Analysis: What reviews of City Rail Link and hospital project reveal on business cases

Analysis - Houses built on the rock and houses built on the sand face different fates. Everyone knows that.

But a couple of extraordinary reports out recently show that figuring out what you are building on can be trickier than you'd think - especially when those doing the figuring have bunches of money to do the prepwork, and billions of public funds are at stake.

The reports on the City Rail Link in Auckland, out Friday, and an internal one on hospital building released to RNZ earlier this year, are extraordinary for the bits picked out below that cut against public expectations and trust that experts are at the helm, and all will be well.

The business cases - or lack of them - described are in a realm that is no more a dark art than computer-assisted weather forecasting.

Like meteorology, wouldn't business cases - that cost a lot, involve a lot of outside experts and AI, and - for hospitals at least - according to official reports, take three to 12 years, only be getting more accurate?

They are the foundation for forecasts in the celebratory launch statements from the Beehive.

If these end up looking farcical over time, and if you wonder why taxpayer dollars are having to shore up the eroding sand, the two recent reports might not help you much: they will tell you what is missing, but not why.

But at least they are a starting point. They are long and mostly boring to most of us, so here are just some of the most startling excerpts.

City Rail Link

Tunnelling for trains under Auckland, with an original $3.3 billion budget now at $5.5b, and counting. Friday's review - or the PR around it - says (italicising by RNZ).

• "The reviewers queried why more than $1 billion of upgrades, essential to delivering the benefits of the project, were omitted from the business case altogether."
• "These 'wider network improvements' ... are currently estimated to be in excess of $1.1 billion ... It is unclear how or why these projects were not identified or included."
• "There was a lack of clarity as to who was responsible for tracking and monitoring this work."

This is extraordinary in two ways: That someone forgot to include the extra essential stuff in the first place, and secondly, that the reviewers have not been able to figure out how that happened.

This uncertainty about what has gone on is repeated at other points, notably:

• ''... it would appear that the desire became to commence and deliver the project through a number of independent packages ... leading to the use of smaller value packages."
• 'No conscious consideration was given as to ownership and operation of the CRL Project but the existing practice in Auckland of AT owning 'above track' and KiwiRail 'below track' was assumed although no interaction with KiwiRail appeared to have taken place."
• "... the Review Team have not been able to sight documentation providing the background and rationale behind the Procurement Strategy and procurement models originally proposed" that have since needed big changes.
• "Major additional works ... should have been identified in the original business case and had responsibilities assigned."
• "A business case prepared in accordance with The Treasury 'Better Business Cases' guidance has never been undertaken for the project."
• "The responsibility for delivery of benefits has become unclear ... the necessary responsibilities and accountabilities of an owner and operator are unclear."

Check out the 43-page report about CRL for more of the same. What is clear in it is that a lot is "unclear", but injurious, on a job that has been going for years and involves billions of dollars.

Hospitals

Building and upgrading 16 mental health facilities which was put at $500m and is now at $800m-plus.

• "Business cases often appeared to be prepared on little information as there was less appetite to advance the design if the funding availability was unknown."
• "The lack of a long-term national investment strategy ... created a system unwilling to invest significantly in investment planning and a pattern of 'light touch' business cases."
• "Project schedules appeared to lack both sufficient detail and be optimistic with little to no float allowed for."
• "The level of detail that was prepared in the original business case was insufficient therefore setting unrealistic expectations at the outset."
• "The gaps in capability included business case development, defining project budgets, scheduling, and stakeholder management."
• "Project budgets were observed to be under pressure because unrealistic expectations were set. For example, insufficient information at business case set unrealistic expectations, escalation, and scope changes (Taranaki, Nelson/Marlborough)."

Do you get a feeling there is a problem with business cases?

The rail and hospital projects are in just two sectors. The question they raise is how many other essential public infrastructure projects have sand between their toes?