabinet approval – unlikely given time remaining to 31 August 2023
• 5 investments intend to submit both IBC and DBCs simultaneously, limiting cabinet’s time to evaluate options and advice
• KiwiRail Marsden Point Rail Link: s9(2)(g)(i)
straight to DBC for cabinet endorsement
System
Green
Budget
Total
Year funding Delivery Delivery
Other
Agency Name
Investment Name
Investment Type
RPA Rating
leader
bond
Funding ($b) Funding ($b)
sought
years
end FY
funding
involvement
potential
s9(2)(f)(iv)
Waka Kotahi
NIWE – SH and local road rebuild
1 Infrastructure
N/A
10
FY33
TW-M
IBC & DBC
KiwiRail
Northern Package - Marsden Point Rail Link
1 Infrastructure
RPA Not Required
5
FY30
TW-M
Te Whatu Ora
Nelson Hospital Redevelopment
1 Infrastructure
High
5
FY30
TW-H
Enhanced Maritime Awareness Capability
NZDF
3 Specialist Equipment
Medium
N/A
N/A
(Phase 2) (Fixed Wing ISR)
Auckland District Court, Hamilton District
IBC & DBC
MoJ
1 Infrastructure
Medium
4
FY28
TW-L
Court & Wellington High Court Seismic
IBC & DBC
MoJ
Auckland District Court Infrastructure
1 Infrastructure
Medium
4
FY28
TW-L
Waters Infrastructure Programme - Phase
Corrections
1 Infrastructure
Medium
3
FY27
TW-H
2A
NZDF
DERP - Anchored to Capability (B24) - OPV
1 Infrastructure
Medium
N/A
N/A
TW-M
All of Government Maritime Domain
NZDF
2 Data and Digital
Medium
1
FY26
Awareness (formally Data Fusion System)
Addressing damage to Conservation sites
IBC & DBC
DoC
1 Infrastructure
RPA Required
1
FY24
TW-H
and assets caused by the 2023 North Island
IBC & DBC
NZ Police
Impaired Driver programme
3 Specialist Equipment
Medium
1
FY26
System leader involvement:
22
H (High) - substantively engaged throughout business case process and/or integrated into its development,
M (Medium) - substantively engaged but contact is irregular,
L (Low) - Engaged but not substantively and are not in regular contact
20240621 TOIA Binder
Item 1
Page 32 of 37
Investments in Planning – Budget funding
Intentions
Planning
Delivery
Realisation
• s9(2)(f)(iv)
• We have heard agencies are undertaking early B24 planning and prioritisation work
• s9(2)(f)(iv)
70
60
)
50
($b
ht
g
40
sou
ng
di 30
fun
et
g 20
ud
B
10
0
CAPEX
OPEX
CAPEX
OPEX
CAPEX
OPEX
CAPEX
OPEX
B24
B25
B26
B27+
s9(2)(f)(iv)
s9(2)(f)(iv)
s9(2)(f)(iv)
s9(2)(f)(iv)
23
20240621 TOIA Binder
Item 1
Page 33 of 37
Investment Delivery Phase:
Investment that have
secured funding, have contracts signed and have
entered the “build phase”
20240621 TOIA Binder
Item 1
Page 34 of 37
Investments in Delivery
Intentions
Planning
Delivery
Realisation
•
148 ($61.7b total approved budgets) investments in delivery, a net increase of 6 investments from last quarter
•
9 investments completed delivery during the Jun-23 quarter, 8 investments were delayed (c.1 year average delay)
•
75% of investments in delivery are either signalling cost pressures and/or experiencing delivery delays
31 March 2023 reporting
30 June 2023 reporting
Total in Delivery
Total in Delivery
+ 6 investments in delivery
Investment Type
No.
Value ($b)
Investment Type
No.
Value ($b)
Infrastructure
84
$47.3
+ 6 investments starting delivery
Infrastructure
84
$45.5
Data and Digital
34
$5.5
+ 9 investments not previously reported
Data and Digital
37
$6.6
Specialist Equipment
14
$7.6
- 9 investments completed delivery
Specialist Equipment
15
$7.7
Organisational Change
10
$1.1
Organisational Change
12
$1.9
Total
142
$61.6
Total
148
$61.7
6 investments starting delivery
9 investments completed delivery
Agency
Investment name
Total funding Delivery Delivery
Agency
Investment name
Original approved
Final approved
Cost
Delay
($b)
(years)
FY
budget ($b)
budget ($b)
escalation (%)
(years)
Waka Kotahi
National Ticketing Solution
0.8
4
FY27
NZDF
Frigate Systems upgrade (FSU)
0.4
0.6
s9(2)(f)(iv)
2.0
Kāinga Ora
Greys Ave 139, Auckland
0.2
0.2
0.3
Te Pūkenga transformation
TEC
0.4
5
FY28
programme (B23)
NZ Customs
New Zealand Traveller Declaration (NZTD)
0.2
0.2
Rail Reinstatement – rebuilding
NZDF
Capital Maintenance Total (B22)
0.1
0.1
KiwiRail
0.3
4
FY27
damaged rail lines following weather
Te Whatu Ora
Te Wao Nui - Children's Hospital
0.1
0.1
1.5
Protected Mobility - Protected
NZDF
0.1
5
FY28
NZDF
Dive and Hydrographic Vessel
0.1
0.1
2.0
Vehicles Medium (PV-M)
FSP Comms- Phase 2 Build and
Te Whatu Ora
Specialist Mental Health Services Relocation
0.1
0.1
0.8
NZDF
0.1
3
FY26
Install
Te Whatu Ora
Energy Centre and Services Tunnel
0.1
0.1
Operational and Regulatory Aviation
NZDF
< 0.1
2
FY25
Te Whatu Ora
Workspace programme
0.0
0.0
0.8
Compliance Sustainment Phase 2B
25
20240621 TOIA Binder
Item 1
Page 35 of 37
Investments in Delivery – Cost pressures
Intentions
Planning
Delivery
Realisation
Cost pressures
Delays
•
39% of investments in delivery are signalling cost pressures, down 17% from Mar-23: B23 cost pressures are now incorporated into delivery budgets
•
$3.3b cost pressures have been reported by agencies, driven by Kiwirail: IREX s9(2)(f)(iv)
NIWE rail reinstatment s9(2)(f)(iv)
•
Agencies tend to signal investment cost pressures as determined by cost quantity surveyors, but only report cost pressure values when project risks
are unable to be mitigated - This introduces a
lag, particularly investments managed by Crown entities who report directly to Boards
Total in delivery
Investments signalling cost pressures
Investments reporting cost pressures
Investment Type
No.
Approved budget ($b)
No.
Approved delivery budget ($b)
No.
Approved budget ($b)
Value of cost pressures ($m)
Infrastructure
84
$45.5
44
$31.3
16
$14.0
$3.1
Data and Digital
37
$6.6
11
$2.0
10
$0.6
$0.1
Specialist Equipment
15
$7.7
2
$1.7
1
$0.0
$0.0
Organisational Change
12
$1.9
1
$0.4
1
$0.4
$0.0
Total
148
$61.7
58
$35.4
28
$15.0
$3.3
Reported cost pressures > $100m
Total Approved Spend to
Cost to
Expected
Reported
Agency
Investment name
Cost Pressures ($b)
Budget ($b)
Date ($b)
Complete ($b)
delivery FY delay (years)
KiwiRail
IREX
1
.5 0.3 s9(2)(f)(iv)
27 -
KiwiRail
Rail Reinstatement
0
.3 0.0
27 3.0
Waka Kotahi
NZUP - Takitimu North Link stage 1
0
.8 0.2
28 0.8
Waka Kotahi
NZUP
6
.5 1.0
31 -
Waka Kotahi
Manawatū Tararua Highway : Te Ahu a Turanga
0
.6 0.3
26 -
Rau Paenga Limited
Parakiore Recreation and Sport Centre
s9(2)(j) and s9(2)(i)
25 3.3
KiwiRail
RNIP (first 5 years of 10 for Rail Network)
2
.1 0.7
26 1.0
Waka Kotahi
Low Emission Vehicles - Clean Car Standard
0
.4 0.0
24 0.5
26
20240621 TOIA Binder
Item 1
Page 36 of 37
Investments in Delivery – Delays
Intentions
Planning
Delivery
Realisation
Cost pressures
Delays
•
45% of investments in delivery are reporting delivery delays, up 3% from last quarter
•
Investments experiencing the longest delays (> 2.5 years) present near-term cost pressure risks as original budgets were approved years prior
•
Investments with low spend & long delays: NZUP Canterbury Package, LINZ STEP, KiwiRail NIWE rail reinstatement (re-evaluated from Mar-23)
Investment Type
Total
Delivery delays
No.
Value ($b) No.
Value ($b) Avg. delay
Infrastructure
84
$45.5
38
$14.8
1.5
Data and Digital
37
$6.6
18
$1.9
1.5
Specialist Equipment
15
$7.7
6
$4.6
2.3
Organisational Change
12
$1.9
4
$0.9
1.3
Total
148
$61.7
66
$22.2
1.5
Agency Name
Investment Name
Approved
Spend to date (%) Cost Pressures ($b) Forecasted delivery FY Delivery delay (years)
Delivery Budget ($b)
Defence Force
Protected Mobility - Protected Vehicles Medium (PV-M)
0
.1
72% s9(2)(f)(iv)
2028 4
.8
Waka Kotahi
NZUP - Canterbury Package
0
.4
12%
2030 4
.0
Te Whatu Ora
Surgical Services Expansion Project
0
.0
71%
2024 3
.8
Rau Paenga Limited
Te Pae Christchurch Convention Centre
s9(2)(j) and s9(2)(i)
2024 3
.5
Rau Paenga Limited
Parakiore Recreation and Sport Centre
2025 3
.3
KiwiRail
Rail Reinstatement
0
.3
11%
2024 3
.0
Defence Force
Maritime sustainment capability
0
.5
86%
2027 3
.0
Ministry of Education
Te Rito
0
.0
43%
2027 3
.0
LINZ
Survey and Title Enhancement Programme (STEP)
0
.3
47%
2027 3
.0
Te Whatu Ora
Dunedin Hospital Transition Programme
0
.0
11%
2025
27
2
.8
20240621 TOIA Binder
Item 1
Page 37 of 37
Investment Portfolio
Investment
This is the combination of the Investment Intentions, Investment Planning and Investment Delivery. It illustrates all the investments that are part of the Governments wider portfolio.
Realisation
Investments that
Investment Pipeline
Investment
are "in-service" and
This is the combination of the Investment Intentions and Investment Planning and is considered the "complete" pipeline of investment s in planning
Delivery
benefits are being
Investments that
delivered
Investment Intentions
Investment Planning
are in delivery
Pre-business casing investments. These
Investment that are in the process of developing a Business Case.
Investment should be in the Strategic
This process is expected to take between 1.5 to 5 years
Plans of agencies and aligned with
Govt. strategies.
c. 3 months
c. 3 - 12 months
c. 6 - 18 months
Up to 12 months
c. 3 - 12 months
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d
o
0
,
project organise f or successf ul
1
l
0
c
delivery?
.
Gateway Review 0 – Strategic
Gateway Review 1 –
Gateway Review 2 –
Gateway Review 3 –
Gateway Review 4
Gateway Review 5
Assessment
Business Justification &
Delivery Strategy –
Investment Decision -
– Readiness for
– Operational &
Assurance - Gateway Reviews
Options – Indicative
Detailed Business Case
Implementation Business
Service
Benefits
Business Case
Case
Realisation Review
Cabinet approval
Cabinet approval
Cabinet approval (Cabinet
Investment / Business Case
(Cabinet Paper and
(Cabinet Paper and
Paper and Cabinet
Approvals
Cabinet Minute):
Cabinet Minute):
Minute):
Implementation
Indicative Business Case
Detailed Business Case
Business Case
Budget Cabinet
Funding Decision / Approval
Decision
Investment
Investment
Investment
Investment
Investment Reporting
Delivery
Realisation
Intentions Reporting
Planning Reporting
Reporting
Reporting
Document Outline
