Part 3: How well is governance and accountability working?

Reviewing aspects of the Auckland Manukau Eastern Transport Initiative.

3.1
In this Part, we look at how well the governance arrangements, accountability arrangements, and stakeholder relationship management for AMETI work in practice. We discuss:

strengths, and lessons to be learned from two case studies – Pakuranga Town Centre and Mokoia Pā; and
how effectively Auckland Transport is managing accountability relationships with the Council, local boards, and NZTA.

Summary of our findings

3.2
Governance and accountability arrangements have helped progress the Pakuranga bus way and Reeves Road Flyover projects. The arrangements have particularly helped with technical aspects, such as reaching design solutions and acquiring property. In this sense, the progress has been in keeping with the clear purpose of the programme, which we noted in Part 2 as a strength.

3.3
However, the way that stakeholders have been engaged has not consistently reflected the aspirations of the communications and engagement strategy. Late and ineffective engagement led to problems with some stakeholders at Pakuranga and Mokoia Pā.

3.4
Sometimes, these problems damaged stakeholders' trust in Auckland Transport and increased perceptions that Auckland Transport was "unaccountable".Governance practices need to support accountability, an important aspect of good governance.

3.5
The problems lead to questions of whether, in practice, all of the right people have had the opportunity to take part in governance of the programme and whether those within the governance structure have shown leadership in the range of activities that need to be governed.

Case study 1 – Pakuranga Town Centre

3.6
We had planned to look at how Auckland Transport managed the risk of objections to its choice of site for a bus station in Pakuranga. By February 2015, when we began this audit, Auckland Transport had rethought its plans for a flyover at Reeves Road. We decided to look instead at how Auckland Transport dealt with the potential changes this rethinking could lead to.

3.7
One of the factors that influenced the choice of site for the bus station was where the flyover would be built. The flyover was part of the solution to reducing congestion in Pakuranga Town Centre and improving east-west journey times for through traffic.

3.8
However, about April 2014, during preparations to lodge a "notice of requirement",⁷ the Project Director informed the Programme Director that the business case for the flyover no longer appeared to be the best solution. The Programme Director referred the matter to the Programme Control Group.

3.9
This led to a temporary halt on further progress on the flyover. This was a bold action. For more than 10 years, many people had been expecting the flyover, so any change would be controversial. The Programme Control Group then commissioned a strategic review to evaluate possible alternatives to the flyover.

3.10
We understand that, at first, the review work (called the High Level Sense Check) was a formality to ensure that Auckland Transport had properly recorded the rationale for the flyover. This was a requirement for the notice of requirement application.

3.11
We agree with Auckland Transport that it was appropriate for the programme team to do the work without consulting people outside the programme. However, by July 2014, it was increasingly clear that changes to the plans at Pakuranga were likely.

3.12
Between July and October 2014, Auckland Transport worked on the High Level Sense Check and arranged a series of internal workshops for its staff and consultants to look at:

the problem that the Reeves Road Flyover was originally intended to solve;
how closely strategy was in line with current objectives, which had changed since the flyover was first envisaged; and
high-level options for possible alternatives to the flyover.

3.13
Programme Control Group members set the final evaluation criteria that all the identified alternatives, including the flyover, would be assessed against. The Programme Control Group then identified a lead team of internal experts and consultants to evaluate the options using the criteria. Finally, the Programme Control Group received the short-listed options from the lead team.

3.14
In October 2014, at about the same time that the review work finished, Stage 2a passed a Gateway review, despite the high likelihood of changes to the project. We consider that the effectiveness of the Gateway process was reduced because the people who were managing and delivering the programme also carried out the Gateway review. The "gate" should not have been passed when the plans for Pakuranga Town Centre were so uncertain.

3.15
In November 2014, the Programme Control Group approved a paper on alternative options to Reeves Road, which was to go to the Board of Auckland Transport the next month. In the paper, the Programme Control Group asked the Board to note a "possible change in the delivery strategy", depending on further work on options and the financial implications.

3.16
During the seven months from May to December 2014, to the world outside Auckland Transport, it looked like "business as usual". For example, in May 2014, the Programme Control Group endorsed the procurement of a contractor to design the Reeves Road Flyover, and had begun discussions with local people and businesses who would be affected.

3.17
Local board members continued to receive monthly briefings, which did not refer to the potential for change. After reviewing documents from that period, we consider that Auckland Transport should have begun to discuss its thinking with the main stakeholders in July 2014.

3.18
Auckland Transport has many stakeholders, including local residents, cycling groups, and utility companies. However, we consider that Auckland Transport needs to involve some stakeholders early and fully. These would include other parts of the Council group and NZTA.

3.19
As late as November 2014, Auckland Transport had not discussed the review work it was doing with anyone outside Auckland Transport. In November 2014, NZTA was told informally that options were being revisited.

3.20
Although Auckland Transport has a good communications and engagement strategy, it put it into practice poorly in this instance and failed to act on the advice of its specialist staff. A management paper to the Programme Control Group identified that working in isolation was likely to increase risks to the project by causing relationship problems with stakeholders. The paper advised the Group to change its approach.

3.21
We found no recorded discussion of the isolation risks that the management paper identified, and subsequent events show that the advice was not heeded. The Council's Shareholder Expectation Guide for CCOs requires that staff in the Auckland "family", including those in CCOs, ensure clear and open communication within and outside the project. However, Auckland Transport did not produce the communication and engagement plan for Stage 2a until December 2014.

3.22
This mattered because difficulties arose when Auckland Transport started to communicate the potential changes. For example, one affected stakeholder went straight to the media. Auckland Transport then provided an inaccurate statement to the media, which stated categorically that the Reeves Road Flyover would not be going ahead and that the money saved would be transferred to build a new bus way earlier than expected. Auckland Transport also published this statement as a news item on the Auckland Transport website.

3.23
The statement misrepresented the decision that the Board of Auckland Transport had made at its December 2014 meeting. It implied that the decision had already been made, when some factors, such as funding, were outside the Board's control. The Board's chairperson had to retract the statement and publicly clarify that the Board was continuing to investigate options.

3.24
The media statement created problems for NZTA, implying that Auckland Transport would simply move the money it saved from not building the flyover to accelerate another part of the programme. This was not an assurance that Auckland Transport could give. In keeping with its approved budget, NZTA has strict funding criteria and processes. Auckland Transport had not discussed changes in funding with NZTA.

3.25
We consider that, in the circumstances, involving the right stakeholders in, at least, the problem definition workshops would have helped the review and reduced the risk of decision-makers lacking full and accurate information. This engagement would have given stakeholders the chance to contribute usefully. It was an opportunity for Auckland Transport to build understanding.

Our conclusions from this case study

3.26
Sometimes, it is appropriate for public entities to consider matters in confidence. Generally, deciding the right time to consult stakeholders is a fine balance. Getting the timing wrong can be profound. In this instance, it lead to a loss of goodwill with the local community and a major funder.

3.27
The late communication and engagement with stakeholders, including NZTA, on the potential changes and inaccurate communication arose from weaknesses in aspects of governance and accountability.

3.28
The Programme Control Group:

did not consider enough the risks of Auckland Transport working in isolation on the potential changes;
did not act on advice from communications and other staff; and
misunderstood NZTA's funding criteria and processes.

3.29
Some aspects of governance and accountability worked well. These included:

referring the question about the flyover to the Programme Control Group and the decisive action taken to halt further progress during the High Level Sense Check review; and
processes within Auckland Transport to evaluate alternatives to the flyover.

Case study 2 – Mokoia Pā

3.30
Aspects of AMETI are likely to affect Māori cultural sites. We looked at how the Programme Control Group managed the major project risk arising from the effect of Stage 2a on Mokoia Pā. The risk was that iwi would object to the notice of requirement.

3.31
Mokoia Pā is a site of significant cultural importance to Māori − in particular, Ngāti Paoa:

Mokoia and Mauinaina were the great bastions of Ngāti Paoa; and though they may have been physically removed from the landscape that now stands before us, the spirit of the people and the connection to those significant sites will remain and endure within the stories and hearts of our people.⁸

3.32
Since it was set up, Auckland Transport has invested in engaging with mana whenua. It facilitates a monthly hui and employs dedicated Māori communications staff. It has also aided the preparation of Māori values assessments.

3.33
Through the Māori values assessments, some iwi note how they value Auckland Transport's willingness to engage and comment on the sincerity of the engagement. For example, they cite Auckland Transport's management "signalling a willingness to understand and incorporate Iwi aspirations and concerns throughout the discussions and planning for AMETI".

3.34
During Stage 1 of the programme, Ngāti Paoa and the project team built good relationships. With much goodwill, the parties used any challenges they encountered to set up new ways of working together.

3.35
The new Panmure Station has many design elements that reflect Māori values. Auckland Transport and Ngāti Paoa worked well together to set protocols on sensitive matters, such as discovering possible kōiwi tangata⁹ during excavations.

3.36
During Stage 2a, the relationship became strained. By July 2014, Ngāti Paoa had withdrawn from discussions with Auckland Transport. The disagreement centred on the reluctance of Auckland Transport to discuss offsetting remedies for works at Mokoia Pā.

3.37
An individual manager, not the Programme Control Group, directed the team delivering Stage 2a to discuss design mitigations only and not other aspects of remediation. We understand that this Auckland Transport manager hardened his attitude and approach deliberately, despite Auckland Transport knowing that remediation would be necessary.

3.38
This is contrary to what the Council says in its Shareholder Expectation Guide for CCOs, which states that staff should "exercise judgement and caution in decision-making distinct from what may be required in a commercial environment".

3.39
Because iwi objecting to the notice of requirement was a major risk for Stage 2a, we expected to see a full discussion of the change in tactical approach at the Programme Control Group meeting and the Board of Auckland Transport informed of the potentially increased risk.

3.40
We searched through the Programme Control Group minutes and papers, but we could not see that the Programme Control Group had endorsed the direction on the negotiation approach. In fact, the Programme Control Group discussed only technical aspects of the Panmure Bridge works affecting Mokoia Pā. This confirms that one manager had suggested the approach to take, and that the Programme Control Group was not well enough informed.

3.41
We conclude that the Programme Control Group had not provided enough critical challenge to the person making the decision under delegated financial authority. The Programme Control Group members had an opportunity to pick up the lack of progress, through the project dashboard information they received.

3.42
Because Programme Control Group members did not recognise the increasing risk, the matter was not referred upward for some time. We consider that this was because the Programme Control Group focused on the more tangible aspects of the delivery plans, such as acquiring property.

3.43
In November 2014, Auckland Transport's chief executive and the kaumatua of Ngāti Paoa re-established relationships. The chief executive has entered into a series of "without prejudice" discussions on a broad range of matters, reflecting Māori values such as kaitiakitanga and rangatiratanga. Ngāti Paoa describe the relationship as progressing.

3.44
Although we cannot say with any certainty, because the outcome is not settled, we consider that the risk to the programme appears to have reduced since July 2014.

Our conclusions from this case study

3.45
Spending time and resources engaging with mana whenua and reducing risk by re-establishing constructive relationships with Ngāti Paoa after an earlier ineffective approach were two aspects of governance and accountability that worked well.

3.46
Auckland Transport's earlier ineffective approach to discussions with Ngāti Paoa on mitigations for works at Mokoia Pā seemed to have stemmed from aspects of governance and accountability that did not work well and from which lessons can be learned:

The Programme Control Group did not consider the non-technical aspects of the works affecting Mokoia Pā enough, particularly the effect on Māori cultural values.
The increasing risks to engagement with Ngāti Paoa were recognised late and referred to the Programme Control Group, senior managers, and the Board of Auckland Transport late.
Action was taken that the Programme Control Group did not challenge enough or endorse.

Important findings from the case studies

3.47
In Part 2, we reported that the Board of Auckland Transport is ultimately accountable for AMETI. In practice, once the Board had approved the delivery strategy, the Board required the Programme Control Group to report only exceptions to the approved plan.

3.48
Although the Capital Review Committee's terms of reference state that it will have a role in monitoring AMETI, the records of its meetings provided no evidence that this was happening in practice. Although the Board receives routine performance information on several key transport measures, these measures tell the Board nothing about how well AMETI is doing.

3.49
It is reasonable to expect that major projects manage their activities under delegation and for the project team to manage risks day to day. However, it is important that there is a process in place to provide the Board with timely information on emerging and increasing risks, such as those arising at Mokoia Pā and Pakuranga.

3.50
From our review of information going to the Board, we consider that the AMETI team focused on obtaining approval too much and not enough on seeking direction early enough. We consider that having a policy on significant matters would help to set expectations about what information should be "pushed" up to the Board, but the Board should also be "pulling" information from the programme team for regular scrutiny.

3.51
For example, we consider that the Board should be regularly and formally monitoring major project information as part of its responsibilities. Ensuring regular reporting of the AMETI programme encourages proper consideration of project risks, costs, and performance, and is an important discipline. It would also be good practice for the information to be periodically verified by people external to the project team.

Recommendation 5 We recommend that the Board of Auckland Transport regularly monitor major projects to ensure that risks are being managed and that projects are on track to deliver their intended outcomes.

How Auckland Transport manages accountability relationships

3.52
Accountability in the context of this audit means how Auckland Transport accounts for its use of public money, and how it communicates and engages with those who the AMETI programme affects.

Relationship with Auckland Council

3.53
The Council is the sole shareholder of Auckland Transport. It also commissions services from Auckland Transport through the long-term plan. Finally, it also regulates Auckland Transport through its CCO monitoring and performance framework. All of these roles require different accountability arrangements and different information. The Council sets out these requirements in its Shareholder Expectation Guide for CCOs. On paper, the expectations are clear.

3.54
In practice, the formal accountability arrangements for AMETI were challenging. The matters raised were similar to some of those we heard in 2012 when we published our report Auckland Council: Transition and emerging challenges (our Transition report).¹⁰

3.55
In our Transition report, we recommended that the Council improve its reporting of large projects and related contracts that involve the Council and CCOs. We highlighted that governing bodies, and the Council, needed better reporting on these projects to limit the risk of project problems and cost overruns.

3.56
We consider that the Council has not achieved greater transparency of information or oversight of the AMETI programme in line with what we recommended in our Transition report.

3.57
The measures contained in the formal performance agreement between the Council and Auckland Transport are too general for the Council to know whether AMETI's benefits are being realised. The problem with measures being set at too general a level is contributing to the problems we identified with reporting to the Board of Auckland Transport in paragraphs 3.47-3.51.

3.58
The Council would like to have more detail on projects of major regional significance, to see whether it is getting a good return on its investment. Auckland Transport considers that this is the responsibility of the Board of Auckland Transport.

3.59
We recognise that one of the benefits of a CCO is that it safeguards against undue political direction. However, this independence should not be at the expense of a lack of accountability to taxpayers and ratepayers. The Council told us that it plans to work with Auckland Transport on reporting requirements for major projects in 2015/16.

Relationship with the New Zealand Transport Agency

3.60
Auckland Transport is not formally accountable to NZTA. NZTA focuses on achieving the Government's national priorities, but it works with the Council and Auckland Transport to plan for their land transport needs. NZTA has agreed "in principle" to co-fund the AMETI programme to its conclusion in 2028.

3.61
NZTA's budget is separated into different pots for different purposes, such as funding road projects and public transport projects. These projects are shortlisted through the national and regional transport planning process. The successful ones are built into NZTA's financial projections. Auckland Transport prepares business cases for each step within each AMETI project (such as design or feasibility studies) and applies to NZTA for funding.

3.62
Since 2011, the relationship between NZTA and Auckland Transport has matured, and the two organisations worked well on Stage 1. NZTA is represented on the AMETI Advisory Group.

3.63
However, as described in our Pakuranga Town Centre case study (see paragraphs 3.6-3.29), we found that Auckland Transport failed to engage openly and transparently with NZTA as an important funding partner.

3.64
In April and May 2015, Auckland Transport did much to remedy the situation. For example, it has a detailed plan to involve NZTA in finding a solution for traffic management in Pakuranga Town Centre.

3.65
Auckland Transport has an opportunity to work with NZTA to make better connections between AMETI and another major project, the East-West connection. In our view, this could have been achieved earlier had Auckland Transport used the AMETI Advisory Group better.

Relationship with local boards

3.66
When preparing budgets and carrying out work in local boards' areas, CCOs are expected to consider local boards' objectives and priorities.

3.67
Auckland Transport has regular contact with local boards and has resources to support this. Chairpersons of local boards told us that they appreciated the regular updating from Auckland Transport but emphasised that the information flowed one way. One described this as Auckland Transport "asking for feedback, not input".

3.68
In our Transition report, we noted that:

Governing body and local board members were frequently surprised by late information about matters such as project and budget changes.

3.69
This remained the case in 2015. The Howick Local Board did not find out until early 2015 that Auckland Transport was considering changes to the AMETI plans in Pakuranga. Members of the local board were particularly unhappy, because they had put their "Town Centre Master Plan" on hold at Auckland Transport's request and were eager to finalise it. Members were disappointed that Auckland Transport had not been transparent with them.

3.70
When we reviewed the briefings that the Howick Local Board received, we confirmed that there had been no indication of possible changes.

3.71
Auckland Transport told us that it found getting the right balance a challenge. It had tried to consult early, but it found that stakeholders were unwilling to engage until they had something "concrete" to discuss.

3.72
Auckland Transport also recognises that going too far with ideas and design on its own means that stakeholders can feel that the outcome is pre-determined. In our view, this is not a unique challenge and is something that Auckland Transport needs to work harder on.

7: A notice of requirement seeks to designate that land is needed in the future for a development such as a public works project.

8: Ngāti Paoa − used with permission.

9: Kōiwi tangata are human remains.

10: This report is available on our website, www.oag.govt.nz.