Video transcript: Making infrastructure investment decisions quickly
Title: Making infrastructure investment decisions quickly
Jason Hewett, Manager, Performance Audits
We examined the processes used to make funding decisions for two major infrastructure investment programmes announced by the Government in 2020: the New Zealand Upgrade Programme – or NZUP – and the Shovel-Ready Programme.
NZUP was announced in January 2020 and was intended to fund transport, hospitals, schools, decarbonisation initiatives, and telecommunications infrastructure projects.
The Shovel Ready Programme was announced in April 2020, after the start of New Zealand’s first Covid lockdown. Shovel Ready was intended to reduce the economic impacts of the pandemic by funding infrastructure projects that could start within the next 12 months. The focus was on projects that would support jobs and provide income.
John Ryan, Controller and Auditor-General
I looked at the New Zealand Upgrade Programme and the Shovel-Ready Programme for a number of reasons. First of all, just their sheer scale – $15 billion of new capital spending. Secondly, this spending was done at speed and announced quickly. The scale of this spending had intergenerational impact. And lastly, the New Zealand Upgrade Programme was described as a once-in-a-lifetime investment in New Zealand’s infrastructure. And for all of those reasons, I wanted to look at the processes and systems used to determine which projects were invested in and how decisions were made.
Jason Hewett
The two programmes were developed quickly, with ministers feeling they had to act urgently and make early announcements to respond to significant economic uncertainty. The process to identify projects and announce funding for NZUP took only a few months. Setting up the application process for Shovel Ready took just weeks.
For NZUP, agencies were given high-level direction and were expected to quickly provide lists of projects that Ministers could announce. Officials worked hard to provide as much information as they could about projects to include within the time constraints. At several points, officials advised ministers of risks to value for money, including potential costs overruns and delays. But it is unclear how ministers assessed or managed these risks when approving projects.
John Ryan
I fully accept that there is a need for ministers to make quick decision on occasions. For both the New Zealand Upgrade Programme and the Shovel-Ready Programme, they had received advice that suggested new capital expenditure would provide confidence to the economy.
In the case of the New Zealand Upgrade Programme, which was $12 billion of the investments we looked at, ministers made announcements even though they had been advised by officials that the projects were either not ready for announcement or there was considerable uncertainty as to their costs or their ability to deliver.
In the case of the Shovel-Ready Programme, which was about $3 billion of new investment, a good process was set up quickly and run efficiently to provide ministers with a list of projects that they could invest in. However, how and why final decisions were taken as to which projects were invested in is not entirely clear.
Jason Hewett
The observations about the adequacy of information and appropriate documentation of decision-making processes echo similar findings in our Office’s work about the Strategic Tourism Assets Protection Programme, the Cost-of-Living payment, and the Provincial Growth Fund.
A lack of transparency and documentation about how and why decision-makers made significant decisions can also create the perception that processes lack integrity.
John Ryan
Ministers have wide discretion on the decisions they make. They do not have to follow the advice of officials. However, when spending public money, the public needs to be able to see on what basis that decisions have been taken, how decisions have been made, and they need to be able to see what value has been achieved for the investment made.
Jason Hewett
Our report makes three recommendations aimed at supporting improved decision-making, public reporting, and accountability for major investment decisions in the future.
The Auditor-General remains interested in the performance of the two programmes and will likely carry out further work to measure the progress of these significant investment initiatives.
Title: Read our report at oag.parliament.nz.