Part 3: Introducing Gateway reviews in New Zealand

3.1
In this Part, we consider whether Gateway reviews are an appropriate tool for major capital projects in the New Zealand public sector.

Our expectations

3.2
We expected to see:

• evidence that Gateway reviews could benefit projects in New Zealand; and
• that there was a need for an intervention like Gateway reviews.

Summary of our findings

3.3
In our view it was reasonable to assume that Gateway reviews could provide some benefit for projects in New Zealand. Gateway reviews are based on a sound methodology and, before being introduced here, had been operating successfully and adding value to projects in the United Kingdom and Australia. Gateway reviews were also tested successfully with five pilot projects before being rolled out in New Zealand.

3.4
However, we did not see a strong case for introducing Gateway reviews in New Zealand. There was little analysis to show where intervention was most needed or why Gateway reviews in particular were the solution. This means that there may have been a better way to benefit projects in New Zealand.

Gateway reviews had been shown to benefit projects overseas

3.5
Before Gateway reviews were introduced in New Zealand, they had been operating successfully in the United Kingdom and parts of Australia, delivering both financial and non-financial benefits to projects. Given the similarities between these jurisdictions and New Zealand, in our view it was reasonable to assume that Gateway reviews could also benefit projects here.

Gateway reviews were tested before being fully introduced

3.6
Gateway reviews were tested with five pilot projects before being fully rolled out in New Zealand. The pilot reviews used experienced reviewers from Australia alongside New Zealand public servants. Feedback from the pilot reviews was very positive and indicated that Gateway reviews were likely to deliver benefits to projects. This meant there was confidence that Gateway reviews could be used effectively for all qualifying projects.

Gateway reviews target projects that are more likely to need help

3.7
Projects are selected for Gateway reviews based on a risk profile assessment, which uses a standard set of risk factors based on research into common causes of project failure. The assessment uses a series of questions set by the Treasury and has been customised from the version used in the United Kingdom.

3.8
The risk profile assessment considers factors such as:

• cost;
• the number of people involved in the project;
• the degree of innovation involved (such as new technology, methods, or services);
• the expected impact of the project;
• the degree of change the project will lead to; and
• the agency's experience in the particular type of project.

3.9
The agency running the project makes a provisional assessment. If the risk profile rating comes out as high or medium, the agency has to submit the assessment to the Treasury. The Treasury and other relevant agencies review each assessment and confirm or amend the risk profile rating. All projects with a final rating of high are required to have Gateway reviews.

3.10
Ministers can also request that a project has a Gateway review.

3.11
By focusing on projects that are considered to have a higher risk of failing, Gateway reviews are more likely have a positive impact on those projects.

3.12
We did not see a strong case for introducing Gateway reviews to New Zealand. We had expected to see some analysis of what had caused problems with major projects in the past, and what types of intervention might address the problems and reduce the chance of their recurring. This would determine the intended purpose and objectives for introducing Gateway reviews. For example, objectives might include reducing costs and improving skills.

3.13
The case for Gateway reviews was based on them working well in the United Kingdom and Australia, jurisdictions with similar systems to New Zealand, where the reviews had been shown to add value to projects. In our view, it was reasonable to assume that Gateway reviews could deliver benefits in New Zealand, but a stronger argument should have been made to support their introduction.

3.14
We also expected to see an analysis of options, matching different types of intervention with the problems identified, so that the most effective and efficient measures could be put in place.

3.15
Gateway reviews were introduced in New Zealand in 2008 after a major review in 2006, led by the Treasury, of capital asset management policy settings and practices in departments and Crown entities. As a result of that review, the Government introduced new processes and standards to strengthen capital asset management in the public sector. Gateway reviews were one of these. The others were:

• a common framework for all assets controlled or monitored by departments and Crown entities;
• a whole-of-life approach to capital asset management;
• a requirement for capital-intensive agencies to demonstrate an advanced standard of capital asset management, and other agencies to demonstrate a core standard;
• a two-stage Cabinet approval process for all new capital investment proposals above a certain threshold; and
• an expectation that capital-intensive agencies would manage their asset portfolios with a 20-year planning horizon.

3.16
The Treasury's review found that capital asset management was poorly understood, and there was room for improvement at all stages of an asset's life cycle. However, we did not find any detailed analysis of how Gateway reviews could benefit projects in New Zealand or why Gateway reviews were the best option.

3.17
Without clear objectives, it is not possible to assess whether Gateway reviews have been successful. Although we found that Gateway reviews have delivered some benefits to projects in New Zealand, it is not possible to say whether an alternative approach might have delivered more.