Part 7: Guidance on expedited decision-making

7.1
In this Part, we discuss:

• the Treasury's guidance on expedited decision-making; and
• our observations about that guidance.

7.2
When significant investment decisions need to be made quickly, it is important to have a clear and well thought-through process for making those decisions. The quality of information to inform these processes must be balanced against the need to act quickly.

7.3
Treasury officials told us that the Investment Management System provides enough flexibility to support rapid decision-making processes if there has been good business planning.

7.4
We are encouraged that the Treasury published guidance on its website about expediting investment decisions in November 2021.³⁴ The guidance recognises that there are situations where investment decisions need to be made rapidly for reasons outside of a public organisation's control.

7.5
This guidance was not available to Ministers or agencies when the initial investment decisions about the NZUP and the SRP were made, but we have considered it as we prepared this report.

The Treasury's guidance on expedited decision-making

7.6
The Treasury's guidance recognises the specific risks associated with using an expedited investment approach that need to be identified and managed. These risks include:

• "optimism bias about cost, time and benefits (due to a lack of detailed understanding)";
• "missed opportunities to integrate with other initiatives (due to an urgency-induced narrowing of focus)"; and
• "unforeseen ‘downstream' effects leading to additional costs and erosion of benefits".

7.7
The Treasury's guidance also identifies some principles for using an expedited approach that align with many of our own expectations. These principles include:

• consulting early with stakeholders and government partners;
• ensuring that the preferred option is fully justified; and
• providing transparent advice about the risks involved in, and potential implications of, making fast decisions to Cabinet, explaining how much (or little) these risks can be mitigated and how agencies intend to do so.

7.8
Central to the Treasury's guidance is the idea that good planning remains critical. The guidance emphasises how the Better Business Case model can assist in considering strategic, economic, commercial, financial, and management perspectives. The Treasury also encourages early risk assessments and investment logic mapping to assist with clearly defining the problem and identifying options and benefits.

Our observations

7.9
The findings of our audit highlight some of the risks that the Treasury identified. The absence of good-quality information (business cases or otherwise) when the initial NZUP decisions were made was a key factor in Cabinet needing to approve additional Crown funding to address cost pressures and provide contingency funding for transport projects within the NZUP.

7.10
Similarly, the limited information available to support decision-making in the SRP process has contributed to longer lead-in times for some projects as officials have worked to carry out additional due diligence.

7.11
Crown Infrastructure Partners is reporting good progress on SRP projects as at 31 August 2023. However, two projects are yet to begin construction more than three years after applications closed.

7.12
Although actual project delivery is outside the scope of our audit, Crown Infrastructure Partners told us that 91% of SRP projects began within 12 months of receiving funding but that the median project duration has increased by eight months from the original completion dates.

7.13
The Treasury's guidance on expediting decision-making is a useful addition to the existing Investment Management System material and aligns with many of our own observations. The Investment Management System provides a comprehensive set of requirements that agencies must navigate. However, that set of requirements is becoming increasingly complex.

7.14
For example, it is not always clear through the Investment Management System:

• how different requirements interact – for example, whether requirements are deemed to have been met if an investment decision is made and announced as part of the government's annual Budget process; and
• the extent that investment criteria are needed to assist agencies and Ministers in choosing between investment options when those decisions are made outside the annual Budget process.

7.15
Additionally, we consider the guidance could further emphasise the importance of keeping good records of:

• the steps agencies have and have not followed to develop investment options;
• how agencies have prioritised which options are presented (if not all options are presented to Ministers); and
• if early engagement and consultation with stakeholders is not possible, what steps have been taken to identify and manage the additional risks this might create.

7.16
Currently, the Investment Management System focuses on supporting agencies to plan and manage investments in the form of individual projects and programmes. There is an opportunity for the Treasury to consider whether there is a need for the Investment Management System to consider minimum requirements for setting up and running contestable funding processes such as the SRP.

7.17
The Treasury told us that the minimum requirements of the Investment Management System are flexible enough to accommodate the context of any contestable fund. However, work we have done in recent years on the Provincial Growth Fund, Strategic Tourism Assets Protection Programme, and now the SRP suggests that there might be some benefit in more guidance for agencies asked to carry out these processes by Ministers.

7.18
The former Minister of Finance noted that our recommendations in this report align with work that the Government began before the 2023 general election.

34: See "Expediting investment decisions" at www.treasury.govt.nz.