New Zealand / Covid 19

Covid-19 creates complex conundrum for Transmission Gully billing

11:46 am on 13 May 2020

Covid-19 will blow the budget again on Wellington's billion dollar road project Transmission Gully, but who will pay the extra is unclear.

Transmission Gully construction. Photo: RNZ / Rebekah Parsons-King

The 27 kilometre stretch of motorway was supposed to cost $850 million but that bill has already grown by nearly $200m more.

Now that Covid-19 has pushed the completion date into next year, more money is needed to cover off delay penalties.

With the project already spilling into the billions, and it's completion date put out three times, the job between the public sector - The Transport Agency - and a private arm called the Wellington Gateway Partnership has grown.

Before Covid-19, the arterial route out of Wellington had a deadline of November, but lockdown has extended that timeline into 2021.

As previously reported, every month over the due date comes at a cost of about $10m.

RNZ was told it's now an armwrestle to work out who pays the bill.

The Transport Agency said the full impacts of Covid-19 were still being assessed, and negotiations between them, Wellington Gateway Partnership, and the builders was underway.

RNZ understands the biggest sticking point of the negotiations is working out who pays for what - does the government wear it - or the commercial team?

If the delay was through the fault of the builders, they would normally foot the bill.

But because the lockdown was the main reason for the hold up, it was unclear who picks up the tab.

Public Private Partnerships have complex contracts to protect each party.

One common clause in the contract for this project relates to what is called Force Majeure.

Normally if Force Majeure - which basically means Act of God - is invoked, then insurance could come to protect both parties.

A pandemic/epidemic where the contractors are unable to work is listed as one of those events.

It wasn't clear if that could be a solution or if Covid-19 would instead be deemed as an uninsurable event.

RNZ understands the parties were also looking at a different clause which could allow them to re-negotiate or even terminate a contract if they were unable to agree after 40 working days.

Those 40 days could end as soon as next week, but sources have told RNZ there is some debate about the start date for that period.

The timeline to get the job completed before the November deadline was always going to be tight and RNZ was told the seven weeks of tools down during the lockdown had really pushed them into next year - especially as they were likely to be the last weeks of dry weather before winter.

So with work not likely to begin in earnest until October, it has been suggested that pushes the completion date out until at least May 2021.

So far the Transport Agency has refused to confirm any new target date for completion, but said it was committed to getting the job completed.