Part 9: Aspects of Auckland Council's governance of the Massey North development

9.1
In this Part, we describe and comment on the Massey North development's:

• governance arrangements;
• reporting arrangements;
• management structure and cost controls;
• costs; and
• completeness.

What are the governance arrangements?

9.2
It is important that Auckland Council has the right governance structure to ensure that there is a clear direction for the Massey North development, that it is adequately progressing in that direction, and that hard questions are asked about whether the direction and progress remain appropriate.

9.3
The right governance structure is also important for reducing the risk of management being seen to form too close a relationship with the private companies involved.

Overall public accountability

9.4
Ultimately, Auckland's elected councillors are publicly accountable for the Massey North development through Auckland Council's governing body, its committees, and the Henderson-Massey Local Board.

9.5
Public accountability requires keeping the public informed about important decisions, how a project is progressing, and what results are being achieved.

Project governance structure

9.6
Aspects of governance of the Massey North development at the relevant times were carried out by Auckland Council; two committees of the whole Council, namely the Finance and Performance Committee and the Auckland Development Committee; and the Henderson-Massey Local Board. Council management, particularly the City Transformation Projects⁵ and North West Transformation teams, manage and steer the development.

9.7
Much of the governance happens away from Auckland Council's governing body.

9.8
Although the Massey North development is not as financially significant as some of Auckland Council's other projects, it still involves considerable amounts of public funding (as we explain later in this Part) and has risks that need to be carefully managed and governed.

9.9
In our view, the project warrants greater oversight by Auckland Council's governing body, including its costs.

Project purpose and direction

9.10
Although the governors continuing with the project's original direction and purpose might be a function of inheriting the project through a transition process, it is important that the governors periodically stand back and consider whether changing circumstances mean that that direction and purpose needs to change.

9.11
Involving governors in the project is important not only for clarity of direction and purpose but also as a way of reducing the risk of management being seen to form too close a relationship with the parties involved. This is a particular risk for this development given the reliance on NZRPG.

9.12
In our view, the project's governors should seek a secondary level of assurance beyond information coming from those directly managing it. Auckland Council has told us that senior management provided some of this assurance because they were not involved in the day-to-day management of the project.

What are the reporting arrangements?

9.13
Reporting on the project should help the project governors maintain oversight of the project, emerging risks, and planned benefits. This is so that the governors can review and update the direction and purpose as necessary, and oversee the project's performance against plans.

9.14
Progress is reported through multiple streams. There is limited consolidated reporting at the overall project level to the governors.

9.15
There is the need to focus on the health of relationships with stakeholders, on contractor performance, and on the benefits delivered to date, as part of management monitoring and reporting on the project.

9.16
The Development Programme Office (formerly the City Transformation Projects team) in Auckland Council's Operations Division produces the monthly "Programme Status" reports for the project. These are included in the monthly capital expenditure reporting to the full Auckland Council.

9.17
The monthly "Programme Status" reports include a status overview; identification of budget and expenditure; key risks, issues, and milestones; and a risk assessment for each of the following dimensions of the project:

• overall status;
• cost;
• schedule;
• scope;
• risk;
• issues;
• resource; and
• quality.

9.18
Monthly "Programme Status" reports in this format started in March 2014.

9.19
However, the monthly "Programme Status" reports we have seen include information about only some of the constituent projects making up the overall Massey North development. There is limited consolidation of all information about the Massey North project in these reports. Auckland Council has told us that this is because the reports focused only on work then being carried out and funded by Auckland Council, and did not routinely report on work already completed. Figure 6 identifies the reporting streams by frequency.

Figure 6
Sources of reporting to the project governors by frequency of reporting

What are the management and project cost control structures?

9.20
A management structure and cost controls support the project.

Management structure

9.21
Strong management systems and processes are needed to support decision-making, sustain programme delivery, help to build and maintain important strategic relationships, and support accurate and complete reporting to the governors.

9.22
Figure 7 shows the management structure of the Massey North development.

9.23
Management accountability for the project rests with Auckland Council's Chief Executive and with the senior staff within Auckland Council with responsibilities for the project. These are the Chief Planning Officer (the Sponsor Executive) and the Manager Regional and Local Planning (the Sponsor Representative). The Chief Executive has a financial delegation of $20 million but is expected to refer lesser-value items that are contentious or political to the governing body or its committees. This is the senior management level of the management structure for the project.

9.24
A 30-person North West Transformation Team reports to the Chief Executive and to the Henderson-Massey Local Board. It includes membership from a range of organisations, not all of which are part of Auckland Council. These organisations include:

• Auckland Council;
• Auckland Transport;
• Panuku Development Auckland (previously Auckland Council Property Limited);
• the New Zealand Transport Agency; and
• Watercare Services Limited.

Figure 7
Management structure for the Massey North development*

* The participation and description of parts of this structure may have changed in recent times.

9.25
The North West Transformation Team is the Steering Group for the project.

9.26
The Auckland Council staff of the North West Transformation Team represent a wide range of functional sections of the council involved with the project.⁶

9.27
A Project Leadership Team that has representatives from Auckland Council, Auckland Transport, and NZRPG reports to Auckland Council's senior management through the North West Transformation Team. We were told this team is responsible for $32 million of the Works Development Agreement work.

9.28
It is one of nine different project control groups, as shown in Figure 7. Each of these groups has specific project management responsibilities.

9.29
There is comprehensive project structure reporting to each of the project control groups shown in Figure 7. Work on the project occurs within this comprehensive project structure.

9.30
Auckland Council has told us that it is not a simple task to get the right balance between governance and management in an organisation with the complexity and breadth of its work programme.

Project cost control

9.31
Cost management controls and processes are in place for the project. These include controls and processes for:

• understanding the nature and timing of the costs;
• estimating, recording, and classifying the costs;
• determining the budget; and
• controlling the costs.

Budgeted cost

9.32
Waitakere City Council's 2009 budget for the project was $205 million. This was out of an overall budget of $325 million for Stage 1 of the Northern Strategic Growth Area projects (Hobsonville Point, Hobsonville Corridor, and Massey North Town Centre).

9.33
In April 2015, the overall budget recorded in Auckland Council's financial systems was $197 million, with a small contingency ($6 million) on top of that. This budget is essentially the same as in 2009.

9.34
The largest component of the project's cost is roading. In Waitakere City Council's original budget, Auckland Transport's work was budgeted as being $107 million, slightly more than half of the project's total cost.

9.35
The next largest component of the total cost are the direct costs to Waitakere City Council (and, later, Auckland Council). In Waitakere City Council's original budget, the direct cost to Waitakere City Council (and later Auckland Council) was $90 million, slightly more than 40% of the total cost.

9.36
By far, most of this direct cost component is the cost of NZRPG contracts for Council works. We estimate that actual expenditure on NZRPG contracts will be about $71 million. Figure 8 shows the estimated value of the individual agreements entered into with NZRPG. These agreements include contracts for the acquisition of land by the Council and contracts for the provision of construction services to the Council.

9.37
This cost breakdown does not include payment for work by Watercare Services Limited or the Council's contribution to relocating the power lines.

Figure 8
Our estimates of the contracted costs of the agreements with the New Zealand Retail Property Group

9.38
We note that these costs do not include any additional cost to the ratepayer as a result of the deferred payment of NZRPG's share of relocation costs and the relief provided to NZRPG in relation to development contributions.

What has the project delivered to date?

9.39
As noted in Part 2, Waitakere City Council's vision was to create a self-contained town centre at Massey North where residents could live, work, and obtain services without needing to travel to other Auckland cities. The town centre is not yet complete.

9.40
Physical work on the town centre development began in 2010. Six years on, work on the infrastructure and significant earthworks has been done to prepare the site for the town centre (as dictated by the topography).

9.41
The infrastructure work on roads, stormwater ponds, and earthworks was largely complete by August 2015. Since then:

• the new NorthWest shopping mall opened in October 2015;
• the town square was completed in October 2015 and renamed Te Pūmanawa; and
• a supermarket and several large-format retail units have been completed.

9.42
A new library and community centre are planned for the western end of the square.

9.43
Auckland Council has told us that these aspects of the town centre development have brought employment but that the Council does not have figures on the number of permanent jobs created.

9.44
In our view, it is too early to definitively determine the extent to which Waitakere City Council's vision for the town centre will be achieved and the ultimate cost to be borne by the ratepayers to achieve that.

5: From late 2015, the City Transformation Projects team was renamed the Development Programme Office located within the Council's Infrastructure and Environmental Services division.

6: A Northern Strategic Growth Area project steering group previously reported to the North West Transformation Team. However, this group no longer exists because the Northern Strategic Growth Area project is largely complete.