PENLINK FINAL S 122C REPORT

Decision Time "The Final Word"

This Section of the final S 122C PENLINK cost-benefit report is "the final word".  The Section identifies the remaining key issues presented for the consideration of elected members - the decision makers.  The Section is intended to focus the final decision making process upon those matters which most will influence a decision;

• To proceed with PENLINK (or not) and
• To achieve the "best deal" possible or
• To reach "another decision", for example further investigation of "fall back" positions.

This S 122C reports, it must be remembered relates to the proposal on the table at present.  That is, the S 122C assignment, its research and findings have all been directed to an examination of the merits and disadvantages of PENLINK - a privately funded toll-road bridge.  The assignment has not been addressed, directly at least, to a comprehensive evaluation of alternatives.  Mention, and some cursory analysis of alternatives has been conducted and reported upon but readers of this report should not presume that the observations of this and the earlier draft report concerning alternatives is the final word.

Should the decision makers choose to make "another decision" then further detailed analysis and evaluation will be needed.  The consideration of differing decisions has made the finalisation of this report something of a challenge.  The need to prepare a balanced report has involved seeking a level amidst recent more partisan support for the project.

The writer, being "the messenger" in these circumstances has had to carefully tread a path amidst the opinions and views of both ardent supporters of the project as well as its obdurate opponents.  S 122C - "The Law" though makes no concession to these influences.  "The Law" was intended to see that a rational and balanced perspective of the costs and benefits of a project is placed in front of the decision makers.  Nothing less than this is acceptable and this has guided the steps of this assignment.

Some of the demands placed on decision makers and influencing the achievement of the "best deal" have partly arisen from the fluid nature of events which have occurred since the election of the new Council.  Much of the public debate, as evidenced by Council discussions and media reports has been concerned not just with the project itself but with alternatives to PENLINK and more recently with the prospect of changes to the roading funding policy environment.

Part of the fluid circumstances can be demonstrated by for example, Cr Walker's recently issued "Press Release" [ref;  Press Release Cr Walker 24/02/2002].  The press release contains inter alia numerous apparently well-founded criticisms of the PENLINK decision making process.  The Press Release also adduces examples of information discrepancies focussing on recent (December 2001) traffic volume counts on Whangaparaoa Road.  These were detailed further in a recent front page article of the local paper. [ref;  Rodney Times page 1 dated 26 February 2002 entitled "PENLINK traffic counts queried"]

The thrust of Cr Walker's position is that, given the data of lower than anticipated traffic volumes, a widening of Whangaparaoa Road, together with the introduction of improved public transport services as Cr Walker states "raises concerns about the viability of the PENLINK Project".  His suggestions also constitute a serious attempt to debate alternatives to a PENLINK Weiti Crossing road-bridge.

Decision makers would be well advised to carefully consider the alternative traffic solutions within their evaluation of PENLINK.  Whether Cr Walker's assertions are sufficient and comprehensive enough for evaluation purposes is a moot point.  Whether there would be public support for any alternative at this late stage in the proceedings is also problematic.  There would be many who would understandably not wish to explore this avenue given the extensive earlier consultative procedures which found widespread support for a bridge.  But Cr Walker has adhered to a consistent position - one of opposing the bridge and has invariably given his reasons.  There will be many proponents for PENLINK who choose to ignore his views but what has become apparent with the hardening of attitudes in support of PENLINK is that Cr Walker has not received satisfactory answers to many of the questions he has raised.  As his press release [ref; Press Release dated 24/02/2002] puts it:

                 "even in my (Cr Walker's) role as Chairman of Funding and Finance it's hard to get information.  The PENLINK project does not come under any of the Council's committees - including finance - and the project is run by a consultant who contracts to the Council".

Recently the rhetoric both from supporters of the project and from its opponents has taken on what could be described as "an edge".  By this is meant that a hardening of positions is observable as decision time draws near.

Amongst this rhetoric there are genuine grounds for concern, concerns for achieving a balanced debate.  If the chairman of the RDC's own Funding and Finance Committee is expressing these concerns then they surely deserve more than a mere dismissal.  Elected members need to judge for themselves if Cr Walker's views have merit or if his assertions of Council Management bias [ref;  para 6 page 3 or Cr Walker's Press Release] can be substantiated.  Possibly these circumstances amount to no more than the expected cut and thrust of debate or on the other hand they may demonstrate a tilting of the playing field in favour of the proposal by the proponents of the project.

There are those Councillors who have expressed the view that none of this matters at this stage, that is the views of those such as Cr Walker's are not relevant because the next and imminent substantial PENLINK decision is "only" directed at selecting a final tenderer, not a decision to finally and irrevocably proceed with PENLINK.

With respect to those who hold this view there are a number of difficulties with it:

• Firstly, this final report is the last chance to consider the forthright views of an independent reporter upon the matters under debate.
• Secondly, as the inertia to proceed with the project grows the balanced and serious consideration of alternatives may diminish.  It is naive to believe that these matters can be continually deferred to a later date.  In fact such a position imperils both a decision to proceed as much as it does the opposite.  For if the belief exists that debate has not been as balanced and robust as it might desirably have been, then together with the many other uncertainties, a perceived or actual lack of an unfettered debate on these matters may seem to some to be a further reason for not proceeding or postponing the proposal.

Any S 122C assignment involves playing "the devils advocate".  There is at this advanced stage in the process a need for all elected members to "get down to tin tacks" and finally thrash out all of the issues.  The writers role though, if only for reasons of practicality cannot encompass anywhere nearly a full evaluation of the great deal of information about alternatives.  This has always been beyond the scope set for the assignment.  But elected members will need to factor Cr Walker's and others views into their reckoning.

Another example of the challenges faced by Councillors in reaching the "best deal" for the Rodney District is the outcome, to date - (28 February 2002), of the bidding process.

The planned process has had its "hiccups" and has been in some respects "unpromising" due to the reduction to two, (down from five initially) of the tenderers prepared to continue negotiations within the PENLINK process leading to a bid to complete the project as proposed.  The RDC's CEO, Mr Wayne Donnelly has attested to the difficulties encountered during the bidding process and is on the record as stating [ref; Press Release Wayne Donnelly 05/02/2002] that:

                 "the BOOT approach as structured does not have great commercial margins" and that "the withdrawal of Fulton Hogan is not an encouraging development."

The moving target that these and other events reveal about the PENLINK proposal makes the decision makers task more difficult.  At the outset of the process it was (confidently? assumed) that the opposite outcome - that is better certainty and less difficulty in reaching firm views would emerge.  For example KPMG stated [ref;  Draft S 122C Report Section A Financial Analysis Page 4] that there was:

                 "no underlying reason why the project as presented could not be viable and attract financing or a toll road operator."

This view has now been seriously challenged to the point that the CEO at least is now questioning the commercial viability of the project (as structured).

Uncertainties that did not exist and which were not reported in the draft S 122C Report (November 2000) now therefore have come into the decision framework.  The recently expressed reservations about PENLINK as well as adding to the uncertainties could also be interpreted by some as an indication that PENLINK - the road bridge concept is not what they had early anticipated, that is that it is a foregone conclusion and that a competitive tendering process would lead to the "best deal" being struck.

The writer has not been privy to any of the BOOT tendering procedures and as a result any firm finding about "how things are going" with the bidding would be speculative.  The decision makers however must take a keen interest in these matters as the detail may reveal a great deal - about the prospect of achieving "the best deal".

These events, and others are not mere sideshows.  They in part demonstrate the tensions afoot amongst the parties in favour or opposed to PENLINK.

One disturbing feature of these matters alluded to at the commencement of this section arose during December 2001.  This was the clear emergence of a "pro-PENLINK stance" amongst its Council proponents.  This is, given the progression of the PENLINK process, not an unnatural outcome and is an anticipated/predictable reaction from proponents of the proposal.  It is normal to support ones own ideas, to seek to further long term plans.  But it is another matter entirely to be unduly influenced in furthering these plans or projects as a result of reacting to the forces of inertia.  In addition, no doubt the interests of the supporters most directly involved would be affected and they are keen to see it advanced.  The by now very large transactional costs alone of the process are contributing to inertia and are influencing a collective will.

It may be unnecessary, (but albeit timely) to remind the supporters of the project - as was pointed out in the draft report [ref;  Draft Report section 9 Summary of Findings page 15]:

                 "The BOOT-bid will not proceed unless the final evaluation process meets the RDC's benchmarked and other criteria."

Elected members are entitled to know the details and to rely upon this representation.

If there is a question over the seemingly subjective (speculative) nature of these observations relating to a "pro-PENLINK stance" then they in part may be due to the writers detachment from the actual bidding process.  In addition, readers should again review the evidence of the appendix [ref;  Your PENLINK questions answered].  This material represents official RDC sanctioned public ("PR") information - a fact confirmed by the CEO in discussions held with the writer.  The "FAQ" (frequently asked question) website content is unequivocally "pro-PENLINK"

The fact that no contrary views, views that would cast any doubts on the value or the viability of PENLINK are contained in the FAQs can only be construed as Council's official and active support for the project.

Whether, since the posting of the FAQs in December, the later events, including the CEO's views as to the (non-)commercial viability of the project alters this stance - is an intriguing matter for speculation.

Just how balanced, or not the debate on PENLINK has become since the draft S 122C report of November 2000 was filed is not easily determined.  Letters to the editors of local papers are "about equal" in supporting or opposing PENLINK.

It must be noted that they, (the letters) are no reliable guide to public opinion on the matters raised.  Once again though, it is disquieting to have to report that a number of the more recent letters to the papers voicing opposition to PENLINK make reference to the positive spin (Cr Walker's "bias") the project is being given by some Council Management - those dealing directly with the project.  For the reasons already outlined though, it would be surprising if at this stage supporters of the project did not close ranks and forge on with the process as planned.  And "forging on", at least to see out the bidding process is necessary for other reasons.

The bidding process must be seen through even if the outcome cannot be predicted.  As intended, much will be learned from the completion of the exercise even if PENLINK does not proceed in its planned form.

A further motivation for the projects proponents "supportive" stance may be associated with the often robust tenor of discussions about PENLINK in the Council chamber.  Opposition to the project has lately become more concerted, motivated in part by the continuing uncertainties and by incidents (hiccups).  One example (of an incident) occurred in December 2001 - the Emergency Committee Meeting debate [ref;  Agenda paper RF/53/2 page 274 20 December 2001] concerning the progression of unbudgeted PENLINK geo-technical investigations.  The actions relating to this event seemed to some to give the appearance that the project's progression was a "done deal" at a time when final positions and decisions were still being considered.

To conclude the list of key influences upon a final decision, brief mention is now made of the changing macro (New Zealand wide) economic circumstances affecting roading funding.  Some hope for changes, favourable to PENLINK could emerge from an expected Ministerial statement but this is by no means certain.

Elsewhere in this report the issue of the Transfund subsidy is traversed.  Within "the final word context" the dilemma posed by receipt or not of a subsidy shakes down to a simple proposition.

If the RDC have good grounds for believing that a subsidy or grants would be paid (by Transfund or others) under an altered road-transportation funding regime, applicable to a tolled (PENLINK) facility, then further serious investigation of the "RDC/DIY" option is essential.  This is because the possible (large) scale of the subsidy (and grants for that matter) completely alters the present picture.  Elected members should seek further information on all of these matters right up until the time that the final decision is made.

Elected members who shortly will make the crucial decisions on PENLINK have been exposed to this, at times somewhat bewildering public debate.  They are no less affected than are others by the fluidity of and the assorted views being expressed.  A good number- five out of 13 have already reflected some concerns, in signalling their reservations about the project. [ref; Minutes Special Council Meeting page 274; RD/53/2; RF/54/1; 17 September 2001]

Given the somewhat "apprehensive" nature of some of the foregoing observations, how will the Council reach its best and measured decisions?  As has already been stated, it is the business of this report to assist by providing a frame of reference for good decision making.  The final cost/benefit analysis involves a weighing of the pros and cons - the costs and benefits of a decision to proceed or not.  This section concludes with a framework to assist in reaching the right decisions.

"A Personal Statement"

Before concluding however, upon reviewing the final report the writer notes its differing tenor or tone - from that of its earlier "cousin".  The final report appears to be more "one-handed" as its content more often advances the reasons not to proceed with PENLINK than the contrary.

In reflecting upon this, the reasons for the differing tones of the two reports is clear.  The first report covered a period of years during which the preliminaries to the project were conducted.  Most of these matters had been settled and were being viewed from an historical perspective.  On the other hand the second and final report contains references to recent events, a constantly changing pattern of these events with all relating to the imminent and major PENLINK decision making.

In addition to the differing environments in which each report was prepared an (even-handed) provision of information has, during the course of the last few months become an issue.  An information imbalance as reported more fully in the body of this report has arisen.  It is plain that the will to progress the project as planned by its proponents has lead to a not unnatural leaning toward support for the project.  Official Council statements including their website content is unmistakably "positive" with respect to the project.

This report has therefore been required to attempt to redress somewhat the perceived information imbalance.

The apparently negative tone of the final report does not signal any firm finding against PENLINK proceeding.  Cautions are sounded, advice regarding for example the need to explore alternatives is given, but no partiality one way or the other is intended nor should it be inferred.  The proper tone of both reports, read as a whole, is to provide a qualified independent and informed view of the projects merits and demerits.

Elected officials now faced with the dilemma of making the crucial decisions involved, must do so in spite of there being some residual inherent risks and uncertainties remaining.  Given the long term and material financial, legal and other commitments involved in a decision to approve the PENLINK contract, Councillors must not be placed under unreasonable pressure in giving their approvals.  For example, pressure to approve, (inertia) to proceed - if only because of the very material sums of public money already expended being at risk, should not be unduly influential within the decision making process.

Any remaining uncertainties that can be addressed (elucidated upon) with provision of further information should be.  The stakes are too high for anything less.  It is submitted also that for such a major contract as PENLINK, if it is to proceed, then it requires a unanimous (or near unanimous) vote in favour from all Councillors.  This will reflect the degree of comfort all elected members have reached when making their final decisions.  Human nature being what it is, this may be too much to ask.

The following table attempts to compile an inventory of the key issues.  The inventory does not include references to matters considered already settled or self evident.  For example, the table makes no reference to a need for further public consultation as this matter is considered to be "settled" in the terms described in the draft S 122C report.  No mention also is made of the consequences of not building the bridge, as these are largely self evident given varying opinions on the extent and nature of the impact if the bridge was not built.

Decision Frame-work

The table identifies the key decision criteria that elected members must have resolved and "be comfortable with" prior to making their decision in "June/August of 2002" to sign a contract to proceed with PENLINK.  The underlying assumption, is that the bridge's commercial viability will be proven and arises from the fact that a qualified commercial private enterprise tenderer is found who is willing and able to enter the relevant contractual arrangements.  The question of a "fall back" position with alternatives should these circumstances not eventuate is (albeit briefly) referred to in the table.

For such a significant and long term contract as PENLINK, the responsibility placed upon elected members for making the best judgment on these matters is very very high.

The decision will almost certainly be the most major decision of Councillor's public life.

The degree of their comfort and certainty that they must insist upon reaching in making a final decision - to get the "best deal" possible must be commensurate with the significance, size and the length of the commitments being entered into.