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Robust investment decision-making requires good processes – even when quick decisions are needed – OAG

Ministers should balance the need to act quickly with appropriate processes to support value for money, transparency, and accountability when making major investment decisions, the Auditor-General says.

The report Making infrastructure investment decisions quickly examines the processes that were used to make funding decisions under two major infrastructure investment programmes announced by the Government in 2020: the $12 billion New Zealand Upgrade Programme (NZUP) and the $3 billion Shovel-Ready Programme (SRP). Their significance was underlined by the then Prime Minister, who described NZUP as “a once-in-a-lifetime opportunity to invest in New Zealand”.

The two programmes were developed at speed, with Ministers feeling that they had to act urgently and make early announcements to respond to significant economic uncertainty both before, and because of, the Covid-19 pandemic. The process to identify projects and announce funding for NZUP projects took only a few months. Setting up the application process for the SRP took only weeks.

The Auditor-General decided to look at how the Government made these infrastructure investment decisions because of the speed of the decision-making, the scale of the investments, and their long-term and potentially inter-generational impacts.

For the NZUP, agencies were given high-level direction and were expected to quickly provide lists of projects that Ministers could announce. At several points, officials advised Ministers of risks to value for money (including potential costs overruns and delays). However, it is unclear how Ministers assessed or managed these risks when approving projects.

“In some circumstances, decisions need to be made quickly, and processes might need to be adapted,” says Auditor-General John Ryan. “However, careful consideration is needed to ensure that trade-offs between good process and speed are proportionate to the scale and significance of investment and its risk.”

“In my view, the scale and stated significance of these investments, the limited information available to Ministers, and the multi-generational impact of the investments warranted considerably more rigour before the NZUP announcements were made,” says Mr Ryan.

“For the Shovel-Ready Programme, a largely well-run process and good reporting on the programme’s delivery was let down by the absence of clear records and a rationale of how and why some decisions were made by Ministers.”

Some of the risks that officials highlighted to Ministers have been realised during project delivery. Costs have increased significantly for some NZUP projects, and some have been delayed or rescoped. Meanwhile, some SRP projects have also been discontinued.

The observations echo similar findings in the Office’s work about aspects of the Strategic Tourism Assets Protection Programme, the Cost-of-Living Payment, the Provincial Growth Fund (PGF), and most recently the reprioritisation of the PGF.

“It concerns me that significant decisions on the spending of public money continue to occur without appropriate processes for ensuring value for money and transparency. I think that Parliament and the public have a right to expect more for spending of this scale,” says Mr Ryan.

“A lack of transparency and documentation about how and why decision-makers made significant decisions can also create the perception that processes lack integrity. In a country that prides itself on the integrity of its public sector, this is something we should all be concerned about.”

The report makes three recommendations aimed at supporting improved decision-making, public reporting, and accountability for major investment decisions. The Auditor-General remains interested in the performance of the NZUP and SRP and will likely carry out further work to measure the progress of these significant investment initiatives.

 

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