NZ Report / Proposal Template - State Services Commission

outcome of negotiations with relevant local authorities. There were also some changes in
Ministry of Health standards relating to water treatment and waste-water discharge.
4.28 Other regulatory changes related to the Holidays Act. These changes resulted in
additional labour costs. We note that the additional costs stemming from the Holidays Act
should be reflected in the CGPI-NRB and so there is some risk that this element of the
overall cost increase is being captured twice.
Design Finalisation
4.29 According to the advice presented to Cabinet in December 2005, completion of
detailed design works at Spring Hill (which occurred subsequent to the reporting in April
2005) identified a number of additional items, the total cost of which amounted to $37.050
million or roughly 10% of the total project cost. These included:
• site drainage ($11.3 million);
• underground ducting and future proofing ($4.6 million);
• water reticulation and management ($2.9 million);
• gas reticulation ($0.6 million);
• access roads and car parking ($6 million); and
• finishing works and landscaping ($10.1 million).
4.30 This is a significant amount. Although the reason behind these changes is
referred to as being a function of completing detailed design work, we understand that
some of the changes are also a function of the outcome of the consents process. In
particular, the consent process lead to some significant design changes, including moving
building platforms. This had flow-on consequences for infrastructural services such as
drainage and utilities reticulation. A general difficulty facing the Department is that when
such changes are being discussed/negotiated as part of the consents process, the cost
impact is not necessarily known with any degree of precision.
4.31 As far as we are aware, Ministers were not advised of these additional costs until
the December 2005 report to Cabinet. In our view, the prospect of additional costs in
these areas would have been known at the time of Budget 05 even though the scale of
cost would not have been known at that stage. Given the scale of the additional cost,
more forewarning of Ministers could have occurred.
Summary
4.32 Many factors have contributed to the increase in costs over and above those
reported as part of Budget 05. The underlying drivers of these can be summarised as
follows:
• the heated nature of the construction market which resulted in higher input costs
(materials and labour);
• international trends for the price of steel;
• the remote location of the sites which has given rise to additional allowances;
Key Drivers and Causes of Cost Escalation 20