Infrastructure News – CRL review offers lessons for future infrastructure projects

The New Zealand Infrastructure Commission, Te Waihanga, has today released an interim review of Auckland’s City Rail Link (CRL) project. The review offers a timely reminder of the significant challenges with delivering large, complex infrastructure projects and the consequences New Zealand faces when risks eventuate.

“It is important to reflect on what we have learnt so far from this project, particularly around business case processes, as we contemplate a significant number of new major transport investments,” says Blake Lepper, GM Delivery.

Te Waihanga commissioned this review to assist project teams and decision makers considering Auckland Light Rail and similarly complex projects to learn from the lessons of New Zealand’s biggest infrastructure investment to date.

The review was led by experts Graeme Joyce and Peter Spies, who studied project documents and interviewed team members. Joyce and Spies have either been involved in or have reviewed many of Australasia’s largest infrastructure projects, including both heavy and light rail and road tunneling projects.

“These multi-billion-dollar projects are complex, disruptive and can exceed a decade under construction. It’s critical we learn as much as we can from this experience if projects of this scale are going to become a more substantive part of our total infrastructure investment,” says Lepper.

“There is no doubt the City Rail Link will be a tremendous asset for Auckland City, delivering significant travel time, safety and urban intensification benefits. However, it is projected to cost more than double what was estimated in 2015, with many billions more to be spent across the Auckland rail network in years to come to realise the full design capacity of the project.”

The review highlighted opportunities to improve the business case process and recommended that future business cases be reviewed when expectations, scope or costs for a project change. The reviewers queried why more than a billion dollars of upgrades essential to delivering the benefits of the project were omitted from the business case altogether. It also emphasised stronger procurement planning, in light of the challenges involved in working with local and international contractors – who all have important, but different, roles to play in making projects a success. And that the community and businesses impacted should be made sufficiently aware of a project’s impacts.

Those interviewed by the reviewers generally agreed that City Rail Link Ltd is delivering in a timely manner and to an acceptable standard – putting this down to the cooperation and support of entities involved in the project. Reviewers were complimentary of many aspects including the project’s property acquisition approach which was a significant step forward on prior projects.

All up, the review contains 24 recommendations for future infrastructure projects.

While the lessons from this review generally mirror issues found internationally, one learning particular to New Zealand is a shortage of people who are skilled and experienced with projects of this scale and complexity.

“For CRL this issue is illustrated by the way in which the governance and oversight of the project needed to continually evolve and develop “workarounds” for the structures originally agreed. This was time consuming and created additional pressure on teams that needed to be focused on delivery,” says Lepper.

“A project of this type has never been completed in New Zealand. It is also the first large-scale integrated-transport-urban development project in New Zealand. If we want to get better at doing these types of projects, then we are going to have to get better at rolling this expertise from one project into the next and ensuring every project is set up better than those that came before.”

The need to build the capability of our major project leaders was a recommendation in the New Zealand Infrastructure Strategy released in 2022. Te Waihanga is currently working on a programme to address this.

The review identifies key learnings that can be applied to future infrastructure megaprojects. It is not an assessment of the current City Rail Link initiative or the performance of City Rail Link Limited or any of the Sponsors. Also, note that the revision of project costings from $4.4b to $5.5b in 2023 wasn’t covered by this review.

The review noted major findings in the following areas:

– Foundation Documents – key foundation documents must be properly developed and understood before a project begins.

– Scoping – everything that’s needed to achieve a project’s benefits should be investigated and identified in the Business Case.

– Timings of Notices of Requirement and Resource Consents – early certainty of funding reduces a project’s timeframes and improves overall efficiencies.

– Property Acquisitions – a good property acquisitions process was supported through such things as high quality communication materials, advanced consenting that reduced uncertainty for landowners, and a non-binding, facilitated mediation process.

– Development of a Procurement Strategy – a robust, coherent Procurement Strategy should be part of the planning and consenting process.

Interviewees were generally complimentary that CRLL is delivering the project in a timely manner and to an acceptable standard. Interviewees agreed that this would not have been achievable without the collaboration and support of the Sponsors, Auckland Transport and KiwiRail Holdings.

Interviewees complimented the willingness of all Public sector entities and individual representatives to continuously work together to evolve and improve the project governance with an overall aim of providing the best outcome for New Zealand as a driver.

The project underestimated how long the public and affected businesses would be impacted. Delays caused by the COVID pandemic exacerbated these community effects.

There has not been an identified, documented and agreed Owner and Operator for the assets delivered by CRLL, which has impacted the project. This included minimal and inadequate ability by Auckland Transport and KiwiRail, as assumed Owners and Operators, to influence essential whole of life considerations regarding capital expenditure (capex), standards and decisions that may be required to minimise operational expenditure.

2015 – original estimation of project cost put at $2.5b and completion date of 2022

2017 – project costings revised to $3.4b

2019 – project costings revised to $4.4b (including a change to longer platforms) and completion date to late 2024

2022 – Office of the Auditor-General says that a further $7.5b will need to be spent on the rail network between 2022 and 2036 in order to realise the full benefits of CRL

2023 – CRL project costings revised from $4.4b to $5.5b and completion date to late 2025

Note: the $5.5b figure above relates to CRL Ltd scope only and excludes the balance of rail network improvements (est. $1.11b prior to opening and $7.5b out to 2036) that will be needed to realise the design capacity of this part of the network.

Auckland Transport and KiwiRail Holdings Group (KiwiRail) are responsible for the wider network improvements needed to integrate the City Rail Link into the existing transport network in Auckland. These wider network improvements include new trains, removing level crossings, and the Wiri to Quay Park upgrade. The budget for these wider network improvements is about $1.11 billion and allow the capacity to reach 27,000 passengers/hr at peak times, approximately half its design capacity.

While the City Rail Link tunnels and stations are being built with the capacity to handle 54,000 passengers/hr at peak times, the rest of the rail network that feeds into CRL is not currently able to handle that number of passengers. Once CRL is completed, the rest of the network would need to be improved to handle that passenger capacity at an estimated cost of $7.5b over the decade following opening.

The review contains a number of lessons applicable to future infrastructure projects, including Auckland Light Rail and the Waitematā Harbour Crossing. In particular, this review strongly highlights the need for care and rigour up-front to ensure that project costings are appropriate and all of the scope necessary to realise the project benefits is included in the business case.

In the case of both these projects, we know from Te Waihanga research that tunnels in New Zealand seem to cost more than they do in other countries. Both the Auckland Light Rail and the second Waitematā Harbour projects have significant tunneling involved.

The Terms of Reference for this high-level review were developed in late 2022 and are published on the Te Waihanga website. Work on the review began later that year. At that time, it was thought this work may feed into a phase 2 review, focusing on comparators and lessons for future projects. Te Waihanga is progressing the scope for this phase 2 work.

Graeme Joyce

Graeme has undertaken over 150 Gateway Reviews across Australia and New Zealand, including many of Australia’s largest infrastructure projects including both heavy and light rail. Graeme’s combination of relevant New Zealand and Australian experience places him in a unique position to undertake a lesson-learnt review on City Rail Link. His experience will allow targeted questioning and comparison to other projects, and his experience on light rail projects will help ensure the information that comes out of the review is useful and informative for Auckland Light Rail, Auckland Second Harbour Crossing and Let’s Get Wellington Moving.

Peter Spies

Peter has participated on project management boards on most of New Zealand’s largest infrastructure projects, including Waterview Tunnel, and provides a depth of knowledge of the industry including governance, approvals, scope, commercial management, procurement and risk allocation. His experience will help ensure that the lessons learnt are fit for purpose for the New Zealand market.