Project Te Matapihi – structural engineering services for the central library

31 October 2022

Ms Barbara McKerrow
Chief Executive Officer
Wellington City Council
PO Box 2199
Wellington 6140

Tēnā koe Barbara

PROJECT TE MATAPIHI – STRUCTURAL ENGINEERING SERVICES FOR THE CENTRAL LIBRARY

As you are aware, we have been looking into the process that Wellington City Council (the Council) followed to procure structural engineering services for Project Te Matapihi – the repair of Wellington’s Central Library (the Library repair).

Summary

In 2016, the Library suffered damage during the Kaikōura earthquake. In March 2019, the Library was closed after an engineering assessment and the Council began to consider what seismic strengthening work would be required.

During 2019 and 2020, the Council consulted with engineering and quantity surveying firms to determine what repair or rebuild strategy would be most appropriate. After that process, the Council decided on a strengthening solution that included repairing the Library to achieve compliance in excess of 100% under the Ministry of Business, Innovation and Employment’s (MBIE) latest seismic performance guidelines, the New Building Standard (NBS), and using the technique of base isolation.

To do this, the Council entered into an agreement with Aurecon New Zealand Limited (Aurecon), a design, engineering, and advisory company, to provide structural engineering services.1 Aurecon, alongside other consultants and Council staff, had been working with the Council about upgrading and repairing the Library since the earthquakes in 2016.

The concerns raised with us

Concerns were raised with us about some of the Council’s decisions. The concerns were that:

  • The structural engineering services, to be performed by Aurecon, were not procured through an open tender process.
  • Council staff were not transparent about the procurement process and Councillors and the public were not kept informed.
  • Council staff pre-determined the repair strategy without considering alternatives.
  • The quality of the structural engineering advice was not sufficient to make a properly informed decision on the repair strategy.

Our work

The Library repair is a significant project for the Council and the Wellington community, and the total cost of the project when this procurement took place was estimated to be $188 million. There is also public interest in this matter. Because of this, I decided to look at how the Council procured structural engineering services for the Library repair.

We requested documentation from Council staff about the procurement process. We have reviewed these documents, which included internal memos, Council meeting minutes, technical advice, and internal emails. We also met with Council staff.

What we saw

The Council considered its needs and options

In September 2019, Council staff held a workshop with engineering, architectural, and construction industry experts to determine what repair or rebuild strategy would be most appropriate.

In May 2020, Council staff presented the Council with five options. These included options to repair to various levels of compliance with the NBS, and options to rebuild the Library. These options were based on a base isolation solution and the Council agreed to put the options out for public consultation.2

In early October 2020, a workshop between Council staff and external experts was held to discuss the options. At that meeting, the question of whether viscous dampers had been adequately considered was raised.3 After this, the Council received independent technical advice that, while viscous dampers could be used, they were unlikely to achieve the same structural engineering safety standard as base isolation (that is, NBS compliance in excess of 100%).

After the workshop, Council staff also set up an informal question and answer session for Councillors on the options, including viscous dampers.4

On 28 October 2020, the Council unanimously voted to repair the Library using base isolators to NBS compliance in excess of 100%.

The Council considered an alternative proposal

After the Council made its decision, it was approached by Beca Group Limited (Beca), another engineering firm, with a different proposal. That proposal was to repair the Library using a technique involving viscous dampers rather than base isolators, and which would offer substantial cost savings while achieving the same level of compliance with the NBS that a base isolation solution could achieve.

Before the Council made a final decision to directly procure services from Aurecon, it carried out a process to consider the Beca proposal. That process was in two parts:

  • The first part involved the Council entering into an agreement in May 2021 with Beca for it to provide a feasibility study for its proposal.
  • The second part of the process was an independent review of the feasibility study. This would be carried out by a Christchurch-based consulting structural engineering firm, as agreed between the Council and Beca.

The Council decided that if the review of the Beca proposal showed it could meet the Council’s requirements, it would begin an open competitive procurement process for the structural engineering services. However, if the review concluded the proposal would not meet the Council’s preferred outcome, it would directly procure services from Aurecon.

Beca provided its feasibility study to the Council and the independent reviewers in August 2021. Following the independent review, the Council decided that it would not proceed with Beca’s alternative proposal and proceeded to directly procure services from Aurecon.

Our comments

Procurement

Procurement covers all aspects of acquiring goods and services from a third party, from initiating a project and identifying a need through to sourcing a supplier and managing the relationship with that supplier.

To achieve good procurement results, organisations need robust policies and processes. Our Office provides guidance on principles of good procurement and MBIE has produced the Government Procurement Rules (the Rules), which are intended to support good market engagement and lead to better procurement outcomes for agencies, suppliers, and taxpayers. The Rules promote good practice for procurement planning, approaching the supplier community, and contracting.

The Rules emphasise transparency, fairness, and design processes that are proportionate to the value, risk, and complexity of the procurement.

As a local authority, the Council is not required to apply the Rules to its procurement activities, but it is encouraged to do so as they reflect good procurement principles.

There is also a presumption in the Rules in favour of using open competitive procurement processes to give all suppliers the opportunity to compete, unless an exemption applies or direct procurement is justified in the circumstances. The Rules require that if a Government agency exempts a procurement (over a certain value) from open advertising, it must:

  • obtain evidence of the facts and circumstances to verify the reason/s for the exemption; and
  • document the rationale for the decision.

Rule 14.9 specifically allows an exemption from open advertising if, for technical reasons, there would be no real competition during an open tender process.5

In this case, we saw that the Council had voluntarily applied these Rules and considered which process was appropriate for procuring the structural engineering services it needed. It considered that a direct procurement of Aurecon was the best option and documented why that was appropriate in the circumstances. In the Council’s view, Aurecon, because of its history with the project, possessed unique technical knowledge that would have meant that there would have been no real competition during an open tender for structural engineering services.

It also considered that a significant amount of re-work would be required by another engineering firm to progress design work to the same stage, and an open tender process would likely delay the strengthening of the Library for six to nine months and add a further $3-5 million to the estimated cost.

As outlined, we also saw that the Council took the step of testing the alternative option put to it by Beca before it committed to the direct procurement. If that option was viable, the Council indicated that it would not have directly procured services from Aurecon and would have approached the market.

As such, we saw that the Council took appropriate steps to consider the solution it wanted for strengthening the Library, engaged the market about how that solution might be delivered, selected the provider to deliver that solution, and made that selection in line with the Rules. That is good practice.

Further, as a local authority, the Council was not required to apply the Rules. However, doing so is good practice because the Rules provide a good foundation for making robust procurement decisions. 

Pre-determination

One of the concerns raised with us was that the Council had a pre-determined view about what repair strategy it would use for strengthening the Library without considering alternatives.

As we have described, the Council did consider the options for strengthening the Library. We saw that:

  • Council staff worked with industry firms (including Beca) to determine five potential repair/rebuild strategies. Those discussions included whether to use base isolators or viscous dampers. The Council also sought feedback from the public through a consultation process on these options.
  • Expert advice was sought in October 2020 about whether using viscous dampers was a viable repair solution.
  • The Council also obtained an independent review of Beca’s proposal of using viscous dampers and the likely cost of that option.
  • Council staff set up an informal question and answer session for Councillors on the options, including viscous dampers.6

Based on what we have seen, it does not appear that the Council pre-determined the option for strengthening the Library or who would be selected to deliver those services.

Information provided to Councillors

A concern raised with us was that Councillors were insufficiently informed about options when they voted on 28 October 2020 to repair the Library using base isolators. On this point, we note that prior to the meeting there was an informal question and answer session for Councillors to ask about the options for repairing the Library. At this meeting Councillors were able to ask questions, including about viscous dampers. Council staff have told us that Councillors were advised of the independent technical advice on viscous dampers that Council officials had earlier received.

We note that the papers7 circulated to Councillors for the meeting on 28 October outlined the consideration that officials had given to viscous dampers. This outline included the fact that Council staff had received independent advice that viscous dampers would not achieve compliance in excess of 100% with the NBS.

The day after the informal meeting, the Councillors unanimously approved a repair option that included using base isolators to achieve compliance with the NBS in excess of 100%.

Quality of option chosen, and advice provided

Concerns were also raised with us that:

  • the option of using base isolators in the repair was not the best technical solution; and
  • the independent reviewers used were not as qualified as others who might have done that review.

It is not for this Office to form a view on which technique for strengthening the Library was the most suitable for the Council to select. That is a choice for the Council to make based on the advice it received. Similarly, it is not our role to reach a view on the skills and experience of any of the specialist structural engineering firms involved.

General comments

Although councils are not required to apply the Rules, doing so is good practice because they provide a good foundation for making robust procurement decisions. We encourage all councils to consider the guidance provided by the Rules and apply them when they are procuring goods and services and developing their own procurement policies.

Because of the public interest in this matter, we intend to publish this letter on our website.

We thank the Council for its assistance with our work.

Nāku noa, nā

John Ryan
Controller and Auditor-General

1: The value of the structural engineering service contract is $3.1m, based on a procurement plan the Council sent to Audit New Zealand in April 2021. The total value of Project Te Matapihi is recorded as $188m in the same procurement plan.

2: Future of the Central Library consultation | Kōrero mai | Wellington City Council. This public consultation was triggered by the Council’s ‘Future of the Central Library’ consultation.

3: 7 October 2020.

4: 27 October 2020.

5: Government Procurement Rules - Rules for sustainable and inclusive procurement – page 26

6: 27 October 2020.

7: Agenda of Strategy and Policy Committee - Wednesday, 28 October 2020 (wellington.govt.nz)