Transmission Gully settlement agreement

9 November 2020: We have responded to correspondence about the Transmission Gully settlement agreement and concerns about a possible conflict of interest.

In February 2020, Waka Kotahi NZ Transport Agency (Waka Kotahi) announced that it had settled a claim by the joint venture responsible for designing and building the Transmission Gully motorway. The settlement agreement included Waka Kotahi agreeing to pay $191 million to the joint venture and extend the deadline for completing the motorway. The correspondence raised questions about the settlement payment and how a conflict of interest involving Sir Brian Roche (Waka Kotahi Chair) had been managed.

Before his appointment as Chairperson of Waka Kotahi’s board in June 2019, Sir Brian was a director of Wellington Gateway Partnership (WGP), the private group of financiers and companies contracted to finance, design, build, and operate the Transmission Gully motorway. Sir Brian resigned from WGP when he was appointed to Waka Kotahi’s board.

Under the Public Audit Act 2001, the Auditor-General can inquire into a public organisation’s use of its resources. Inquiries focus on a particular set of decisions and actions, so we can accurately describe what happened and why, and set out our comments on the merits of what was done.

We did some work to help us decide whether an inquiry into the settlement or wider project might be needed. We met with staff from Waka Kotahi, the Infrastructure Commission, and Ministry of Transport, and received regular updates from those agencies. We reviewed information and documents provided by those agencies, along with publicly available information. This was alongside our annual audit work, which also considered the settlement payment as part of the standard audit process.

Based on this work, we do not intend to inquire further into the settlement or the Transmission Gully project at this stage. Instead we will continue to monitor developments with the project, including the outcome of a government review of the project that was announced in August 2020.

Management of Sir Brian’s conflict of interest

The Auditor-General cannot make a legal ruling on whether someone has a conflict of interest or acted appropriately in relation to a potential conflict. However, the proper management of conflicts of interest is a fundamental part of maintaining public confidence in the public sector, and we have a strong interest in supporting good practice.

The Auditor-General’s good practice guide Managing conflicts of interest: A guide for the public sector acknowledges that conflicts of interest can arise in many situations. Conflicts do not need to cause problems as long as they are promptly disclosed and well managed. Based on what we have seen, including through our annual audit work, both Waka Kotahi and Sir Brian Roche appear to have taken reasonable steps to manage Sir Brian’s conflict in the lead up to the $191 million settlement agreement.

Waka Kotahi told us that Sir Brian was not involved in any board discussions or decisions about the Transmission Gully project or WGP for the first year of his appointment. This is reflected in the board minutes from meetings leading up to the decision to approve the $191 million settlement. These minutes show that Sir Brian declared his conflict in relation to the Transmission Gully project at the beginning of each meeting and left the room while these matters were discussed and decided. Other board members chaired those parts of the meetings.

There were also measures in place to restrict Sir Brian’s access to confidential information about the Transmission Gully project.

Government review of project

The Transmission Gully project has been subject to further delays and claims since the announcement of the $191 million settlement in February this year. In August 2020, the Government announced that it had asked the Infrastructure Commission to oversee a review into the project. The terms of reference for the review indicate that it will consider the project’s beginnings, procurement, and governance.

The review is being led by an international expert and is expected to be completed in the first quarter of 2021. Given this, we have decided not to inquire further at this time. However, we look forward to seeing the outcome of the review and, as mentioned above, we will continue to monitor developments with the project.