CONFIDENTIAL - For Internal Use Only
Chief Executive's Leadership Group
Paper no:
X.X Advisor to insert
Meeting date:
27 November 2024
Paper author:
s 9(2)(a)
@kaingaora.govt.nz
Director Infrastructure and Civil Construction (Acting)
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s 9(2)(a)
Business Group:
Urban Development and Delivery
Title:
CONFIDENTIAL - Auckland LSPs Infrastructure Update
INFORMATION
RELEASED UNDER THE
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CONFIDENTIAL - For Internal Use Only
Purpose
1. This paper outlines the decision to transition away from using the LEAD Al iance in the Auckland Large-Scale Projects. It is being brought to the Chief
Executive’s Leadership Group for noting before being presented to Kāinga Ora Investment and Delivery Committee (IDC) for endorsement.
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Recommendations
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2. It is recommended that The Chief Executive’s Leadership Group (CELG):
a)
note that LEAD Alliance was initially procured and set up in 2018 to deliver a programme of works in the Auckland Large-Scale Projects (LSPs) that
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was planned, but not fully funded;
b)
note that the brief for the alliance in 2018 was ‘scale and pace’ and this worked well for a fast start and a very high volume of work to follow,
delivering more than $600m of works and enabling 4,000 homes between 2018 – 2022;
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c)
note that the alliance model has provided flexibility as the scope and definition of the multi-year LSP programme evolved, including managing the
Covid-19 disruption very well and ensuring resourcing availability during a constrained market;
d)
note that as the alliance matured, the programme cost and performance was not in alignment with Kāinga Ora expectations, and in 2023 Kāinga
Ora managed a significant reset process to increase the alliance’s productivity and value proposition, with a focus on programme, cost
performance and quality. Following this reset the alliance contract was extended for a period of five years;
e)
note that, while the reset was successful and the alliance is stable and performing well with consistent and predictable costs to complete, Kāinga
Ora Urban Development and Delivery (UDD) has determined that LEAD Alliance does not deliver the value we require given the high programme
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nature, and therefore the alliance model no longer suits our current needs;
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f)
note that the Alliance Agreement and contract extension does not commit Kāinga Ora to using the alliance for work in our Auckland and Porirua
LSPs as sole Owner-Participant of the alliance, Kāinga Ora UDD has the authority to wind down the alliance at any time;
g)
note that the process of transitioning away from using LEAD Al iance is expected to take up to 6 months with committed projects completed for
design and construction;
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CONFIDENTIAL - For Internal Use Only
h)
note that UDD is currently assessing options for civils delivery and may engage with the civil construction industry in order to inform a
procurement plan; and
i)
note that the next steps are for UDD management to inform the Programme Alliance Board (PAB), whose members represent the participant
companies of the alliance. Following this, a paper will be prepared for the Kāinga Ora Investment and Delivery Committee for noting, and the
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office of the Minister of Housing wil also be informed of the decision. UDD wil report back to CELG on the transition and procurement plan by
March 2025.
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Background
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3. The LEAD Alliance (formerly Piritahi Alliance) was established in 2018 to help with the coordination of the consent, design and delivery of the civil
infrastructure required to enable additional housing for the Auckland LSPs, at the time known as the Auckland Housing Programme.
4. LEAD Al iance consists of one owner-participant, Kāinga Ora, and five non-owner participants: civil designers Tonkin + Taylor, Harrison Grierson and
Woods, and civil constructors Hick Bros and Dempsey Wood.
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5. It was contracted by HLC (the urban development subsidiary of Housing New Zealand) through an Auckland Civils Alliance Programme Agreement
(ACAPA) for an initial term of five years, from December 2018-2023.
6. The use of alliancing in programme delivery (rather than project-specific delivery) was an innovation for land development. Furthermore, none of the
companies had been involved in an al iance programme of the scale that was on the table. By focusing on construction and design companies that
occupy the industry’s ‘second-tier’, HLC sought to grow the overall sector capability and capacity.
7. The alliance also worked well for a fast start and a very high volume of work, which total ed more than $600m and enabled 4,000 homes between
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2018 – 2022. It was instrumental in retaining community support throughout the long development timelines, despite the very high work volumes and
disruption.
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8. The alliance had delivered a significant amount of infrastructure, but had not been focused enough on the basics of project delivery, including efficient
processes and systems. As the contract term was closing, Kāinga Ora was to consider whether or not to extend the contract for a further five years.
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CONFIDENTIAL - For Internal Use Only
9. At the time, the projection for LEAD Alliance’s deliverables over the five years of the contract extension period (December 2023 – December 2028),
being land for 6,000 homes and up to $1b of works, was based on the Cabinet-approved Programme Business Cases for Mangere, Roskill and Tāmaki
Large-Scale Projects (LSPs), and the remaining work in Northcote and Oranga.
10. Kāinga Ora UDD entered into contract renewal negotiations with LEAD Al iance in November 2022, with Kāinga Ora managing a rigorous review and
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reset process of the Alliance. This approach was supported by the Kāinga Ora Board and the Construction Programme Assurance Panel (CPAP). The
reset focused on cost management and programme performance, as well as alliance systems and processes. It included a complete overhaul of senior
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leadership and directors, new KRA and KPI frameworks, a strategic review and significant training and upskilling, both for alliance personnel and Kāinga
Ora staff. This work resulted in a five-year extension to the al iance contract, signed in December 2023.
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11. It is worth noting that UDD has previously undertaken to wind down the Te Aranga Al iance in the Porirua LSP because the remaining works
programme for Eastern Porirua no longer justified an alliance delivery model, due to the low complexity and reduced programme scale. UDD has
successful y managed a transition process for this in 2023.
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Discussion
12. During a period of a very constrained labour market (particularly during Covid-19), one of the efficiencies of LEAD Alliance was in keeping the labour of
both civil designers and constructors together. As these constraints have softened and industry growth builds, this efficiency within the al iance model
is no longer demonstrable.
13. The Al iance was set up on the basis of a volume of work expected to be more than $200m per year. This programme of work has been reduced and
neighbourhoods / stages have been pushed out due to funding decisions made to the original approved funding envelope.
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14. The remaining design and construction work within the funded LSP programme yet to be delivered is approximately $950m. We are currently on
budget and broadly on programme, although this is starting to fal behind as our approvals for future neighbourhoods are delayed.
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15. Due to the programme of work reducing, and project delivery moving out, this has resulted in a higher overhead cost to project delivery. UDD
management has identified that it wil be more cost-effective to deliver the remaining programme under other delivery models.
16. We anticipate savings of $18m per year for the alliance, with expected savings over the remaining funded programme of $90m - $100m.
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CONFIDENTIAL - For Internal Use Only
17. The ACAPA reserves the right for Kāinga Ora to not put all work in the LSP programme through the alliance, and reserves the right to terminate the
contract at any stage.
18. UDD estimates that the process of transitioning away from an al iance model wil take up to 6 months, with a further two years to close out Project
Quality assurance. This can be managed by the UDD team with limited support from the current partners in the LEAD Al iance. We also have internal
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resource and expertise to manage procurement and delivery within UDD.
19. Alongside the agreed projects allocated to LEAD Alliance, Kāinga Ora UDD has continued exploring and implementing alternative best-for-project
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decisions in its Auckland LSPs and greenfield projects, and in some instances has used a conventional 3910 construction contract (the most commonly
used contract for building and civil engineering construction) where appropriate.
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20. As new design and construction projects emerge during this transition period, UDD wil take a tailored approach to the delivery of these civils. Kāinga
Ora already has panels for civil partners, and UDD wil use these panels (and add to the panels) as needed. UDD will also engage with the civil
construction industry to inform a procurement plan.
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21. Kāinga Ora, as the client and owner-participant, owns the project-specific intel ectual property and wil continue to use lessons learned from the
alliance to inform future decisions around the design and delivery of civil infrastructure.
22. A transition team will be put in place to manage the transition of work away from the alliance. s 9(2)(a)
Director Infrastructure and Civil
Construction, wil lead this team and focus on the most cost-effective and efficient plan to close out the remaining work in the Alliance. We will report
back to IDC with an update by March 2025.
Risks and their Treatments
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Type
Risk/Issue
Causes (s)
Consequence (s)
Control ed
Risk Treatment
Risk Owner
Risk Rating
Risk
Costs incurred
Breaking lease term
Up to $1m
Medium (6-
The transition team wil work with the s 9(2)(a)
for lease of
payable per year 15)
landlord on an exit option, and look
alliance office
for lease
for other government projects that
after it ceases
may require a project office
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CONFIDENTIAL - For Internal Use Only
Issue Issue of alliance Poor messaging and
Aggrieved
Low (1-5)
Comms plan with key messages that s 9(2)(a)
closure closely
communications
alliance partners,
note that the contract extension was
following
media coverage
based on funded programmes that
publicised
have since been reduced.
contract
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extension and
reset process
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Risk
Delivery
Assumption that investment in
OIA requests,
Low (1-5)
Comms plan which notes that the
Transformation LEAD participating in pilot
media coverage
pilot work wil be used by UDD to
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investment
programme is wasteful spending
inform how to improve management
and deliver civils work outside of the
alliance. We note that UDD has
undertaken a similar plan for the
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Porirua.
Next Steps
23. The next steps are to inform the LEAD Alliance Programme Alliance Board (PAB) members of the decision, and then a noting paper wil be prepared for
the Kāinga Ora Investment and Delivery Committee. The office of the Minister of Housing will also be informed of the decision.
24. Kāinga Ora UDD will develop and implement a plan to communicate the announcement. The expectation is that al stakeholders are informed by
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Monday 9 December 2024.
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25. UDD wil report back to IDC with a transition plan by March 2025.
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Document Outline
