A death-knell for PPPs?

When the then-National government approved a public-private partnership (PPP) funding model for Transmission Gully, it claimed it was all about building it quicker and cheaper. Paying a private company's profit margin would supposedly give "certainty of delivery and... better value for money". So how has it turned out? The cost has blown out by $191 million, a third of the road has failed quality checks and needs to be torn up and re-laid, the project is now delayed until 2021, and rather than face these costs, the PPP contractor is planning to walk away and dump everything back on the government:

Officials acknowledged on Sunday the already-delayed Transmission Gully project would be delayed until 2021. This has the potential to blow out costs by yet-more hundreds of millions of dollars. NZTA said in February the project’s estimated costs would over-run by $190m to $1b and the completion date had been extended from May to December this year.

An NZTA spokesman said on Sunday the project would now not be completed until some time in 2021 and the agency was in urgent negotiations again with the PPP’s contractor CPB HEB about the project. He would not comment on the fears of those close to the project that the contractor was days away from pulling out completely and dumping the project uncompleted back on the taxpayer. The project was suspended during the Level 4 lockdown, but failed to resume with all its workers as expected last week.

The entire project looks to be an expensive failure. Rather than transferring risk to the private sector, it turns out to be the usual scam of privatising profits and socialising losses. And its hard to escape the impression that we could have built it quicker and cheaper and without the quality issues caused by the contractor shaving costs and using substandard materials to increase its profits by just getting the government to do it in the first place. And hopefully it will be a death knell for PPPs in this country.