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What is the Pūhoi to Warkworth project?
The Pūhoi to Warkworth project is a first stage of the Ara Tūhono - Pūhoi to Wellsford project, which will improve the safety, reliability and resilience of the state highway between Northland and the upper North Island freight triangle of Auckland, Waikato and Tauranga. The project aims to provide a better connection from Northland southward for freight, tourism and motorists.
What led to the project being procured as a Public Private Partnership (PPP)?
In May 2015, Cabinet approved an application from Waka Kotahi NZ Transport Agency to finance, design, build, manage and maintain the Pūhoi to Warkworth motorway through a Public-Private Partnership (PPP).
What was the basis for Cabinet’s decision to approve Waka Kotahi's application?
Waka Kotahi determined, following an extensive business case analysis, that the project met Treasury’s criteria to be procured as a Public Private Partnership (PPP). On that basis, Cabinet gave Waka Kotahi approval to finance, design, build, maintain and manage the Pūhoi to Warkworth motorway through a PPP.
What is a Public Private Partnership (PPP)?
A Public Private Partnership (PPP) is a long-term contract between the public and private sector covering aspects which may include the design, finance, construction, maintenance and management of the motorway. Full ownership of the motorway remains with the public sector at all times.
What are the benefits of a PPP?
PPPs allow large and complex projects to benefit from private sector innovation and funding which can increase certainty of delivery and drive better value-for-money. There are also savings to be had on all aspects of the project. PPPs are typically used for large-scale infrastructure projects where risks can be effectively identified and transferred to the private sector.
Why was the Pūhoi to Warkworth project considered a strong candidate for a PPP?
Key factors that supported using a PPP to deliver the Pūhoi to Warkworth project included:
- The project has the size and complexity that makes it a strong candidate for a PPP. It also meets the government’s value-for-money criteria and offers opportunities for private sector innovations in design, construction and maintenance.
- An outcomes-based PPP for the Pūhoi to Warkworth project allows great flexibility within the designation to achieve optimised innovative outcomes.
- The outcomes required from the project can be captured in a performance-based contract.
- Waka Kotahi has the capability and resources to manage the PPP procurement process effectively.
- A well-run procurement process would produce PPP bids that are lower than the cost of delivering the project through traditional procurement processes.
- Waka Kotahi has the benefit of experience from the PPP procurement of the Transmission Gully motorway project in Wellington. A PPP contract for the Transmission Gully motorway project was awarded to the Wellington Gateway Partnership in July 2014.
- Delivering the Pūhoi to Warkworth project through a PPP will allow Waka Kotahi to move ahead with greater certainty. Under a PPP arrangement, the new road is planned to be opened in mid-May 2022, delivering the economic and improved travel benefits to motorists sooner.
How will stakeholder interests be addressed under a PPP model?
Waka Kotahi is committed to engaging with stakeholders on all of its projects and that commitment will not change under a PPP. The PPP contract will stipulate the required engagement for the PPP contractor to undertake, and stakeholders can also always engage with Waka Kotahi at any time and on any matter pertaining to the project during the duration of the PPP contract.
How will the conditions laid down by the Board of Inquiry be met under a PPP?
The PPP contractor will be contractually bound to adhere to and undertake all designation and resource consent conditions laid down by the Board of Inquiry for the Pūhoi to Warkworth project.
How is the PPP contract for the Pūhoi to Warkworth project structured? When does the Transport Agency make payments, and where do these payments come from?
Under the PPP, the Northern Express Group will finance the design, construction, maintenance and management of the motorway. In return, Waka Kotahi will commit to making debt payments for up to 25 years once the motorway is available to traffic and continues to meet the prescribed outcomes. These payments will be made through the National Land Transport Fund.
What is the duration of the Public Private Partnership (PPP) contract on the Pūhoi to Warkworth project?
The PPP contract will see the PPP consortium maintain and manage the motorway for the 25 years that will follow the anticipated six-year period to build the motorway.
What is the final contract price arrived at for the Pūhoi to Warkworth project?
When the project was originally contracted, the net present contract price for the Pūhoi to Warkworth project was $709.5 million (2017 net present value). This is the ‘whole of life’ cost for the Northern Express Group to build the motorway over the next five years, and then operate the road for 25 years. Because the costs are spread over time, they are expressed at the time of contract close.
The settlement package in June 2020 increased the cost of the Pūhoi to Warkworth project by $168 million.
How has Waka Kotahi ensured that the motorway will meet the required safety and performance standards? What safeguards have been written into the PPP contract?
The PPP contract stipulates the level of performance that the PPP consortium must achieve. The consortium will only be paid for the services delivered. Full delivery to the prescribed performance standards will result in full payment; services delivered below the required performance standards will result in a reduced payment.
Key performance indicators have been developed to provide the basis for measuring achievement of required standards. These indicators cover such outcomes as safe travel, predictable journeys, health and safety, customer satisfaction and environmental performance.
Is there any difference between the PPP model to be used for the Pūhoi to Warkworth project and that used on overseas PPP highway infrastructure projects?
Many overseas PPP highway infrastructure projects have passed patronage risk back to the private sector (i.e. revenue from patronage is used to pay for the private finance). However an availability PPP model was chosen by Waka Kotahi for the Pūhoi to Warkworth project (and similar to that adopted for the Transmission Gully motorway project) which means that the PPP consortium will be paid for making a safe road open and available to traffic. Payments are not linked to the volume of traffic using the road - with incentives for the private sector to achieve quality levels of service through commercially-incentivised performance targets.
Will PPPs be used to deliver other key Waka Kotahi projects?
Waka Kotahi will consider PPPs for other large-scale and complex infrastructure projects which could potentially benefit from the innovation and value for money which can be achieved by using a PPP approach.
What stage is the project at now?
The Northern Express Group (NX2) has started constructing the motorway under a Public Private Partnership (PPP) arrangement. For the latest construction updates, please visit www.nx2group.com(external link).
Why is the Warkworth access to the north?
To provide better journey time reliability and regional connection, the new highway will bypass Warkworth.
The access point to the north of the township also reflects feedback from the public consultation held in 2010 and further technical analysis. Newsletter 05 [PDF, 430 KB] and Newsletter 06 [PDF, 527 KB] provide more information on the project’s public consultation results.
Why are there no north-facing ramps (i.e northbound on-ramp and southbound off-ramp) planned for Pūhoi?
At this stage, we do not expect enough demand for northfacing ramps for several years and therefore they are not included in the current project. North-facing ramps also present a number of engineering and environmental challenges and would have a significant cost. The current designation has enough space for future ramps should they be required.
Will motorway ramps be provided at Pūhoi?
Yes, a northbound off-ramp and southbound on-ramp will be included for Pūhoi residents to access the new motorway.
Will Pūhoi to Warkworth be tolled?
Every new state highway in New Zealand, along with significant upgrades to existing state highways is assessed to see if they meet the criteria to be tolled.
The Pūhoi to Warkworth project met this criteria and Waka Kotahi carried out public consultation on the tolling proposal on between 15 May until 15 June 2020. Submissions for this consultation have now closed but you can find more information about the tolling proposal on the Tolling consultation information page.