Assessing arrangements for jointly maintaining state highways and local roads.

Transit New Zealand (Transit) is responsible for maintaining state highways, and district councils are responsible for maintaining local roads. In most districts, Transit and district councils carry out their respective road maintenance responsibilities separately.

Three district councils (Rotorua, Marlborough, and Western Bay of Plenty) have entered into different types of collaborative agreements with Transit to work on cost-effective ways to maintain local roads and state highways in their districts as a single district roading network (a combined network of state highways and local roads within the area covered by a district council). Several other collaborative agreements between local authorities and Transit have been proposed but have not proceeded.

In our audit, we looked at whether the three existing collaborative agreements between district councils and Transit were set up in a robust way, were working well, and were resulting in effective maintenance of local roads and state highways at lower cost. We also looked at the reasons four other proposed collaborative agreements between Transit and district councils in Central Otago, Taranaki, Southland, and Tasman had not proceeded. We drew together views on the lessons learned and on what made collaborative agreements more likely to succeed.

We did not compare how cost-effectively local roads and state highways were being maintained under the existing collaborative agreements with how cost-effectively they might otherwise have been maintained had the district councils and Transit worked either separately or under different joint arrangements. A robust analysis of the relative cost-effectiveness of alternative scenarios was beyond the scope of our audit. Therefore, we have not formed a view on whether the existing collaborative agreements represent the most cost-effective means of maintaining roads in the districts they cover.

Our findings and conclusions

Our overall conclusion is that collaborative agreements between Transit and district councils can be an effective means of maintaining local roads and state highways. In some instances, they have resulted in cost savings and more coordinated and locally responsive management of local roads and state highways as a single district roading network. However, from Transit's national perspective, there are significant drawbacks to collaborative agreements as they can lead to fragmented and less efficient management of state highways as a national network.

On how the existing agreements had been set up and their objectives

We found that each of the three existing collaborative agreements had been set up in different but robust ways. The district council had initiated the agreement in all three cases. While the specific objectives of the district councils and Transit were different, for each agreement they were aligned on effective joint management of local roads and state highways in the districts and, for two of the agreements, on reducing maintenance costs.

On the benefits of the existing agreements

The district councils were getting greater benefits from the agreements than Transit. For the two agreements where cost savings were expected, the savings for the district councils were expected to be greater than those for Transit. The district councils and Transit were not comprehensively tracking actual savings and how they were being applied, but available evidence suggested that the district councils were realising greater savings than Transit. In all three cases, the district councils were also noticing more non-financial benefits than Transit through their greater input to more co-ordinated and locally responsive integrated management of local road and state highway activities.

The balance of opinion among the district councils was that roads in their districts were being well managed and kept in a mostly stable condition. Our high-level analysis of the main Land Transport New Zealand (the Crown entity set up under the Land Transport Management Amendment Act 2004 to promote land transport sustainability and safety, and allocate government funding for land transport) and Transit road condition indicators showed that, 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 from, or improving more than, the road condition in other districts.

Transit had gained some initial benefits from the existing agreements but believed that its cost savings were not substantial from a national state highway viewpoint. It also believed that it spent more time involved in managing the agreements than the time it spent managing other parts of the network.

Transit saw significant drawbacks to wider collaboration, both in achievement of its responsibilities under the Land Transport Management Act 2003 and in gaining efficiencies across the network. It had decided not to pursue further collaborations.

Transit had not formally compared the costs and benefits of collaborative agreements with other network management approaches, as it had difficulty quantifying 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 may disadvantage Transit's purchasing power. It believed that, from the perspective of a national roading network, these packages of work may not be the most effective or efficient packages to put to the market. In Transit's experience, the most efficient and effective networks generally covered more than one local authority. Its view was that collaborative agreements in the form of shared services arrangements with adjacent local authorities would result in savings.

On proposed agreements that had not proceeded

We found that no new collaborative agreements between Transit and local authorities had been set up since 2002, although several had been proposed. Of the four proposed collaborative agreements that we looked at, we found that one was stopped at an early stage. The remaining three went through a feasibility stage. In each case, the feasibility stage concluded that there were benefits to collaboration, including cost savings that we note were forecast using models with varying degrees of accuracy. Two of these three proposed agreements involved a group of district councils coming together to enter into a collaborative agreement with Transit.

While the specific reasons that the proposed agreements did not proceed were different in each case, differences in view between Transit and the district councils on their preferred model for collaboration were an important factor. These differences centred on whether Transit or the district councils would give authority to the other party to act on their behalf. Each preferred to be acting on behalf of the other party rather than giving authority to the other party. As well as this matter of trust, doubts about the extent of the likely cost savings and other benefits contributed to the proposed agreements not proceeding.

On lessons learned and the factors underpinning successful collaboration

From those involved in the existing agreements and the proposed agreements that had not proceeded, we drew together views on lessons learned and what made collaborative agreements more likely to succeed. These views highlighted that commitment and trust combined with sound preparation underpinned successful collaboration. The lessons learned and factors underpinning successful collaboration presented in Part 7 of this report are consistent with the findings of our May 2004 report Local Authorities Working Together, which, together with the brochure that accompanies it, off ers guidance to local authorities on identifying opportunities and preparing proposals for working together.

Our recommendations

In making our recommendations, we note that in May 2007 the State Services Commission released a land transport sector review (Next Steps in the Land Transport Review) that recommended Transit and Land Transport New Zealand be merged.

We recommend that Transit and Rotorua District Council:

  • review the operation of the delegation in the next year, as it was last reviewed in 2000 (Recommendation 1, page 30);
  • consider, as part of the review of the delegation in the next year, how arrangements for governance of the delegation might be further strengthened (Recommendation 2, page 30);
  • 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 (Recommendation 6, page 44); and
  • review the delegation at three-yearly intervals, as specified in the delegation agreement, to ensure that it continues to operate cost-effectively for both parties (Recommendation 3, page 30).

We recommend that Transit (Marlborough Roads office) and Marlborough District Council:

  • prepare a succession plan for the Marlborough Roads office that covers how the capability of the organisation will be maintained in the future as staff change (Recommendation 4, page 34); and
  • devise more specific targets for the council's service expectations from Marlborough Roads and build these into their reporting process to provide a clearer picture of ongoing performance under the agreement (Recommendation 5, page 35).

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 (Recommendation 7, page 46).

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 8, page 60); and
  • use the assessment of collaborative agreements that we have recommended as a robust basis for informing future decisions on whether and how to collaborate (Recommendation 9, page 60).

We recommend that Transit and local authorities, if pursuing future opportunities for collaboration, refer to the success factors identified in Part 7 of our report as a guideline to help them make well-informed decisions on whether and how to collaborate (Recommendation 10, page 75).

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