Part 2: Was the governance, programme management, and accountability structure designed effectively?

Reviewing aspects of the Auckland Manukau Eastern Transport Initiative.

2.1
In this Part, we discuss whether the governance, programme management, and accountability structure for AMETI has been designed in a way that supports effective governance and programme management. We discuss:

The overall governance structure;
the Council's expectations of Auckland Transport;
the Board of Auckland Transport and its sub-committees;
the relevant programme management structure;
the roles and responsibilities of the Programme Control Group; and
arrangements for communicating and engaging with stakeholders.

Summary of our findings

2.2
Most of the governance and accountability arrangements have been designed in a way that should support effective governance of AMETI if applied in practice.

2.3
Auckland Transport has updated and brought together the projects that it inherited in eastern Auckland in a cohesive way, with a clarity of purpose. Auckland Transport has designed the programme management structure and programme documents so that they support the strategic purpose for AMETI.

2.4
However, some important aspects of the arrangements should be strengthened, particularly information used to manage project risks and to monitor performance. In our view, the governance arrangements do not have enough information for these purposes.

2.5
The Board of Auckland Transport and the Council need more information to judge whether AMETI is on track to deliver the expected benefits. Benefits need to be better defined at the beginning of a project stage. Auckland Transport cannot afford to wait until the end of the programme in 2030 to assess AMETI's success.

2.6
The Programme Control Group needs to do more routine reporting to the Board about AMETI's delivery risks.

2.7
The Board needs more independent assurance about AMETI's operation. For a programme costing $1.1 billion, we expect a secondary level of assurance beyond information coming directly from those managing AMETI.

2.8
The value and importance of the Key Stakeholder Forum in the governance structure needs to be clearer. To date, the Forum has not met. Auckland Transport needs to decide whether to continue with it.

2.9
We have made three recommendations in this Part about aspects of these matters. Some of the recommendations we make in Parts 3 and 4 also relate to aspects of these matters.

The overall governance structure

2.10
The Council owns Auckland Transport and Auckland's roads (except state highways). It appoints directors to the Board of Auckland Transport.

2.11
Auckland Transport owns the public transport network and maintains the region's roads (except state highways). It is accountable to the Council. It must consult the Council on its draft statement of intent and report to the Council on its operations every quarter.

2.12
Auckland Transport must "give effect to" the relevant aspects of the Council's long-term plan. It must "act consistently" with any other plan of the Council "to the extent specified in writing by the governing body of Council".

Auckland Council's expectations of Auckland Transport

2.13
The Council's CCO policy sets out the Council's overall strategic direction for Auckland Transport. The policy expects that Auckland Transport will "contribute to an efficient, sustainable, energy saving and cost effective land transport system to support Auckland's social, economic, environmental and cultural well-being".

2.14
The Council's long-term plan sets out transport priorities for Auckland Transport. AMETI is one of three priority programmes in the long-term plan.

2.15
At the beginning of the annual business planning round, the Mayor of Auckland sends a Letter of Expectations to Auckland Transport. This letter sets out priority matters and detailed expectations for the coming year.

2.16
Auckland Transport then agrees a statement of intent with the Council. The statement of intent shows how Auckland Transport will meet expectations and contains performance measures, targets, and financial information.

2.17
The Council has set up institutional arrangements, including the CCO Governance and Monitoring Committee, to monitor performance. Another committee appoints members of the Board of Auckland Transport.

2.18
AMETI is expected to help to:

reduce carbon dioxide emissions and public transport subsidies;
increase bus use and passenger satisfaction; and
increase the "productivity" of important roads.³

2.19
Auckland Transport's 2014-17 statement of intent has only one activity measure for AMETI − to build the Reeves Road Flyover by 2019. The statement of intent contains no specific performance measures or financial reporting about AMETI.

2.20
Clearly, the Board of Auckland Transport is accountable to the Council for the delivery of AMETI. However, the performance and financial reporting in the statement of intent is too general to show the programme's contribution to the performance measures we describe. The Council told us that it plans to work with Auckland Transport in 2015/16 to achieve greater transparency of information and oversight of AMETI.

2.21
The Council sets out further expectations and accountability requirements in its Shareholder Expectation Guide for CCOs. This guide covers how Auckland Transport should "give effect to" the relevant aspects of the Council's long-term plan and "act consistently" with any other plan of the Council. For example, the Council expects Auckland Transport to support Māori aspirations and well-being in keeping with the Council's Māori Responsiveness Framework.

2.22
The Council expects that Auckland Transport will adopt a "no-surprises" approach to communications to ensure that the Council is well informed about matters that might affect Aucklanders.

The Board of Auckland Transport and its sub-committees

2.23
Figure 4 shows AMETI's governance, programme management, and accountability structures.

Figure 4
Governance, programme management, and accountability arrangements for the Auckland Manukau Eastern Transport Initiative, February 2015

Source: Auckland Transport (adapted from Auckland Transport's programme governance structure for AMETI).

2.24
The Board of Auckland Transport is ultimately accountable for delivering AMETI. Auckland Council appoints between six and eight voting directors, and two of those directors may be members of Auckland Council. Auckland Council firstly appoints directors for a one- to three-year term and may then reappoint them for a further three years. NZTA nominates one non-voting member as well.

2.25
The Board of Auckland Transport also meets as the Regional Transport Committee, to prepare the Regional Land Transport Plan. On those occasions, its decisions include a vote from the NZTA representative on the Board.

2.26
As a principle of good governance, the Board should set a clear strategic purpose for the AMETI programme and provide direction that helps Auckland Transport to achieve that purpose.

2.27
The Board has approved the overall strategic purpose and delivery plan for AMETI, after ensuring that it was a good strategic fit with the Auckland Plan and other strategic plans.⁴ AMETI updates and brings together the legacy projects that Auckland Transport inherited in eastern Auckland.

The sub-committees

2.28
The work of two of the Board of Auckland Transport's sub-committees – the Finance and Risk Committee and the Capital Review Committee − is directly relevant to AMETI.

2.29
The Finance and Risk Committee supports the Board of Auckland Transport in setting clear expectations for standards of performance, professional conduct, and achievement. Some Board policies (or "strategies") set out these expectations, including:

a procurement strategy that includes probity checks;
a policy on how managers should record and report risks;
policies on avoiding or mitigating conflicts of interest and on dispute resolution processes; and
direction on how the Board expects its staff to communicate and engage with stakeholders.

2.30
The Board also has a policy on delegated financial authority (see paragraphs 2.62 to 2.67).

2.31
The Board has a Capital Review Committee because it recognised the risks inherent in legacy projects and put in place arrangements for additional scrutiny. The Capital Review Committee can spend extra time getting a thorough understanding of complex projects and provide better leadership and direction to staff.

2.32
The Capital Review Committee does not make decisions. If a major change in AMETI's scope or budget is necessary, the Capital Review Committee receives supporting papers from the Programme Control Group. The Capital Review Committee will consider those papers in detail and provide advice and recommendations to the Board. The Board makes the final decision.

2.33
Under its terms of reference, the Capital Review Committee is to ensure that:

projects are planned and managed through the various phases and milestones of delivery and that the required documents are maintained and reported;
project and programme risks are identified and effective mitigation plans put in place; and
adequate reporting on the capital programme is provided to the Board.

Programme management structure

2.34
AMETI sits within the Capital Development Division of Auckland Transport (see Figure 5). A Chief Officer heads the division and reports to the chief executive. The Executive Leadership Team for Auckland Transport comprises the chief executive and the heads of all of Auckland Transport's divisions.

Figure 5
Auckland Manukau Eastern Transport Initiative's programme management structure

Figure 5 Auckland Manukau Eastern Transport Initiative's programme management structure.

Source: Auckland Transport (adapted).

2.35
The Group Manager, Investment and Development reports to the Chief Officer and manages the AMETI Programme Director.

2.36
AMETI's management team contains some people specifically appointed to roles in the programme. The Programme Director manages AMETI's management team, including project directors, project managers, and project support staff. The remainder of staff on the team are functional specialists who work elsewhere in Auckland Transport but supply services to the project and programme.

The Programme Control Group's roles and responsibilities

The Programme Control Group's terms of reference

2.37
In October 2013, Auckland Transport recorded its approach to delivering the AMETI programme. The stated purpose of the Programme Control Group was to be "responsible for assurance and decision-making for the programme whilst providing independent infrastructure programme expertise and advice".

2.38
The Programme Control Group's purpose is to:

control the scope, cost, and programme of the public transport development projects within the authority that the Board of Auckland Transport delegates;
ensure that the projects are completed on time and within budget, and meet the specified product definition objectives; and
provide a forum for rapidly approving matters within its delegated authority, or for endorsing proposals outside its delegated authority and referring them to the chief executive or the Board.

2.39
The Programme Control Group has specific responsibilities under its terms of reference. In July 2014, these responsibilities included:

approving strategies for managing the projects, such as procurement, construction management, and engaging stakeholders;
regularly reviewing the risks to delivering the programme and putting in place appropriate measures to deal with any adverse trends;
approving the purchase of properties that any project affects;
reviewing costs, and approving (or otherwise) changes within delegated authority and budget, and referring any matters outside its delegated authority to the Board of Auckland Transport with appropriate recommendations; and
arranging for monthly reporting of costs, use of contingencies, trends, and measures put into place to deal with any adverse trends to the Board, the Council, the Mayor's Office, and others as required.

2.40
Although the terms of reference state that the Programme Control Group should regularly review delivery risks, they do not explicitly require the Group to report these risks. We could infer this requirement from the Programme Control Group's responsibility to report on "implementation of measures to deal with any adverse trends".

2.41
However, we consider that this could limit the effectiveness of reporting. The Programme Control Group could interpret adverse trends more narrowly – for example, as a potential overspend or a delay, rather than a full account of delivery risks. We consider that this is a deficiency in the terms of reference, which otherwise look appropriate.

The Programme Control Group's leadership

2.42
The July 2014 terms of reference for the Programme Control Group state that the Chief Officer⁵ of the Capital Development Division chairs the Programme Control Group. Other members are the Group Manager, Investment and Development (the "programme sponsor"), who has responsibility for the programme; AMETI's Programme Director; the Manager, Property and Planning; and one other Group Manager.

2.43
Good practice requires the chairperson of the Programme Control Group to be independent of the programme. Although not fully independent of the programme, AMETI's Programme Control Group chairperson is not directly involved in delivering AMETI and does not manage the Programme Director. As a second-tier manager, the chairperson of the Programme Control Group should be able to provide the right senior management leadership and direction.

2.44
In Part 4, we discuss how changes made to leadership arrangements for Stage 2a of the programme reduced the separation between those leading and those delivering the programme, and the effect of those changes.

Communicating and engaging with stakeholders

2.45
Auckland Transport's communications and engagement policy sets out guiding principles on how to involve stakeholders. These principles include:

Auckland Transport should approach stakeholders with information rather than wait for people to come to it with inquiries.
Auckland Transport should communicate with affected parties before communicating more widely.
Responses should be timely, full, helpful, frank, and detailed. They should show that Auckland Transport is listening, even if agreement cannot be reached.
Stakeholders and affected parties have a right to express their views and concerns about a project that could affect them.

2.46
We consider that the communications and engagement strategy provides good direction to staff. It should help Auckland Transport to show genuine accountability to those with an interest in AMETI, who might not be party to a formal accountability arrangement.

2.47
However, the case studies in Part 3 highlight that, in practice, a variable approach meant Auckland Transport did not always meet the needs of its stakeholders or its own expectations about engaging with stakeholders.

2.48
Clearly understanding the purpose of AMETI should help the Board of Auckland Transport and the Programme Control Group to communicate AMETI's benefits clearly and consistently. Regular communication with key stakeholders (including those who benefit from the project and those who fund it) should ensure that the project remains in line with stakeholders' interests, especially if Auckland Transport needs to adjust its plans during the programme.

Stakeholder groups in AMETI's programme structure

2.49
The AMETI Advisory Group and the Key Stakeholder Forum form part of AMETI's programme management structure. Involving stakeholders in these groups should help Auckland Transport make better informed decisions about the programme.

AMETI Advisory Group

2.50
In April 2014, the AMETI Advisory Group agreed its terms of reference. These state that the group will be made of representatives from Auckland Transport, the Council, and NZTA.

2.51
The representatives from Auckland Transport are the:

Chief Development Officer (chairperson);
Group Manager, Investment and Development; and
Project Director, Key Strategic Initiatives.

2.52
The representatives from the Council are the:

Manager, Regional and Local Planning; and
Financial Planning Manager – CCOs.

2.53
The representative from NZTA is the Regional Manager, Planning and Investment.

2.54
The AMETI Advisory Group's main purpose is to:

… provide strategic leadership to ensure transport infrastructure improvements within the AMETI Programme area are well-aligned with other investments and coordinated with planned growth in the Auckland region.

2.55
The group provides a forum where Auckland Transport should share information about funding and performance against objectives, providing accountability to funders.

2.56
The group is to make decisions by consensus. Among other tasks, it is expected to:

help the then project control group (which was changed to the Programme Control Group later – see paragraph 4.16) build and maintain effective relationships with central government agencies;
ensure that communication between the member organisations is timely and effective; and
assess how changes in the external environment will affect the programme.

2.57
The group is expected to meet at least every quarter and more often if necessary.

2.58
We consider that these terms of reference, if applied, should allow the group to contribute positively to AMETI's governance and management arrangements.

Key Stakeholder Forum

2.59
The intended purpose of the Key Stakeholder Forum was for Auckland Transport to share project and programme information with important Council and CCO stakeholders, including Auckland Council Property Limited, Auckland Council Parks, the Council's planners, and City Transformation. The forum should meet every quarter but had not met at all at the time of writing this report.

2.60
The Key Stakeholder Forum has no terms of reference. We are unable to say whether it will help the programme governance and management arrangements.

2.61
If a decision is made to continue with the Key Stakeholder Forum, Auckland Transport needs to use it effectively to share programme and project information with stakeholders.

Recommendation 1 We recommend that Auckland Transport decide what value the Key Stakeholder Forum has in the programme governance structure. If Auckland Transport decides to keep the Forum, it needs to use the Forum to share programme and project information with stakeholders effectively.

Arrangements for making decisions and managing risks to the programme

Financial decisions and mandatory quality assurance

2.62
The Board of Auckland Transport delegates responsibility for money to management staff through its policy on delegated financial authority. This gives staff permission to spend money or commit resources on Auckland Transport's behalf.

2.63
The amount of money that staff are able to commit depends on their role. Staff with delegated financial authority can commit resources only to projects that the Board has approved, within predefined limits. They cannot exceed the project's budget or make changes to the scope without the Board's approval.

2.64
The Board's policy on delegated financial authority states that mandatory quality assurance is required for some financial decisions. The exact form that this assurance must take is not specified, and there is no separate policy on mandatory quality assurance.

2.65
The delegated financial authority policy states that one form of mandatory quality assurance could be a review by the Programme Control Group. The policy states that, whatever form mandatory quality assurance takes, it does not absolve the delegation holder from responsibility for exercising a delegation. The delegation holder is solely responsible for all decisions made, regardless of endorsement or agreement from others.

2.66
For example, the policy says:

… a decision by a Programme Control Group is an endorsement but an employee holding a delegated financial authority must still make the decision. The accountability for the decision sits with the manager exercising the delegation. Delegations may not be shared or split and delegation decisions may not be made jointly.

2.67
No separate guidance or policy guides the Programme Control Group on making programme decisions that do not have an immediately quantifiable monetary value. Auckland Transport should define how staff should seek higher managers' or the Board of Auckland Transport's endorsement of non-financial project decisions. We discuss this further in Part 4.

Recommendation 2 We recommend that Auckland Transport clearly define the roles and responsibilities of staff charged with making financial decisions for getting quality assurance and the form that quality assurance should take.

Decisions about projects proceeding between phases

2.68
Auckland Transport uses a Gateway review at decision points to decide whether projects are ready to proceed to the next phase.⁶ To help the Programme Control Group meet its responsibilities, AMETI's management team prepares the reviews for the Programme Control Group. The reviews should provide:

a baseline that the performance of the next phase of the project can be measured against;
a record of the project's background and work to date; and
a plan of how to carry out the next phase of work.

2.69
We compared how Auckland Transport uses Gateway with the methodology in other parts of government. Auckland Transport has two major deviations from the standard methodology.

2.70
First, Gateway reviews should assess how likely it is that the project will successfully deliver the intended outcomes. This assessment was not in the AMETI documents we saw.

2.71
Secondly, the Gateway methodology assumes an independent review, but AMETI's reviewers are internal.

2.72
We consider that these deviations weaken the assurance that can be taken from the reviews.

Recommendation 3 We recommend that Auckland Transport ensure that Gateway reviews of major transport projects, including those that comprise the Auckland Manukau Eastern Transport Initiative, include an assessment of how likely it is that a project will successfully deliver the intended outcomes.
Recommendation 4 We recommend that Auckland Transport ensure that those conducting Gateway and other assurance reviews have appropriate independence relative to the project's risks, scale, and nature.

Main strategic risks

2.73
Auckland Transport identified risks associated with AMETI and has been able to reduce the likelihood of those risks. In February 2015, the following risks have a high residual risk (after mitigation) at the programme level:

Local or national government priorities change.
Auckland Transport cannot organise the construction stages in the best way, which will affect traffic management, and might mean that the expected benefits are not realised.
The projects end up costing more than estimated.

2.74
Likewise, the risks that have a high residual risk (after mitigation) at the project level for Stage 2a are that:

iwi object to proposals at Mokoia Pā, which would affect the plan for Panmure Bridge works; and
Pakuranga Mall owners, other property owners, and important tenants object to Auckland Transport's preferred site for the Pakuranga Bus Station because of a loss of car parking.

Managing increasing risks

2.75
The Programme Control Group has responsibility for monitoring risks and taking action to deal with risks that are increasing. The terms of reference for the Programme Control Group are clear about referring financial risks upward when necessary.

2.76
However, there are no similar requirements for referring project risks. The Programme Control Group is expected to report only on actions taken. In paragraph 2.41, we concluded that this was a deficiency in the design of the terms of reference and was likely to reduce the effectiveness of governance. In Part 3, we discuss some of the problems this caused in practice.

3: "Productivity" is measured by counting the number of vehicles in a lane, how fast they are going, and how many people are in each vehicle.

4: These include the Integrated Transport Programme − Auckland Transport's 30-year investment plan, the regional land transport plan, and the regional public transport plan.

5: In 2014, the Chief Officer was called the Chief Development Officer. By 2015, the title had changed to Chief Infrastructure Officer.

6: Gateway is an assurance methodology for major investments. It was developed in the United Kingdom by the Office of Government Commerce in 2001. The New Zealand Treasury adopted the methodology in 2008 for use in Crown entities and government departments. Its use in other New Zealand public services is good practice but discretionary.