Part 5: Benefits from the agreements

5.1
In this Part, we report on whether the agreements have led to more cost-effective maintenance of roads and other benefits. We discuss whether:

• the district councils and Transit have achieved savings on road maintenance costs through the agreements;
• the condition of roads in the districts covered by the agreements has improved;
• the district councils have noticed other benefits or drawbacks from the agreements; and
• Transit has noticed other benefits or drawbacks from the agreements.

5.2
Overall, the district councils were noticing greater benefits from the agreements than Transit. The district councils were achieving greater cost savings than Transit, and the balance of opinion among the district councils was that roads were being well managed and kept in a mostly stable condition. The district councils were also getting other benefits from the agreements more than Transit.

5.3
Transit had gained some initial benefits from the existing agreements but saw significant drawbacks to wider collaboration and had decided not to pursue further collaborative agreements.

5.4
We did not attempt to compare the cost-effectiveness of maintaining local roads and state highways under the existing collaborative agreements with the cost-effectiveness of the district councils and Transit working either separately or under different joint arrangements to maintain them. An analysis of the relative cost-effectiveness of alternative scenarios was beyond the scope of our audit. Therefore, we have not drawn any conclusions on whether the existing collaborative agreements represent the most cost-effective means of maintaining roads in the areas they cover.

Cost savings achieved by the district councils and Transit

5.5
We expected that district councils and Transit would be tracking the cost savings realised through the collaborative agreements against those estimated when entering into them, together with how the savings were being spent. While there was some tracking of savings, this was not enough to accurately determine the total level of savings achieved and how they were being spent. Available evidence suggested that district councils were realising greater savings than Transit.

Cost savings achieved by Rotorua District Council and Transit

5.6
Rotorua District Council had achieved savings on its local roads maintenance contract by putting it out to tender with the state highways maintenance contract. The winning contractor had bid for both contracts and offered a discount if it won both, on the basis that it would be able to better use its resources. The council told us that it had achieved a discount on the cost of its local roads maintenance contract, giving a saving of around $50,000 to $60,000 a year over five years.

5.7
The council told us that there could be further savings through combining both local road and state highway maintenance into one contract, similar to the contracts in the Marlborough and Western Bay of Plenty districts. The council had considered this but had not combined the contracts for local roads and state highways, because it:

• wanted to keep reporting and financial streams for local roads and state highways separate;
• was concerned about the complexity of a combined contract; and
• did not want to reduce competition by potentially excluding some local providers.

Recommendation 6
We recommend that Transit and Rotorua District Council consider, as part of the review of the delegation in the next year, whether additional savings might be made by combining maintenance contracts for local roads and state highways.

Cost savings achieved by Marlborough District Council and Transit

5.8
Marlborough District Council believed that it had achieved greater cost savings than Transit through the agreement in Marlborough. The exact amount that had been saved by the council during the agreement was not clear. The council had reinvested some of the savings in increased expenditure on local roads. We were not able to verify how all of the savings had been spent.

5.9
An internal report to the council in February 2001 reported annual contract savings of $574,000 from consolidating road maintenance contracts when the Marlborough Roads office was set up. The report noted that contract savings totalled $686,245 for each year (close to the $718,000 estimated) but had been off set by a loss of subsidy of $112,245 for each year because of reduced spending. It also noted that additional expenditure of $213,000 had been incorporated into the council's budget for 2001/02 for items including street cleaning and increased bitumen costs. The report identified other items that could be incorporated in the budget for the council's consideration.

5.10
A technical audit of the council's road operations by Land Transport New Zealand in late 2004 found that total cost savings in the range $900,000 to $1,000,000 had been achieved consistently in each year since Marlborough Roads was set up. These included savings of around $400,000 to Land Transport New Zealand on subsidised work, against $660,000 estimated. The audit noted that savings had been realised in maintenance contracts and that the auditors believed that asset management and professional services costs had not changed significantly.

5.11
We were unable to find any quantitative assessment of the actual cost savings realised by Transit against the estimated $300,000 a year or identify how the savings were used. A report to the Transit Board in June 2005, at the time the Marlborough agreement was extended by another five years, noted that management of the combined district roading network continued to offer economies of scale for both parties to the agreement.

Cost savings achieved by Western Bay of Plenty District Council and Transit

5.12
Figure 4 shows forecast savings from the 10-year performance-based contract, divided between council and Transit services. The forecast savings are the difference between the contract price for the services and the estimated cost of the services by continuing with a traditional maintenance regime and traditional contract formats.

Figure 4
Forecast savings from the 10-year performance-based contract split between council and Transit services

	Estimated cost of services	Contract price for services	Forecast savings
			Total	Split
Council services	$135,350,0001	$105,015,077	$30,334,923 (22.4% of estimate)	$19m to council $11m to Land Transport New Zealand3
Transit services	$39,500,0002	$33,210,513	$6,289,487 (15.9% of estimate)	All to Transit
All services	$174,850,000	$138,225,5904	$36,624,410

Source: Western Bay of Plenty District Council documents and the report of the latest independent review of the contract in August 2006

Notes:
1 Council estimate.
2 Transit estimate.
3 Based on the council's estimate at the time the contract was announced that Land Transport New Zealand funded approximately 36% of council services.
4 The total contract price was $140,225,590 including an additional provisional sum of $2,000,000 for the data collection contract.

5.13
Over the 10-year term of the contract, Western Bay of Plenty District Council is forecast to save more than Transit. The contract is forecast to save the council around $19 million (about 22% of the estimated cost of services) and Transit around $6 million (about 16% of the estimated cost of services). Land Transport New Zealand is also forecast to save around $11 million on its share of the funding of council services. The contract superintendent told us that he believed Transit did not enjoy the same level of savings as the council because Transit had not specified key performance measures and other standards for state highways in the contract in terms of desired outcomes as much as the council had for local roads. This reduced the scope for efficiencies in how work was planned and completed.

5.14
The August 2006 independent review of the contract concluded that the intent of the contract, which was to provide the required services for the sum set, was intact, with no variation to the sum set for the original scope. If this is the case, then the forecast savings should be being made. The council was investing the bulk of its savings during the contract in a programme to seal some of the unsealed local roads in the district.

5.15
We were unable to find any comprehensive quantitative assessment of the actual cost savings being realised by Transit and Western Bay of Plenty District Council and how they were being used.

Recommendation 7
We recommend that Transit and Western Bay of Plenty District Council introduce a more comprehensive system for tracking whether the 10-year performance-based contract is realising the expected savings and, if so, how they are being used.

Roads condition benefits

5.16
The balance of opinion among the district councils was that roads were being well managed and kept in a mostly stable condition. Our high-level analysis of the main Land Transport New Zealand and Transit road condition indicators showed that, for all the districts generally, most of the road condition indicators remained steady. Individual indicators for particular districts pointed to specific aspects of road condition improving or deteriorating and being above or below average. There was no general pattern to suggest that road condition in the districts covered by the agreements was discernibly different to, or improving more than, that in other districts.

Opinion in the Rotorua district

5.17
The balance of opinion in the Rotorua district was that the delegation had improved the management of roads through better co-ordination of activities rather than by improving the condition of the roads. The representatives of the council that we spoke to were very happy with the delegation and reported a lot of benefits from managing the state highways within the council. There was not a strong perception that having the delegation had improved the condition of the roads, although this may be because the delegation has been operating for many years.

Opinion in the Marlborough district

5.18
A report to Marlborough District Council by officials in 2005 noted that staff at Marlborough Roads continued to actively support the council and provide a good level of service. It said that Marlborough Roads had helped the council respond to pressures on the roading infrastructure and meet demands for higher levels of service at an affordable price.

5.19
The council had carried out random road customer surveys for the past eight years. The most recent customer survey showed that the majority of motorists believed that the roads were of good or acceptable quality and that 80% of those surveyed were satisfied with the management of road maintenance and construction.

5.20
A Land Transport New Zealand procedural audit in late 2004 concluded that Marlborough Roads had been successful in achieving efficient and effective management of the state highways and local roads in the area. A Land Transport New Zealand technical audit around the same time also found that the local roads had been well maintained and that both the surface condition and smoothness of the council's sealed roads appeared to be better than the networks of other authorities. The technical audit noted that, overall, the condition of local roads was stable over time.

5.21
The New Zealand Automobile Association representative for the area believed that the condition of the roads was much the same as before the agreement between the council and Transit, and the chairman of the regional branch of the New Zealand Road Transport Association believed that the condition of the roads had not improved.

Opinion in the Western Bay of Plenty district

5.22
The August 2006 independent review of the 10-year performance-based contract in the Western Bay of Plenty district reported that elected members of the council perceived that the condition of the district roading network had improved. It also reported that a representative from the Transit regional office perceived that the condition of the state highway network had improved under the contract. The Transit representative had said that the improvement may also have occurred under the traditional maintenance model, given the same level of funding.

5.23
The review also concluded that In³roads was generally meeting its contractual obligations and was in some cases exceeding the council's and Transit's expectations. All the stakeholders who were consulted considered the contract to be largely successful and healthy. The review noted that there was evidence of a strong culture of continuous improvement within In³roads. The Management Board that oversaw the implementation of the contract has indicated in the past that it was generally happy with the results being reported against the key performance measures for the contract.

5.24
Some of the council staff whom we spoke to were unsure whether the condition of the roads had improved, and the Transit representative that we spoke to thought that it was too early to tell. As was the case in Marlborough, the New Zealand Road Transport Association said that it had not noticed a difference in the condition of the roads.

Road condition indicators

5.25
To gain a high-level view of how well roads in the districts covered by the agreements were being maintained, we looked at the main indicators of road condition published by Land Transport New Zealand for local sealed roads and Transit for state highways. For local sealed roads, we looked at the full set of Land Transport New Zealand indicators, covering smoothness, surface condition, and structural integrity. For state highways, we looked at two Transit indicators covering smoothness and skid resistance. These state highway indicators are not the full set of indicators published by Transit, but Transit told us that they covered the most important aspects of state highway condition.

5.26
Figures 5 to 7 present our analysis of the most recently published indicators and historical trends in the indicators over time for the districts covered by the agreements. For each of the districts, we compared the district's indicator and the trend in the district's indicator with the average and trend for other districts on the same island and for all districts nationally. We also carried out some more detailed analysis (not shown in Figures 5 to 7) that compared trends in the indicators for the three districts covered by the agreements with trends in their neighbouring districts.

5.27
We wanted to establish whether the condition of roads in the group of districts covered by the agreements was discernibly different from that in other districts and whether there had been any discernibly greater improvement in road condition in these districts than in other districts. Our high-level view from our analysis is that, generally, the condition of the roads in the group of districts covered by the agreements was not discernibly different from that in other districts. There was also no discernible general pattern across the group to suggest that road condition was improving more in the districts covered by the agreements than in other districts. Across the districts covered by the agreements, most of the indicators pointed to the condition of the roads remaining steady.

Figure 5
Analysis of road condition indicators for Rotorua District Council

Indicators of the condition of local (council) sealed roads

	Rotorua District Council	All councils in North Island	All councils nationally
Smooth Travel Exposure (a higher value indicates smoother roads)
2005/06	80%	82%	83%
5-year trend	Deteriorating	Steady for 39 Improving for 3 Deteriorating for 7	Steady for 60 Improving for 4 Deteriorating for 8
Condition Index (a lower value indicates the surface condition of roads is better e.g. fewer potholes)
2005/06	1.6	2.9	3.0
5-year trend	Steady	Steady for 30 Improving for 17 Deteriorating for 2	Steady for 46 Improving for 22 Deteriorating for 4
Pavement Integrity Index (a lower value indicates the underlying condition of roads is better)
2005/06	1.6	1.9	1.8
5-year trend	Steady	Steady for 20 Improving for 21 Deteriorating for 8	Steady for 34 Improving for 27 Deteriorating for 11
The high-level view we take from our analysis of the above indicators is that: - the smoothness of the council's roads appears to be deteriorating and in 2005/06 was at a level slightly below the average for councils in the North Island and for councils nationally; - the surface condition of the council's roads appears to be remaining steady and in 2005/06 was at a level above the average for councils in the North Island and for councils nationally; and - the structural integrity of the council's roads also appears to be remaining steady and in 2005/06 was at a level above the average for councils in the North Island and for councils nationally.

Indicators of the condition of state highways

	Rotorua state highway Network Management Area	All state highway Network Management Areas nationally
Smooth Travel Exposure (a higher value indicates smoother roads)
2006	98.2%	98.8%
Trend	Deteriorating	Steady for 23 areas Improving for 0 areas Deteriorating for 2 areas
Skid Resistance (a lower value indicates roads with better skid resistance)
2006	0.13%	1.08%
Trend	Improving	Steady for 15 areas Improving for 3 areas Deteriorating for 7 areas
The high-level view we take from our analysis of the above indicators is that: - the smoothness of the state highways in the area, while high in 2006, appeared to be slightly below the average for other areas nationally and deteriorating; and - the skid resistance of state highways in the area in 2006 appeared to be above the average for other areas nationally and improving.

Source: Land Transport New Zealand and Transit road condition data

Figure 6
Analysis of road condition indicators for Marlborough District Council

Indicators of the condition of local (council) sealed roads

	Marlborough District Council	All councils in South Island	All councils nationally
Smooth Travel Exposure (a higher value indicates smoother roads)
2005/06	88%	85%	83%
5-year trend	Deteriorating	Steady for 21 Improving for 1 Deteriorating for 1	Steady for 60 Improving for 4 Deteriorating for 8
Condition Index (a lower value indicates the surface condition of roads is better; e.g. fewer potholes)
2005/06	2.7	3.0	3.0
5-year trend	Improving	Steady for 16 Improving for 5 Deteriorating for 2	Steady for 46 Improving for 22 Deteriorating for 4
Pavement Integrity Index (a lower value indicates the underlying condition of roads is better)
2005/06	4.1	1.6	1.8
5-year trend	Steady	Steady for 14 Improving for 6 Deteriorating for 3	Steady for 34 Improving for 27 Deteriorating for 11
The high-level view we take from our analysis of the above indicators is that: - the smoothness of the council's roads appears to be deteriorating but in 2005/06 was at a level slightly above the average for councils in the South Island and for councils nationally; - the surface condition of the council's roads appears to be improving and in 2005/06 was at a level above the average for councils in the South Island and for councils nationally; and - the structural integrity of the council's roads appears to be remaining steady and in 2005/06 was at a level below the average the average for councils in the South Island and for councils nationally.

Indicators of the condition of state highways

	Marlborough state highway Network Management Area	All state highway Network Management Areas nationally
Smooth Travel Exposure (a higher value indicates smoother roads)
2006	99.7%	98.8%
Trend	Steady	Steady for 23 Areas Improving for 0 Areas Deteriorating for 2 Areas
Skid Resistance (a lower value indicates roads with better skid resistance)
2006	0.50%	1.08%
Trend	Steady	Steady for 15 Areas Improving for 3 Areas Deteriorating for 7 Areas
The high-level view we take from our analysis of the above indicators is that: - the smoothness of the state highways in the area appeared to be remaining steady and in 2006 was at a level above the average for other areas nationally; and - the skid resistance of state highways in the area also appeared to be remaining steady and in 2006 was at a level above the average for other areas nationally.

Source: Land Transport New Zealand and Transit road condition data

Figure 7
Analysis of road condition indicators for Western Bay of Plenty District Council

Indicators of the condition of local (council) sealed roads

	Western Bay of Plenty District Council	All councils in North Island	All councils nationally
Smooth Travel Exposure (a higher value indicates smoother roads)
2005/06	95%	82%	83%
5-year trend	Steady	Steady for 39 Improving for 3 Deteriorating for 7	Steady for 60 Improving for 4 Deteriorating for 8
Condition Index (a lower value indicates the surface condition of roads is better; e.g. fewer potholes)
2005/06	3.2	2.9	3.0
5-year trend	Steady	Steady for 30 Improving for 17 Deteriorating for 2	Steady for 46 Improving for 22 Deteriorating for 4
Pavement Integrity Index (a lower value indicates the underlying condition of roads is better)
2005/06	3.0	1.9	1.8
5-year trend	Steady	Steady for 20 Improving for 21 Deteriorating for 8	Steady for 34 Improving for 27 Deteriorating for 11
The high-level view we take from our analysis of the above indicators is that : - the smoothness of the council's roads appears to be remaining steady and in 2005/06 was at a level well above the average for councils in the North Island and for councils nationally; - the surface condition of the council's roads appears to be remaining steady and in 2005/06 was at a level below the average for councils in the North Island and for councils nationally; and - the structural integrity of the council's roads also appears to be remaining steady and in 2005/06 was at a level well below the average for councils in the North Island and for councils nationally.

Indicators of the condition of state highways

	Western Bay of Plenty state highway Network Management Area	All state highway Network Management Areas nationally
Smooth Travel Exposure (a higher value indicates smoother roads)
2006	96.8%	98.8%
Trend	Steady	Steady for 23 Areas Improving for 0 Areas Deteriorating for 2 Areas
Skid Resistance (a lower value indicates roads with better skid resistance)
2006	0.42%	1.08%
Trend	Steady	Steady for 15 Areas Improving for 3 Areas Deteriorating for 7 Areas
The high-level view we take from our analysis of the above indicators is that: - the smoothness of the state highways in the area, while high in 2006, appeared to be remaining steady at a level slightly below the average for other areas nationally; and - the skid resistance of state highways in the area appeared to be remaining steady and in 2006 was at a level above the average for other areas nationally.

Source: Land Transport New Zealand and Transit road condition data

5.28
As we expected, individual indicators for particular districts pointed to specific aspects of road condition improving or deteriorating and being above or below average. For example:

• in the Rotorua district, the surface condition of the local roads and the skid resistance of the state highways were both above average;
• in the Marlborough district, the structural integrity (underlying condition) of the local roads was below average; and
• in the Western Bay of Plenty district, the smoothness of the local roads was above average.

5.29
We acknowledge that these comparisons give only a rudimentary high-level view. From our discussions with Land Transport New Zealand and Transit, we recognise that a range of factors will contribute to the road maintenance requirements in different areas and the condition of the roads. How efficiently and effectively road maintenance is managed is one important factor. Other factors include geological conditions (for example, the rock and soil types on which roads are laid), climatic conditions (for example, temperature ranges and rain levels), and the type and volume of road traffic using the roads. The reliability of the condition indicators is also dependent on the quality of the underlying data and the measurement techniques.

Other benefits noticed by the district councils

5.30
The district councils have noticed other benefits from having the agreements in place.

Other benefits noticed by Rotorua District Council

5.31
The representatives from Rotorua District Council that we spoke to had noticed many other benefits from integrated management of the district roading network through the delegation. These included:

• being able to feed local knowledge and issues raised by road users directly into state highway management;
• being able to advocate and drive state highway projects;
• having access to Transit's skills, systems, and procedures;
• promoting industry growth by being able to package state highway work to promote the participation of local contractors in competitive bids, which they otherwise would not be able to participate in under Transit's contractor pre-qualification process;
• having better knowledge of planned works on the state highway network, enabling integrated planning with works for local roads;
• being able to manage events and emergencies that affect both local roads and state highways in an integrated way;
• having more influence over state highway planning;
• having a one-stop shop for the public for dealing with both state highways and local roads;
• having direct access for councillors to a local Transit representative; and
• improved relationships with Transit.

Other benefits noticed by Marlborough District Council

5.32
Marlborough District Council had noticed other benefits from the Marlborough agreement. The report to the council by staff in 2005 seeking approval to extend the agreement noted benefits against all of the fundamental objectives of the agreement. Apart from the cost savings already reported, these included:

• joint management of state highways and local roads having enabled a better understanding of, and influence on, the district's roading priorities;
• a continuing strong customer service focus with the Marlborough Roads brand, which meant that many members of the public were unaware of the Transit and council roles in the structure and saw the office as a "one-stop roading shop"; and
• service levels having improved in some respects because of the Marlborough Roads office.

5.33
The report considered two other options for performing the Marlborough Roads office's functions. These were tendering the local roads management function or taking it back in-house. It concluded that the reasons for setting up Marlborough Roads still applied and there seemed no justification for the other options.

Other benefits noticed by Western Bay of Plenty District Council

5.34 The representatives of Western Bay of Plenty District Council that we spoke to believed that, in addition to cost savings, the council had benefited through the 10-year performance-based contract by:

• having more influence over state highways that were critical to the movement of local traffic and economic development;
• learning from Transit about the risks involved in contracting out roading maintenance using performance-based contracts;
• focusing maintenance on outcomes;
• having set levels of service, which meant less council involvement by staff and councillors in operations matters; and
• having one point of contact for the public.

5.35
The representatives of the council also believed that the handling of complaints and ratepayers' satisfaction with the roading network had improved. They believed that ratepayers now expected higher levels of service. The contract includes a customer satisfaction performance measure that consistently averaged at about 90% customer satisfaction between early 2003 and the end of 2006. The measure is based on a customer survey, and the contractor has indicated that results must be treated with caution as they may be affected by an element of confusion caused by the design of the survey and the way that it is conducted. The August 2006 independent review of the contract also questioned the value of the measure.

Benefits and drawbacks noticed by Transit

5.36
Transit had gained some initial benefits from existing agreements but also saw significant drawbacks to wider collaboration, both in achieving its responsibility under the Land Transport Management Act 2003 and in gaining efficiencies across the network. Transit had decided not to pursue further collaborations at this time. Benefits from existing agreements noticed by Transit

5.37
Transit told us that Rotorua District Council was managing the delegation in a highly competent way and that the council had been carrying out a significant amount of strategic planning for the district outside of the scope of the delegation.

5.38
One of the Transit regional managers responsible for the Marlborough area believed that there had been a number of benefits from setting up the Marlborough Roads office. These included Transit being able to:

• bring its nationwide experience and expertise in managing state highways to managing local roads;
• assert more control over road management in the Marlborough district, as the Marlborough Roads office was part of Transit;
• reach a shared understanding with the council on issues such as developing subdivisions along state highways;
• learn how to deal with local authorities better;
• gain a wider customer focus; and
• reduce costs (although the manager said it was difficult to quantify this).

5.39
One of the Transit regional managers responsible for the Western Bay of Plenty district told us that it was too early to evaluate the 10-year performance-based contract to determine whether it was offering value for money, but that it was clear a good tender price had been received. In the future, it would be necessary to review the quality of the network, the extent to which the value of the road assets had changed, and whether there had been any variations to the contract that would affect the provision of the required services within the set sum. The Transit member on the Management Board for the contract told us that the contract had given some examples of innovation that Transit was considering using in other parts of its business - for example, the use of a balanced scorecard.

Drawbacks to wider collaboration noticed by Transit

5.40
The Transit regional manager responsible for the Rotorua district told us that he would not like to see similar delegations being set up with other local authorities, because:

• it was important to retain staff expertise within Transit;
• demands on state highways were very different from the demands on local roads, and there was a need to avoid any imbalance between local and national influence over decision-making; and
• Transit felt distanced from the final customer and from what the local community thought about Transit's roads.

5.41
Transit told us that the concept of the Western Bay of Plenty performance-based contract was good but that too many separate contracts made managing the state highway national network difficult and inefficient. There were about eight different contracts in the Bay of Plenty region. From the viewpoint of a national state highway network, Transit believed that the cost savings it was achieving from the contract and the other collaborative agreements did not appear substantial and that the time involved in managing the contract was significant and out of proportion to the time required for the rest of the network.

Transit and further collaborative agreements

5.42
The formal delegation from Transit to Rotorua District Council in December 1996 noted that the functions, duties, and powers delegated to the council had not been delegated to any other council and that Transit was satisfied that they ought not to be.

5.43
In June 2001, Transit's board decided that its policy on wider collaborative agreements would be to:

• seek a clear advantage from any new arrangement over existing arrangements - for example, a more efficient form of management or cost savings;
• ensure the technical and professional capability of any new arrangement;
• satisfy itself about the processes, procedures, and systems, including quality management or assurance systems, under any new arrangement;
• avoid conflicts of interest - for example, by not delegating planning and access control because of the conflict of interest in providing for the ratepayers' interests against protecting the state highway;
• ensure appropriate accountability mechanisms between any new arrangement and Transit - for example, performance agreements, annual plans, and quarterly or annual reports;
• recover or contribute to costs as appropriate;
• ensure that flexibility was retained and incentives for an alliance to survive beyond its useful purpose were not created;
• be aware of the danger of creating a road management monopoly without adequate accountabilities; and
• retain responsibility for Transit's statutory function of deciding the State Highway Programme.

5.44
In late 2005, Transit concluded that there was not enough merit in the present collaborative agreements to warrant pursuing further collaborations. Transit concluded that collaborative agreements of this type required more complicated management regimes that directed the work of Transit staff away from the new objectives for Transit in the Land Transport Management Act 2003 and the New Zealand Transport Strategy.

5.45
Transit told us that collaboration had a strong local focus that was inconsistent with achieving Transit's strategic goals for a total transport network. These strategic goals were to:

• ensure that state highway corridors made the optimal contribution to an integrated multimodal transport system;
• provide safe state highway corridors for all users and affected communities;
• ensure that state highways enabled improved and more reliable access and mobility for people and freight;
• improve the contribution of state highways to economic development; and
• improve the contribution of state highways to the environmental and social well-being of New Zealand, including energy efficiency and public health.

5.46
Transit had not formally compared the costs and benefits of collaborative agreements with other network management approaches through cost-benefit analysis, as it had found it difficult to quantify many of the variables contributing to such an assessment. However, its view was that collaborative agreements potentially limited the size of contracts to packages of work consisting of small lengths of state highway and large lengths of local roads within council boundaries and that this might disadvantage Transit's purchasing power. It believed that these packages of work might not be the most effective or efficient packages to put to the market from a national state highway perspective. In Transit's experience, the most efficient and effective networks generally covered more than one local authority. Its view was that large-scale, collaborative agreements for shared services that involved adjacent local authorities would result in savings.

5.47
The national state highway network is split into network management areas covering different lengths of the network. Transit had analysed the costs of all work on state highways within the different network management areas to compare the cost of work for each kilometre of state highway across the areas. Figure 8 shows Transit's analysis of 2006/07 costs. We drew a trend line through the Transit data based on the assumption that there is a direct relationship between length of state highway covered by the network management area and the cost of work for each kilometre. This showed a general trend for the cost of work for each kilometre to be higher for areas covering shorter lengths of the network.

Figure 8
The cost of work for each kilometre for 2006/07 for different areas of the state highway network

Note:
The areas labelled 1, 2, and 3 were not included in drawing the trend line as the cost of work for each kilometre in these areas stood out as being much higher than in other areas. These areas were Tauranga City, Auckland South, and Wellington respectively. Tauranga City has the smallest network length. Auckland South and Wellington both cover large urban state highway networks.

Source: Transit data

5.48
A range of factors affect the costs of work across different areas of the state highway network. As we noted earlier (see paragraph 5.29), geological conditions, climatic conditions, and the type and volume of traffic using the network all contribute to road maintenance and other work requirements. Figure 8 indicates that how Transit and local authorities collaborate may also have an effect. It shows that the cost of work for each kilometre in the Western Bay of Plenty district is in line with the general trend and higher than for areas covering larger lengths of state highway. However, the cost of work for each kilometre in both the Marlborough and Rotorua districts is lower than in some other areas covering longer lengths of state highway.

5.49
The differences in cost of work for each kilometre between the Marlborough, Rotorua, and Western Bay of Plenty districts and the other network management areas in Figure 8 cannot be solely attributed to collaboration. This is because the costs used for the analysis in Figure 8 include the costs of activities outside the scope of the collaborative agreements in the Marlborough, Rotorua, and Western Bay of Plenty districts. For example, the costs for the Western Bay of Plenty district include the costs of the joint maintenance contact and also the costs of other work on the state highways in the area, such as additional road widening, structural bridge maintenance, and road improvements.

Recommendation 8
We recommend that Transit, in consultation with local authorities and Land Transport New Zealand, more fully assess the value of collaborative agreements with local authorities, including how they affect efficient and effective management of the state highway national network as part of an integrated land transport system.

Recommendation 9
We recommend that Transit, in consultation with local authorities and Land Transport New Zealand, use the assessment of collaborative agreements that we have recommended as a robust basis for informing future decisions on whether and how to collaborate.

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