Part 1: Introduction

Effectiveness and efficiency of arrangements to repair pipes and roads in Christchurch.

In this Part, we set out:

Why we did our audit

A significant amount of taxpayer and ratepayer money is being spent on the Canterbury earthquake recovery and rebuild. A large proportion of this expenditure is on providing basic services, such as wastewater collection, stormwater drainage, fresh water supply, and roading (horizontal infrastructure).

Many public entities are engaged in procuring goods and services as part of the recovery effort. These involve significant, large-scale contracts.

We considered it important to provide assurance to Parliament that public money is being spent in an effective and efficient way, and that the public entities involved are managing the risks of the rebuild.

Who and what we audited

We carried out a performance audit of how effectively and efficiently three public entities are managing the rebuild of Christchurch's horizontal infrastructure through the Stronger Christchurch Infrastructure Rebuild Team (SCIRT). The three public entities (also known as clients) are Christchurch City Council (CCC), the Canterbury Earthquake Recovery Authority (CERA), and the New Zealand Transport Agency (NZTA).

Although SCIRT is not a public entity, it is rebuilding the horizontal infrastructure with public money.

We looked at the scope of works that SCIRT is responsible for, which is confined to the city boundaries of Christchurch City Council. Some other works are being delivered under business-as-usual arrangements referred to as non-SCIRT works, which we did not look at.

How we carried out our audit

To carry out our audit, we:

  • interviewed staff from the three public entities, SCIRT, and external parties involved in independent review roles;
  • reviewed and analysed relevant documents, mostly from SCIRT and the three public entities;
  • reviewed information and data from six SCIRT projects, looking at controls, layers of review and quality assurance, the target cost process, processing of claims, and any additional illustrative information;
  • visited a construction site and spoke with the contractors working there; and
  • carried out a benchmarking study to compare and contrast the construction costs incurred by SCIRT with those obtained from local government contracts throughout Canterbury and New Zealand.

We carried out our fieldwork and analysis in 2013.

Our expectations

To draw our conclusions on how effectively and efficiently the three public entities are managing the rebuild of Christchurch horizontal infrastructure through SCIRT, we established some expectations about what an effective and efficient approach would look like.

For the decision to choose an alliance as a procurement approach, we expected that the three public entities would have put in place appropriate strategic arrangements that promote effective and efficient procurement in the context of post-disaster recovery and in a manner consistent with their respective roles and responsibilities. We expected a compelling value proposition that supported the use of an alliance and that the adopted alliance model would contain critical success factors in its design.

We expected that operational project delivery would be effective and efficient in the circumstances. This would include a system of programme delivery where projects are of an appropriate size and configuration to optimise resources and where there is an effective prioritisation method.

We expected that the system would provide enough layers of quality assurance checks and controls to ensure that projects are delivered to a reasonable level of quality and that there is adequate scrutiny of business at all levels to safeguard its integrity.

We expected that the commercial arrangements provide enough tension to constrain costs and that the cost of the rebuild on the three public entities is fair and reasonable.

We expected that high-level strategic planning would ensure, where possible, that the horizontal infrastructure rebuild repairs the right infrastructure, in the right place, at the right time, to the right standard. Where trade-offs are necessary, we expected that they would be made to support the Canterbury earthquake recovery.

We expected that the three public entities would agree on the scope of works that SCIRT would deliver and clearly express what value means in the context of the horizontal infrastructure rebuild programme. We expected that this value proposition would address the original and any updated business objectives and that the three public entities would measure SCIRT's achievement against a cohesive framework.

Audit context

We carried out our audit almost two years after SCIRT was formed. SCIRT was formed during an earthquake emergency response phase that transitioned into earthquake recovery. Ongoing seismic activity in Canterbury means that the distinction between response and recovery is not well defined.

Appendix 1 summarises the transition from the procurement arrangements that were put in place after the 4 September 2010 earthquake to the arrangements after the 22 February 2011 earthquake.

Because Christchurch's horizontal infrastructure was damaged by a natural disaster, there has been some overlap between planning and implementation. Consequently, at the time of our audit, SCIRT was implementing final layers of assurance processes and controls. The Crown and CCC were also negotiating a cost-sharing agreement and reviewing their client governance arrangements in parallel with our work.

It is expected that SCIRT's design will continue to be subject to review and improvement as the rebuild progresses.

What we did not audit

We did not inspect construction work nor carry out a technical review of the engineering design solutions that SCIRT developed.

We did not look at infrastructure outside the scope of SCIRT's mandate, such as other types of infrastructure or infrastructure outside Christchurch's city boundaries.

We did not assess the performance of the private companies involved in SCIRT.

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