Reference: 20160199
16 August 2016
Thank you for your Official Information Act request, received on 7 June 2016. You requested:
“1. A copy of all communications, including e-mails, between Treasury and DPMC regarding Christchurch projects included in the Major Projects Performance Report, since 1 January 2016; 2. A copy of all communications, including e-mails, between Treasury and Minister Brownlee’s office regarding Christchurch projects included in the Major Projects Performance Report, since 1 January 2016; 3. A copy of all advice and briefings prepared by Treasury regarding Christchurch projects included in the Major Projects Performance Report, since 1 January 2016.”
On 21 June I sought an extension of 20 working days.
On 24 June, you clarified points one and two of your request to be communications ‘raising concerns’ with the Christchurch projects included in the Major Projects Performance Report.
Information Being Released
Please find enclosed the following documents:
Item Date Document Description Decision
1. 29 January 2016 Joint Report: Incorporation and Release in part Initial Funding Arrangements CrownCo
2. 1 February 2016 Email: RE: CCC initial thinking Release in part
3. 12 February 2016 Aide Memoire: Christchurch Release in part Convention Centre
4. 14 March 2016 Email RE CCCP Cabinet Papers Release in part
5. 17 March 2016 Email RE: Convention Centre Release in part
6. 18 March 2016 Aide Memoire: Upcoming Release in part Decisions on the Christchurch Convention Centre
7. 24 March 2016 Email FW: CCCP transition plans Release in part and options
Attachment [withheld under s9(2)(j)]
8. 1 April 2016 Email: FW Joint Ministers Paper Release in part send to MCER Office today
9. 5 April 2016 Email: RE Convention Centre Release in part Report
10. 7 April 2016 Email: Convention Centre Report Release in part
11. 11 April 2016 Aide Memoire: Convention Centre Release in part – Transition to Otakaro
12. 19 April 2016 Treasury Report: Treasury Release in part monitoring of CERA-led major programmes after 19 April 2016
13. 13 May 2016 Aide Memoire: Proposed Next Release in part Steps on the Christchurch Convention Centre
14. 20 May 2016 Aide Memoire: Update on Release in part Christchurch Convention Centre Precinct negotiations
I have decided to release the documents listed above, subject to information being withheld under one or more of the following sections of the Official Information Act, as applicable:
• personal contact details of officials, under section 9(2)(a) – to protect the privacy of natural persons, including deceased people,
• commercially sensitive information, under section 9(2)(b)(ii) – to protect the commercial position of the person who supplied the information, or who is the subject of the information.
• advice still under consideration, section 9(2)(f)(iv) – to maintain the current constitutional conventions protecting the confidentiality of advice tendered by Ministers and officials,
• certain sensitive advice, under section 9(2)(g)(i) – to maintain the effective conduct of public affairs through the free and frank expression of opinions,
• Commercially sensitive information under section 9(2)(i) – to enable a Minister of the Crown or any department to carry out, without prejudice or disadvantage commercial activities, and
• confidential information, under section 9(2)(j) – to enable a Minister of the Crown or any department or organisation holding the information to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)
2
Information to be Withheld
There are additional documents covered by your request that I have decided to withhold in full under the following sections of the Official Information Act, as applicable:
• advice still under consideration, section 9(2)(f)(iv) – to maintain the current constitutional conventions protecting the confidentiality of advice tendered by Ministers and officials, and
• commercially sensitive information, section 9(2)(b)(ii) – to protect the commercial position of the person who supplied the information, or who is the subject of the information.
As requested, below is a list of the documents I have decided to withhold in full:
Item Date Document Description Proposed Action
15. 10 May 2016 Email on the Metro Sports Facility Withhold under section (9)(2)(j)
16. 1 June 2016 Email - RE: MSF Car Parking Proposal Withhold under section (9)(2)(j)
17. 2 June 2016 Email - RE: MSF Car Parking Proposal Withhold under section (9)(2)(j)
18. 3 June 2016 Treasury Report: Update on contingency Withhold under planning for the Christchurch Convention section 9(2)(i) & Centre Precinct 9(2)(j)
In making my decision, I have considered the public interest considerations in section 9(1) of the Official Information Act.
Please note that this letter (with your personal details removed) and enclosed documents may be published on the Treasury website.
This fully covers the information you requested. You have the right to ask the Ombudsman to investigate and review my decision.
Yours sincerely
Ricky Utting Manager, Investment Management and Asset Performance
3
Information for release OIA 20160199
1. Incorporation and Initial Funding Arrangements for CrownCo 1 2. RE CCC initial thinking 24 3. Aide Memoire Christchurch Convention Centre 27 4. CCCP Cabinet Papers 30 5. RE Convention Centre 32 6. Aide Memoire Upcoming decisions on the Christchurch Convention Centre 34 7. FW CCCP transition plan and options 39 8. FW Joint Ministers Paper send to MCER Office today 41 9. RE Convention Centre Report 44 10. Convention Centre Report 46 11. Aide Memoire Convention Centre - Transition to Otakaro 48 12. Treasury monitoring of CERA-led major programmes after 19 April 51 13. Aide Memoire Proposed Next Steps on the Christchurch Convention Centre 57 14. Aide Memoire Update on Christchurch Convention Centre Precinct negotiations 59
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From: Elizabeth Scurr [TSY] Sent: Monday, 1 February 2016 3:11 p.m. To: Mike Shatford Cc: ^Parliament: Simon Duncan Subject: RE: CCC initial thinking
[IN-CONFIDENCE]
Hi Mike
Until we have a better understanding of s9(2)(i) & 9(2)(j) we have not progressed our thinking any further. s9(2)(i) & 9(2)(j) as outlined below there are a number of other factors to be consider that may mean that the downsides may outweigh the benefits but we haven’t yet fully assessed them. The key sentences from our email below are:
1. s9(2)(g)(i)
2.
3.
4.
Would be keen to have a chat ahead of tomorrow’s meeting with you.
Cheers Betty
Elizabeth Scurr | Team Leader, Fiscal and State Sector Management | The Treasury Tel: +64 4 917 6190 Cell: + 64 27 436 0082| [email protected]
CONFIDENTIALITY NOTICE The information in this email is confidential to the Treasury, intended only for the addressee(s), and may also be legally privileged. If you are not an intended addressee: a. please immediately delete this email and notify the Treasury by return email or telephone (64 4 472 2733); b. any use, dissemination or copying of this email is strictly prohibited and may be unlawful.
From: Mike Shatford [mailto:[email protected]] Sent: Monday, 1 February 2016 2:51 p.m. To: Elizabeth Scurr [TSY] Cc: ^Parliament: Simon Duncan Subject: FW: CCC initial thinking Importance: High
1 Doc 2 Page 25 of 65
Hi Betty
MCER is meeting with MoF tomorrow afternoon to discuss Crown Co matters.
It is also very likely that there will be a brief project update on the Convention Centre. s9(2)(i) & 9(2)(j)
Mike
From: Elizabeth Scurr [TSY] [mailto:[email protected]] Sent: Friday, 18 December 2015 5:35 p.m. To: Mike Shatford Cc: Liz Innes [TSY] Subject: CCC initial thinking
[IN-CONFIDENCE]
Hi Mike
You have requested that Treasury provide some preliminary thinking about front-end payment options for the convention centre, ahead of full consideration in the new year. This email is the Treasury’s response to this request.
5. In order for front-loading payments to make a difference, the benefit to PCNZ of receiving early payment needs to outweigh the costs and risks associated with this. 6. Payments are typically made at key milestones as an asset earns value. Based on this payment model, the
Crown would expect to pay [1] up-front, after applying the 8% public sector discount rate.
7. s9(2)(i) & 9(2)(j)
8. This means, if found to be beneficial, the front-loading option is possible from a budget management perspective. Depending on how this occurs, for example lending or accounting treatments, there could be other implications under the PFA. Unfortunately, these implications will only be found out once more detail is known.
9. s9(2)(g)(i)
10.
11. Acceptance of risk typically results in increased costs to offset both uncertainty and management associated with this.
12. For example, s9(2)(g)(i)
s9(2)(b)(ii)
2 [1] - withheld s9(2)(i) & s9(2)(j) Doc 2 Page 26 of 65
13. s9(2)(g)(i)
14.
15. Commercial negotiations are underway between PCNZ and CERA, and these are exploring risk and other aspects, to confirm the parameters of agreement and close funding gaps. 16. The Treasury expects that payment options are considered as part of this, so that benefits of alternatives can be explored. Once preferred payment schedules are created, the Treasury can advise in more detail on the options and implications of these.
Happy to discuss
Cheers Betty
Elizabeth Scurr | Team Leader, Fiscal and State Sector Management | The Treasury Tel: +64 4 917 6190 s9(2)(a) | [email protected]
CONFIDENTIALITY NOTICE The information in this email is confidential to the Treasury, intended only for the addressee(s), and may also be legally privileged. If you are not an intended addressee: a. please immediately delete this email and notify the Treasury by return email or telephone (64 4 472 2733); b. any use, dissemination or copying of this email is strictly prohibited and may be unlawful.
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IN-CONFIDENCE
Reference: T2016/186 TY-2-1
Date: 12 February 2016
To: Minister of Finance (Hon Bill English)
Deadline: Monday 15 February (if any)
Aide Memoire: Christchurch Convention Centre
1. On 21 October 2015, Cabinet agreed funding for the Convention Centre of s9(2)(i) & 9(2)(j) (excluding land) [CAB-15-MIN-0094 refers]. This comprises capital
funding of s9(2)(i) & 9(2)(j) and operating funding of s9(2)(i) & 9(2)(j)
2. On 7 December, CERA received three proposals from PCNZ for the Convention Centre Precinct, but none of these could meet both requirements and could be delivered with the level of funding agreed by Cabinet.
3. Since then, CERA has been negotiating with PCNZ to determine whether agreement can be reached to meet requirements within funding constraints. s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j)
4. CERA recommends that you agree to proceed to negotiations, s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j)
5. CERA has a contractual obligation to update PCNZ on the Crown’s Go/No Go decision by Tuesday 16 February, which means you may be asked for your decision in the next few days.
Proposals 6. The revised PCNZ proposals are listed below. CERA’s advice centres on Option Two.
a. Option One (5 star facility) s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) It meets most requirements with minor compromises.
b. Option Two (4.5 star facility) s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) it has an iconic facade (though not wrapped around the entire building) and high-quality finish, meets most requirements
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with some compromise to size and scope but still retains the ability to host 1400 delegates, which is considered a key requirement by CERA.
c. Option Three (3 star facility) s9(2)(i) & 9(2)(j) ,C but ERA advises this is not considered acceptable as it compromises the quality of finish, the size of the venue, and the ability to hold events concurrently. CERA considers this option would reduce revenue, and expected economic benefits associated with precinct activation and international conferences. This option also carries more commercial risk for the Crown than the others, where more risk is transferred to PCNZ.
7. The Treasury notes these proposals are not yet final, and should be considered indicative. Although more certainty can be expected if negotiations are concluded, we consider that further decisions around scope, and funding, will probably be required to complete the project.
Options for consideration 8. CERA suggests three options: a. Stop the current process and reassess the project objectives b. Return to market, or c. Continue with the procurement process and negotiate an acceptable deal with Plenary
9. s9(2)(i)
10. CERA recommends option c, s9(2)(i) & 9(2)(j) and proposes to work with central agency stakeholders to develop the Implementation Business Case and appropriation of funding papers for Cabinet approval by the end of March 2016.
11. The Treasury considers that option b is not advisable, s9(2)(g)(i) & s9(2)(i) s9(2)(g)(i) & s9(2)(i) s9(2)(g)(i) & s9(2)(i)
12. Stopping the process, even to reassess options, would probably increase uncertainty and reduce confidence, meaning the project could be more expensive in the long run, and benefits realisation is further delayed. The process could be stopped later s9(2)(i) & 9(2)(j) ) if an acceptable agreement cannot be reached.
13. If a Christchurch convention centre is to proceed, the Treasury also recommends option c, s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) .
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s9(2)(i) & 9(2)(j)
Risks 19. s9(2)(i) & 9(2)(j)
20. There is a risk that the level of funding s9(2)(i) & 9(2)(j) is not sufficient to complete the project, which would mean that further decisions and funding are required.
21. Any delay to the negotiation process may mean the agreement with PCNZ needs to be concluded by Ōtākaro. This could make it harder to determine appropriate funding for the project, and increase the complexity of its transition to Ōtākaro.
22. s9(2)(j)
Liz Innes, Senior Advisor, Investment Performance, IMAP (Investment Management & Asset Performance), 04 917 7029
Elizabeth Scurr, Team Leader, Fiscal and State Sector Management, 04 917 6190
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From: s9(2)(a) [DPMC] Sent: Monday, 14 March 2016 11:55 a.m. To: Brent Gray; Liz Innes [TSY]; '[email protected]'; Lee McCauley [TSY]; Elizabeth Scurr [TSY]; Dan Marshall [TSY] Cc: Katherine Snook; Blake Lepper; Richard Sudell; Baden Ewart; Greg Wilson; Rose O'Neill Subject: RE: CCCP Cabinet Papers
Categories: Yellow Category
[IN-CONFIDENCE]
Hi all
I won’t give markup comments but see below for my feedback on this paper. It reads well and has progressed significantly from the previous version – well done to the authors. In spite of this comment, I do have a few queries / suggestions etc
1. The paper needs to be clear that the Crown will not be artificially driven by the deadline of CERA’s wind- down in the negotiations. The intent is for all contractual matters to be completed by 18 April and for the Acting CE of CERA to sign but if this is not the case then the contract will be signed by either Otakaro or DPMC.
2. Para 3 and elsewhere. The paper states that this approach of s9(2)(i) & 9(2)(j) is the best approach; does this meet the previously identified scope in all aspects, or in all of the important aspects? It might be useful to give Cabinet a feel for what could be delivered within the budget that had previously been identified. 3. Para 5 and elsewhere. I’m not sure that you can be so confident as to say that the next best alternative will cost the Crown [1] As I understand it, this is a modelled figure, and you should say so. You don’t have an alternative quote as far as I know. 4. Para 9 and elsewhere. What guarantee do we have that we will get the working capital back?
5. s9(2)(g)(i), s9(2)(i) & s9(2)(i)
Call me with any queries; I am down in chch tomorrow and keen to chat if that is useful to anyone. I look forward to the next version.
s9(2)(a)
s9(2)(a) Policy Advisor Policy Advisory Group Department of the Prime Minister and Cabinet s9(2)(a) @dpmc.govt.nz
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From: Brent Gray [mailto:[email protected]] Sent: Friday, 11 March 2016 3:18 p.m. To: Liz Innes [TSY]
Hi all, please find attached the Draft Cabinet Papers for the Convention Centre for your review and feedback.
I appreciate the short notice turnaround times, but this feedback needs to be provided by no later than Monday 14th March at 2.00pm, in order to process to MCER in time on Wednesday 16 March 2016. Please provide mark-up comments to Rose O'Neill [email protected].
Should you have any major concerns or questions, please do not hesitate to contact me.
A Draft Implementation Case will be issued by COB today and will be aiming for feedback to Liz Innes by midday on Wednesday 16th March.
Thank you for the support,
Regards Brent
Brent Gray | Project Director, Christchurch Convention Centre Christchurch Central Development Unit Canterbury Earthquake Recovery Authority (CERA) Private Bag 4999 Christchurch 8140 DDI: 03 354 30616 s9(2)(a) E: [email protected] W: www.cera.govt.nz
------This email and any attachments may contain information that is confidential and subject to legal privilege. If you are not the intended recipient, any use, dissemination, distribution or duplication of this email and attachments is prohibited. If you have received this email in error please notify the author immediately and erase all copies of the email and attachments. The Canterbury Earthquake Recovery Authority (CERA) accepts no responsibility for changes made to this message or attachments after transmission from CERA. For further information about CERA, please visit www.cera.govt.nz. ------
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From: Elizabeth Scurr [TSY] Sent: Thursday, 17 March 2016 4:03 p.m. To: 'Mike Shatford' Cc: ^Parliament: Simon Duncan; Liz Innes [TSY] Subject: RE: Convention Centre
[IN-CONFIDENCE]
Hi Mike,
From a Treasury perspective the negotiations are progressing well. We are likely to provide an aide memoire to MOF tomorrow, or on Monday.
Broadly, our advice is: • The CCC has followed an atypical investment path, s9(2)(g)(i) s9(2)(g)(i)
• However the Treasury notes decisions on the CCC have been to Cabinet a number of times, and Cabinet has demonstrated its commitment to this investment each time. If Cabinet wishes to invest in a convention centre, then the Treasury considers that s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) . • s9(2)(i) & 9(2)(j)
•
• s9(2)(g)(i)
s9(2)(i) & 9(2)(j) .
Kind regards, Betty
Elizabeth Scurr | Team Leader, Fiscal and State Sector Management | The Treasury Tel: +64 4 917 6190 s9(2)(a) [email protected]
CONFIDENTIALITY NOTICE The information in this email is confidential to the Treasury, intended only for the addressee(s), and may also be legally privileged. If you are not an intended addressee: a. please immediately delete this email and notify the Treasury by return email or telephone (64 4 472 2733); b. any use, dissemination or copying of this email is strictly prohibited and may be unlawful.
From: Mike Shatford [mailto:[email protected]] Sent: Thursday, 17 March 2016 2:51 p.m. To: Elizabeth Scurr [TSY]
Hi Betty
1 Doc 5 Page 33 of 65
At my Minister’s request, I’m checking in on how you see progress with the negotiations for the Christchurch Convention Centre –from a Treasury perspective.
Minister Brownlee is looking to provide an update to cabinet and then discuss this with the Minister of Finance on Monday 21st and I want to make sure there are no surprises or uncertainty around advice.
My understanding is that there is broad comfort with the current figures - s9(2)(i) & 9(2)(j)
Cheers
Mike
Mike Shatford Private Secretary – Canterbury Earthquake Recovery Office of Hon Gerry Brownlee 7.4 Executive Wing | Private Bag 18 041, Wellington 6160 Tel: +64 4 817 9085 | Cell: s9(2)(a)
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IN-CONFIDENCE
Reference: T2016/451 TY-2-1
Date: 18 March 2016
To: Minister of Finance (Hon Bill English)
Associate Minister of Finance (Hon Steven Joyce)
Associate Minister of Finance (Hon Paula Bennet)
Deadline: None (if any)
Aide Memoire: Upcoming decisions on the Christchurch Convention Centre
Background 1. Further to our aide memoire in February, we understand MCER will shortly update Cabinet on the Convention Centre Precinct and seek authorisation for joint Ministers to make decisions s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) and authorise the CE of CERA to execute the Plenary Conventions New Zealand (PCNZ) contract to build the convention centre.
2. s9(2)(i) & 9(2)(j)
3. s9(2)(i) & 9(2)(j)
An Unconventional Investment Pathway
4. The Christchurch Convention Centre Project, has not followed a conventional investment pathway. s9(2)(g)(i) s9(2)(g)(i)
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5. However we note decisions on the CCC have been to Cabinet a number of times, and Cabinet has demonstrated its commitment to this investment each time. 1 If s9(2)(i) & 9(2)(j)
Funding
6. s9(2)(i) & 9(2)(j)
7. s9(2)(i) & 9(2)(j)
8. s9(2)(f)(iv)
Contract Execution – PCNZ Agreement 9. We doubt that final pricing from PCNZ will be available in time to inform CERA’s planned execution of this agreement. We understand that if a final price is not available, it is proposed to use a condition precedent so the agreement can still be signed on time.
10. This means if the PCNZ builder can’t get sub-contractors pricing within the proposed budget, PCNZ could exit the agreement, s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j)
11. The Treasury would strongly prefer price to be fixed before any agreement is signed. If pricing can be finalised and agreed by CERA’s proposed execution date, there is no reason execution could not go ahead as planned, s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j)
12. If PCNZ is unable to meet the desired timeframes, a final price is expected within 6 weeks of CERA’s proposed date for contractual close. In this scenario, we consider that contract execution would best be done by Ōtākaro, once the final price is agreed.
1 Refer to page 4
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Contract Execution – Accor Agreement 13. If the agreement with the operator includes providing an advance of funds s9(2)(i) & 9(2)(j) to cover establishment costs, then this contract needs to be executed by Ōtākaro.
14. If the Crown were to execute a contract with such a provision, an additional appropriation and authorisation would be required under the Public Finance Act. As the need for this is temporary, the Treasury has recommended, and CERA agrees, that Ōtākaro is best-placed to execute the agreement with the Operator.
Decision Authority 15. s9(2)(i) & 9(2)(j)
16.
17. We understand that MCER is taking an oral item to Cabinet on Monday seeking authorisation for joint Ministers to make decisions regarding this project, but given the significance of this we recommend Cabinet remains involved. To meet CERA’s timeframes MCER would need to lodge a paper for consideration by EGI on 30 March, and Cabinet on 4 April, so the project can proceed.
Risks
18. s9(2)(i) & 9(2)(j)
19. s9(2)(f)(iv)
20. We note risks associated with the timing of the proposed contract execution and the transition to Ōtākaro. There is a risk that if CERA executes the PCNZ contract ahead of agreed final pricing (ie under preconditions) that pricing could change and funding provided may be insufficient, and further decisions may be required.
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21. There is a risk that if CERA does not sign the agreement, then there will be a slow-down as Ōtākaro undertakes due diligence and negotiates the support it will require from the Crown. There also a risk that Ōtākaro declines to sign the agreement, or imposes terms and conditions that are not acceptable to the Crown.
Liz Innes, Senior Advisor, Investment Performance, Investment Management and Asset Performance, 04 917 7029
Elizabeth Scurr, Team Leader, Fiscal and State Sector Management, 04 917 6190
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Previous Cabinet decisions regarding the Christchurch Convention Centre Precinct
1. The Christchurch Central Recovery Plan provided for a Convention Centre Precinct as a major anchor project contributing to recovery as noted by Cabinet on 30 July 2012. At this time the initial cost estimate for the Project was s9(2)(i) & 9(2)(j) including land). The scope, funding, and benefits of investment were not fully explored, though the cost excluding land was estimated at s9(2)(i) & 9(2)(j) Cabinet appropriated $10 million for the precinct [CAB Min (12) 26/8 refers].
2. The second investment decision was in July 2013, when the Crown-Christchurch City Council Cost Sharing Agreement was signed, though the funding included in the Cost Sharing Agreement was insufficient to cover the estimated cost. [CAB Min (13) 21/3 refers].
3. s9(2)(i) & 9(2)(j)
4. Cabinet noted in May 2014 that four of the five shortlisted consortia had withdrawn from the procurement process (although one of these parties had re-engaged by joining the remaining consortium) and how CERA would proceed with procurement. [CAB Min (14) 17/6 refers].
5. In July 2014 Cabinet noted anticipated issues in the next stage of procurement s9(2)(i) & 9(2)(j) and agreed to the release of $4 million from the Convention Centre tagged contingency for procurement costs. [EGI Min (14) 178 refers].
6. In November 2015, Cabinet agreed funding for the Convention Centre of s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) and directed officials to report to joint Ministers with advice on the specifications for the Convention Centre and balance of precinct supported by an updated Business Case. [CAB-15-MIN-0094 refers].
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From: Elizabeth Scurr [TSY] Sent: Thursday, 24 March 2016 12:55 p.m. To: s9(2)(a) [DPMC] Subject: FW: CCCP transition plan and options Attachments: 20160322 Contractual Close Process.pptx
Elizabeth Scurr | Team Leader, Fiscal and State Sector Management | The Treasury Tel: +64 4 917 6190 s9(2)(a) | [email protected]
CONFIDENTIALITY NOTICE The information in this email is confidential to the Treasury, intended only for the addressee(s), and may also be legally privileged. If you are not an intended addressee: a. please immediately delete this email and notify the Treasury by return email or telephone (64 4 472 2733); b. any use, dissemination or copying of this email is strictly prohibited and may be unlawful.
From: Dan Marshall [TSY] Sent: Wednesday, 23 March 2016 12:11 p.m. To: Elizabeth Scurr [TSY]
[IN-CONFIDENCE]
A few thoughts from my meeting with Blake (also Paul Melville – EY and Sarah Sinclair – Minters) on the CCCP yesterday. It was predominately to discuss contractual derogation points but Blake wanted to talk through this slide deck first. It presents three options to address the pending date of 18 April and outstanding contractual matters which will not be resolved at that time.
I note that I am not across the detail of progress on the Otakaro discussion so some of the points below may be addressed already – I have simply sought to represent them as they were put to me by the prject team. I haven’t shared outside Tsy at this stage but you may wish to forward on to others as discussions progress.
In no particular order: i) The project team favours Option 1, however, they consider that it may be possible to implement a structure where the project team/ Board stay in place and report to joint Ministers – Otakaro has a right of review over the currently negotiated terms and any subsequently agreed positions but the project doesn’t officially transfer to Otakaro until the contract is signed. This obviously has a number of holes – including where the project team sits prior to transfer. ii) s9(2)(g)(i) l
iii) The project team expect that the outstanding design, price confirmation and operational requirements will be resolved within 6 weeks beyond 18/4. It was acknowledged that this was likely an optimistic timeframe and relied on not encountering any governance hurdles. iv) s9(2)(g)(i)
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s9(2)(g)(i)
v)
I stressed to Blake that the project team needs to provide a very clear view on those items/ contractual matters that will be resolved by the 18th and those that will remain outstanding (the latter being the most important as I don’t feel they have given people a fair understanding of the scope and scale of those matters that will still need to be negotiated).
I’ll look to pop up to discuss further but thought it useful to get some reflections through from the team.
Dan.
Dan Marshall | Head of PPP Programme | The Treasury Tel: +64 4 917 6285 | s9(2)(a) | [email protected]
CONFIDENTIALITY NOTICE The information in this email is confidential to the Treasury, intended only for the addressee(s), and may also be legally privileged. If you are not an intended addressee: a. please immediately delete this email and notify the Treasury by return email or telephone (64 4 472 2733); b. any use, dissemination or copying of this email is strictly prohibited and may be unlawful.
Standard Form PPP Project Agreement and latest PPP guidance material available online www.treasury.govt.nz/ppp
2 Doc 8 Page 41 of 65
Out of scope of request
From: Elizabeth Scurr [TSY] Sent: Friday, 1 April 2016 8:33 a.m. To: 'Greg Wilson'
That is fine, just so I’m complete open with you. I’ve asked MOF’s office that MOF not consider a paper on the Convention Centre until we receive this information and are able to form a view on the risks associated with the conditional contract.
Elizabeth Scurr | Team Leader, Fiscal and State Sector Management | The Treasury Tel: +64 4 917 6190 s9(2)(a) | [email protected]
CONFIDENTIALITY NOTICE The information in this email is confidential to the Treasury, intended only for the addressee(s), and may also be legally privileged. If you are not an intended addressee: a. please immediately delete this email and notify the Treasury by return email or telephone (64 4 472 2733); b. any use, dissemination or copying of this email is strictly prohibited and may be unlawful.
From: Greg Wilson [mailto:[email protected]] Sent: Thursday, 31 March 2016 7:22 p.m. To: Elizabeth Scurr [TSY]
Thank you Betty,
Please note that the 2-pager will not be sent directly to Tsy or any other external agency prior to being released by Baden.
Cheers 1 Doc 8 Page 42 of 65
Greg
Greg Wilson Deputy Director Project Delivery Christchurch Central Development Unit Private Bag 4999, Christchurch 8140
T: 03 354 2745 s9(2)(a) E: [email protected] W:www.cera.govt.nz
From: Elizabeth Scurr [TSY] [mailto:[email protected]] Sent: Thursday, 31 March 2016 5:14 p.m. To: Brent Gray; s9(2)(a) D[PMC]; 'Roger Wigglesworth'; Liz Innes [TSY]; Dan Marshall [TSY] Cc: Rose O'Neill; Greg Wilson; Baden Ewart; Katherine Snook Subject: RE: Joint Ministers Paper send to MCER Office today
[IN-CONFIDENCE]
Hi Brent
Thanks for sending the paper through. We are awaiting your 2-pager on the outstanding issues in the contract negotiations before we will comment on the paper. As you are aware, we still have concerns with the Crown entering into a conditional contract on 15 April and look forward to seeing the detail to be able to understand the risk positions better.
We also have noticed a couple of issues with the financial implications/recs which we will send through at the same time.
Cheers Betty
Elizabeth Scurr | Team Leader, Fiscal and State Sector Management | The Treasury Tel: +64 4 917 6190 s9(2)(a) | [email protected]
CONFIDENTIALITY NOTICE The information in this email is confidential to the Treasury, intended only for the addressee(s), and may also be legally privileged. If you are not an intended addressee: a. please immediately delete this email and notify the Treasury by return email or telephone (64 4 472 2733); b. any use, dissemination or copying of this email is strictly prohibited and may be unlawful.
From: Brent Gray [mailto:[email protected]] Sent: Thursday, 31 March 2016 1:22 p.m. To: Elizabeth Scurr [TSY]
Team , see the joint ministers paper that is with MCER office for his review over the weekend.
The paper is the draft Cab paper that was converted to the joint Ministers paper – please let Rose know if you have further comments. 2 Doc 8 Page 43 of 65
We will send out more detailed view on the process end of day to day.
Cheers Brent
Brent Gray | Project Director, Christchurch Convention Centre
Christchurch Central Development Unit
Canterbury Earthquake Recovery Authority (CERA)
Private Bag 4999
Christchurch 8140
DDI: 03 354 30616 s9(2)(a)
W: www.cera.govt.nz
------This email and any attachments may contain information that is confidential and subject to legal privilege. If you are not the intended recipient, any use, dissemination, distribution or duplication of this email and attachments is prohibited. If you have received this email in error please notify the author immediately and erase all copies of the email and attachments. The Canterbury Earthquake Recovery Authority (CERA) accepts no responsibility for changes made to this message or attachments after transmission from CERA. For further information about CERA, please visit www.cera.govt.nz. ------
------This email and any attachments may contain information that is confidential and subject to legal privilege. If you are not the intended recipient, any use, dissemination, distribution or duplication of this email and attachments is prohibited. If you have received this email in error please notify the author immediately and erase all copies of the email and attachments. The Canterbury Earthquake Recovery Authority (CERA) accepts no responsibility for changes made to this message or attachments after transmission from CERA. For further information about CERA, please visit www.cera.govt.nz. ------
3 Doc 9 Page 44 of 65
From: Elizabeth Scurr [TSY] Sent: Tuesday, 5 April 2016 3:39 p.m. To: 'Brent Gray'; Baden Ewart; 'Greg Wilson' Cc: s9(2)(a) [DPMC]; Dan Marshall [TSY]; 'Roger Wigglesworth'; Liz Innes [TSY]; '[email protected]' Subject: RE: Convention Centre Report
Importance: High
[IN-CONFIDENCE]
Hi Brent
Thank you for your time yesterday to talk through the issues. However, based on the information from PCNZ, we don’t think you will be able to get sufficient specificity around the works requirements to be able to sign on 15 April.
As we mentioned in the meeting, we are comfortable with the conditional contract approach on the following basis:
• That sub-contracting pricing is the only major outstanding Condition Precedent • That the contract includes detailed specification of the works and services requirements (including, but not limited to, scope and quality in relation to the design and finishes). s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j)
It is the joint view of Treasury, MBIE and DPMC officials that this level of detail is required to be formally documented before we could recommend that Ministers agree the contract be signed. s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j)
• Should the above two points not be met the recommendation is that the contract not be signed on 15 April.
Based on the documentation received and reviewed there is not yet sufficient detail to support a recommendation to sign the contract. The gap seems significant and given the timeframe to the 15th, it does not seem feasible that the Crown will be in a position to sign a contract with PCNZ. s9(2)(g)(i)
Our fixation with this is because the Crown (or the future owner) will pick up the tab from any quality decreases in the long run and we want to ensure that we get what we are paying for. This article is one of a number of examples of the long-term implications of short-term focused cost-cutting http://www.stuff.co.nz/dominion- post/news/wellington/75992293/leaky-water-pipes-force-closure-of-three-icu-beds-at-wellington-hospital
Liz has been working with Rose to ensure that this is covered in the report but understand that MCER has requested a different timeframe than what we think is possible to get to an agreed report. We have informed Mike and Simon in our respective offices of that position.
Regards Betty
Elizabeth Scurr | Team Leader, Fiscal and State Sector Management | The Treasury 1 Doc 9 Page 45 of 65
Tel: +64 4 917 6190 s9(2)(a) | [email protected]
CONFIDENTIALITY NOTICE The information in this email is confidential to the Treasury, intended only for the addressee(s), and may also be legally privileged. If you are not an intended addressee: a. please immediately delete this email and notify the Treasury by return email or telephone (64 4 472 2733); b. any use, dissemination or copying of this email is strictly prohibited and may be unlawful.
2 Doc 10 Page 46 of 65
From: Elizabeth Scurr [TSY] Sent: Thursday, 7 April 2016 9:18 a.m. To: ^Parliament: Simon Duncan Cc: Liz Innes [TSY]; 'Mike Shatford'; Dan Marshall [TSY]; Fiona Ross [TSY]; Angela Graham [TSY] Subject: Convention Centre Report
Hi Simon
We understand that the Minister will shortly receive the CERA report on the Convention Centre s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) tteo comple negotiations with Plenary Conventions New Zealand (PCNZ) and to authorise the Acting Chief Executive of CERA to sign the contract on 15 April.
As per our previous advice to the Minister s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j)
A number of details need to be finalised before the contract is signed. We have been working with CERA over the last two weeks and are continuing to work with them to understand the issues outstanding on the contract and the risk profile to the Crown. We are not yet comfortable with the level of certainty of the works and services requirements (including, but not limited to, scope and quality in relation to the design and finishes) in the contract and have doubts about the ability to get the required level of detail by 15 April. However, the project team remain confident, and we will continue to monitor how the negotiations play out.
s9(2)(g)(i), s9(2)(i) & s9(2)(j)
s9(2)(b)(ii)
The process of drawing up the funding agreement for this project between Otakaro and the Crown will bring to light any costs or risks to the Crown that are not explicitly funded at this time, therefore:
- The contract novation process is likely to reveal additional costs based on Otakaro’s assessment of risks and the Crown should ideally know these before it signs any contract with Plenary. - s9(2)(i)
Other risks - s9(2)(f)(iv)
1 Doc 10 Page 47 of 65
- Otakaro is a limited life company, and if the Convention Centre is not able to be sold by them within the 5 years, they are likely to require to the Crown to buy it back. - s9(2)(i)
Feel free to give me a call if you would like to discuss.
Regards Betty
Elizabeth Scurr | Team Leader, Fiscal and State Sector Management | The Treasury Tel: +64 4 917 6190 s9(2)(a) | [email protected]
CONFIDENTIALITY NOTICE The information in this email is confidential to the Treasury, intended only for the addressee(s), and may also be legally privileged. If you are not an intended addressee: a. please immediately delete this email and notify the Treasury by return email or telephone (64 4 472 2733); b. any use, dissemination or copying of this email is strictly prohibited and may be unlawful.
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IN-CONFIDENCE
Reference: T2016/632 ST-4-8-1-1-15-6-1197
Date: 11 April 2016
To: Minister of Finance (Hon Bill English)
Minister for Canterbury Earthquake Recovery (Hon Gerry Brownlee)
Deadline: 11 April 2016 (if any)
Aide Memoire: Convention Centre - Transition to Otakaro
This aide memoire outlines the proposed approach to transition the Christchurch Convention Centre project to Ōtākaro.
Background
On 6 April 2016, CERA reported to Ministers regarding the Christchurch Convention Centre and negotiations with Plenary Conventions New Zealand (PCNZ) and Accor.
We understand that Ministers s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) , but have declined to provide delegation to allow Canterbury Earthquake Recovery Authority (CERA) to execute the contract.
Given this decision, we are now considering how best to finalise negotiations and contractual close, so Ōtākaro can proceed with delivery.
Proposed Approach to Transition We agree with CERA’s advice that going back to the market would likely result in a worse outcome for the Crown, delaying recovery and benefits realisation, and adding potential cost to the procurement. We also agree that there is benefit in designing an approach to preserve the achievements of negotiation to date, even if contract execution is to be carried out by Ōtākaro.
On this basis, we have developed a transition approach, based on discussions including officials from MBIE and DPMC, to: • protect the Crown’s current positions in negotiations;
• maintain momentum;
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• maintain the relationship with PCNZ and Accor through the transition; and
• allow limited flexibility for Ōtākaro to adjust agreements.
To achieve this, we will ensure the Ōtākaro Limited Services Agreement includes provisions that: 1. Ōtākaro will continue the negotiation of the Project Agreement to finalise the outstanding issues with PCNZ and Accor based on the draft Project Agreements as at 15 April 2016.
2. CERA will need to provide a point in time version of the draft Project Agreement clearly outlining where things are still being negotiated and where they have been agreed. It may be beneficial to share the purpose of this draft with PCNZ, and consult with them on it, to help their confidence in this process.
3. s9(2)(j)
4. Treasury will escalate any issues to Ministers that are contrary to previous Cabinet or Ministerial decisions, or other substantial issues as necessary on a no surprises basis. This will give Ōtākaro a mechanism to request changes to scope and other negotiating parameters that Ministers and Cabinet have agreed, but only if these are necessary and well-justified.
5. We believe it is best if Ōtākaro signs the contract in their own right, however for this to occur the land needs to transfer to Ōtākaro at least a day before contract execution. The trigger for transfer of Convention Centre land will be when there is agreement between Ōtākaro and the Crown that the contract is ready for execution.
6. s9(2)(i) & 9(2)(j)
Risks and Mitigations
• s9(2)(g)(i)
•
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• s9(2)(g)(i)
•
Liz Innes, Senior Analyst, Investment Management & Asset Performance, 04 917 7029 Elizabeth Scurr, Team Leader, Fiscal and State Sector Management, 04 917 6190
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Treasury Report: Treasury monitoring of CERA-led major programmes after 19 April 2016
Date: 19 April 2016 Report No: T2016/604 File Number: ST-4-8-2-7
Action Sought Action Sought Deadline Minister of Finance Note that CERA-led programmes are being (Hon Bill English) reconfigured and transferred to inheriting entities. Note this makes it timely for the Treasury to assess the monitoring and reporting required of each programme. Agree the Treasury’s recommendations for future monitoring of these programmes and projects. Refer this paper to Ministers responsible for inheriting agencies, for their information: the Prime 29 April 2016 Minister, the Minister for Greater Christchurch Regeneration, and the Minister for Land Information. Associate Minister of Finance Note the Treasury’s recommendations for future (Hon Steven Joyce) monitoring of these programmes and projects. Associate Minister of Finance Note the Treasury’s recommendations for future (Hon Paula Bennett) monitoring of these programmes and projects.
Contact for Telephone Discussion (if required)
Name Position Telephone 1st Contact
Liz Innes Senior Advisor, IMAP 04 917 7029 (wk) s9(2)(a) Jason Webber Manager, IMAP 04 917 6203 (wk) Angela Graham Manager, Commercial 04 917 6115 (wk) Operations
Actions for the Minister’s Office Staff (if required)
Return the signed report to Treasury. Refer to the Prime Minister, the Minister supporting Greater Christchurch Regeneration, and the Minister for Land Information.
Note any feedback on the quality of the report Enclosure: No
3425169
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Treasury Report: Treasury monitoring of CERA-led major programmes after 19 April
Purpose of Report
1. The purpose of this report is to recommend an approach for monitoring and reporting on major CERA-led programmes as these transition to inheriting agencies.
Analysis
2. Cabinet has previously agreed to transfer recovery functions that need to continue beyond April 2016 to a number of inheriting agencies [CAB Min (15) 22/8 refers].
3. Part of the functions that will transfer are investment programmes currently in the major projects portfolio, including the Christchurch Central Delivery Programme, the Residential Red Zone and the Horizontal Infrastructure Programme.
4. These programmes are being reconfigured to best fit with inheriting entity operations and purpose, so work is being split across multiple agencies.
5. This means it is timely to assess how the Treasury will apply monitoring and reporting to these new configurations of work.
Christchurch Central Delivery Programme
6. This programme has brought similar projects within CERA together to make the most of resources and stakeholder engagement, and manage dependencies.
7. The Crown has now transferred most anchor projects to Ōtākaro, though the Christchurch City Council (the Council) and Development Christchurch Limited share responsibility for delivering some projects, and will likely take the lead on others [CAB-16-MIN-0137 refers].
8. Ōtākaro, as a Schedule 4 Crown Company, is now subject to a different entity monitoring and reporting regime. Monitoring agencies (Treasury and DPMC) will monitor the company’s performance against its objectives, and against the specific deliverables set out in its annual Statement of Intent. Quarterly reports will be provided to shareholding Ministers.
9. The company’s Statement of Intent and Annual Report will be tabled in the House, and we expect that these will include more detailed information on project progress than would typically be provided in standard departmental reporting.
10. Nonetheless as there is high public interest in the anchor projects, we also propose to continue reporting on these through the Major Projects Performance Report.
11. As the programme will now be delivered across three different entities, the Treasury considers that reporting at project-level (rather than programme level, as was done previously) will provide the best indication of performance and risk.
T2016/604 : Treasury monitoring of CERA-led major programmes after 19 April Page 2
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12. On this basis, we recommend the programme exits from monitoring and reporting, to be replaced with monitoring and reporting of its most significant projects: • the Avon River Precinct Project • the Convention Centre Precinct Project; • the Metro Sports Facility Project; • the East Frame residential development.
These projects will continue to be included in Major Project Performance Reporting, and the proactive release of this.
13. The Treasury notes that Ōtākaro must comply with the Cabinet Circular Investment Management and Asset Performance in the State Services CO(15)5. Specifically, this means it must: • prepare a long-term investment plan; • be subject to review, and receive and Investor Confidence Rating; • apply the Government Rules of Sourcing; • complete risk profile assessments for all significant investments identified on multi-year plans and provide these to Treasury for any investment proposal that has a medium or high risk profile; • report to the Treasury as part of the government project portfolio dataset on project costs, schedule, benefits and risks on a regular basis; and • all investments that are determined high risk by the risk profile assessment will need to undertake Gateway reviews.
14. This provides the Treasury with a framework to empower Ōtākaro over time. We expect project monitoring and reporting will continue until such time as Ōtākaro has received a high Investor Confidence Rating, or projects are performing consistently well.
15. Once this has occurred, the Treasury expects to recommend Ōtākaro’s projects exit from monitoring and Major Projects Performance Reporting. We would continue to report on the performance of Ōtākaro at entity level.
16. The Circular’s requirements also mean the Treasury will determine whether or not to monitor the Stadium project at such time as a risk profile assessment is submitted to us for review.
Residential Red Zone
17. This programme has been split in two: demolitions and clearances; and future use. These work streams have different inheriting agencies.
18. Operations: demolitions and clearances, and interim land management of areas such as the Residential Red Zone, transferred to Land Information New Zealand between 1 December 2015 and 1 March 2016 [EGI-15-MIN-0080 refers].
19. As part of the transition of this work stream, the expected completion date for this work was extended to December 2018, which alleviates schedule pressures from increased scope. Remaining risks include health and safety, budget pressures, and stakeholder engagement.
20. As schedule pressures are essentially removed with the new completion date, and because the risks have been present throughout the programme, and have been consistently well- managed, the Treasury considers that monitoring and reporting are no longer required.
T2016/604 : Treasury monitoring of CERA-led major programmes after 19 April Page 3
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21. The coordination of central government recovery effort; and completion of critical (short-term) recovery functions, including aspects of the future use of the Residential Red Zone programme, transferred to the Department of Prime Minister and Cabinet on 1 March 2016 [EGI-15-MIN-0080 refers].
22. The future use work is no longer of the scale, complexity or risk typically associated with major projects, so the Treasury considers that additional monitoring and reporting on this project is no longer required.
Horizontal Infrastructure Programme
23. The coordination of central government recovery effort, and completion of critical (short-term) recovery functions, including the Horizontal Infrastructure Programme, transferred to the Department of Prime Minister and Cabinet on 1 March 2016 [EGI-15-MIN-0080 refers]
24. The most significant risk to this project s9(2)(j) s9(2)(j) has been successfully resolved in the last period. The transition to the Department of Prime Minister and Cabinet has also been completed successfully.
25. The Treasury has also maintained a high delivery confidence assessment, Amber-Green, for this project over the last three reporting periods, and so considers that monitoring of this programme is no longer required.
Risks
26. There is a risk that projects and programmes that are exited from intensive monitoring decline, and there are no early warnings of this. To help mitigate this, the Treasury will continue to scrutinise regular reporting, and if necessary, can resume more intensive monitoring as appropriate.
Next Steps
27. Subject to your agreement to the recommended actions, the Treasury will send a letter of expectations to each inheriting agency to outline their obligations under the Cabinet Circular Investment Management and Asset Performance in the State Services CO(15)5.
28. The Treasury notes CERA officials have already engaged with inheriting entities to help them understand monitoring and reporting obligations. This will assist these entities to engage with the Treasury so we can provide Ministers and the public with useful information and advice.
Recommended Action
We recommend that you: a note that on 29 June 2015, Cabinet agreed to the transfer of recovery functions that need to continue beyond April 2016; [CAB Min (15) 22/8 refers].
Christchurch Central Delivery Programme b note that responsibility for the most significant parts of the anchor project work programme has transferred to Ōtākaro, while other aspects of the programme will be advanced by, or in partnership with, the Council and/or Development Christchurch Limited [CAB-16-MIN-0137 refers];
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c note that as projects that made up this programme will now be advanced by different entities, the Treasury considers programme-level monitoring is no longer appropriate; d agree to exit the Christchurch Central Delivery programme from Major Projects Performance Reporting.
Agree/disagree e note that the Treasury expects to continue monitoring and reporting on the most significant projects within the former programme: • the Avon river precinct project • the convention centre precinct project; • the metro sports facility project; • the East frame residential development project; f note that Ōtākaro must comply with the Cabinet Circular Investment Management and Asset Performance in the State Services CO(15)5, which includes providing the Treasury with information on projects’ costs, benefits and risks on a regular basis.
Residential Red Zone: demolitions & management; and future use g note that this programme has been split in two: demolitions and clearances; and future use, and these work streams have different inheriting agencies; Land Information New Zealand and the Department of Prime Minister and Cabinet respectively.
Residential Red Zone: demolitions & management – Land Information New Zealand h note that as schedule pressures have been alleviated and residual risks are well managed, the Treasury considers that monitoring is no longer required for the demolitions & management work stream of the Residential Red Zone programme; i agree to exit the Residential Red Zone programme (demolitions and management) from Major Projects Performance Reporting.
Agree/disagree. j note that Land Information New Zealand must continue to comply with the Cabinet Circular Investment Management and Asset Performance in the State Services CO(15)5, which includes providing the Treasury with information on projects’ costs, benefits and risks on a regular basis.
Residential Red Zone: future use – Department of Prime Minister and Cabinet k note that aspects of the future use of the Residential Red Zone programme transferred to the Department of Prime Minister and Cabinet on 1 March 2016 [EGI-15-MIN-0080 refers] l note that the future use aspect of the Residential Red Zone programme on its own does not have the characteristics of a major project, and as such, the Treasury considers that monitoring is no longer required; m agree to exit the Residential Red Zone programme (future use) from Major Projects Performance Reporting.
Agree/disagree. n note that the Department of Prime Minister and Cabinet must continue to comply with the Cabinet Circular Investment Management and Asset Performance in the State Services CO(15)5, which includes providing the Treasury with information on projects’ costs, benefits and risks on a regular basis.
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Horizontal Infrastructure Programme o note that the coordination of central government recovery effort; and completion of critical (short-term) recovery functions, including the Horizontal Infrastructure Programme, transferred to the Department of Prime Minister and Cabinet on 1 March 2016 [EGI-15-MIN- 0080 refers] p note that due to successful resolution of issues and consistently high confidence assessments of this programme, the Treasury considers that monitoring is no longer required for the Horizontal Infrastructure programme q agree to exit the Horizontal Infrastructure programme from Major Projects Performance Reporting.
Agree/disagree. r note that the Department of Prime Minister and Cabinet must continue to comply with the Cabinet Circular Investment Management and Asset Performance in the State Services CO(15)5, which includes providing the Treasury with information on projects’ costs, benefits and risks on a regular basis.
General s refer to the Prime Minister, the Minister supporting Greater Christchurch Regeneration, and the Minister for Land Information.
Refer/not referred.
Jason Webber Angela Graham Manager, Investment Management Manager, Commercial Operations
Hon Bill English Hon Steven Joyce Minister of Finance Associate Minister of Finance
Hon Paula Bennett Associate Minister of Finance
T2016/604 : Treasury monitoring of CERA-led major programmes after 19 April Page 6
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COMMERCIAL-IN-CONFIDENCE
Reference: T2016/859 TY-2-1-6-4
Date: 13 May 2016
To: Minister of Finance (Hon Bill English)
Minister supporting Greater Christchurch Regeneration (Hon Gerry Brownlee)
Deadline: None
Aide Memoire: Proposed Next Steps on the Christchurch Convention Centre
This aide memoire provides you with an update on the Christchurch Convention Centre and an outline of the process ahead of contractual close.
Progress Update On 15 April, the responsibility for the Christchurch Convention Centre transferred to Ōtākaro Limited under a Services Agreement between the Crown and the company. The majority of the core project team from CERA has been retained by Ōtākaro and the team is continuing to negotiate a contract with Plenary Conventions New Zealand (PCNZ).
Ōtākaro employees have been working with PCNZ to conclude negotiations. Further information is expected from PCNZ on Monday 16 May. Following receipt of this, officials from Department of Prime Minister and Cabinet (DPMC), the Treasury, Ministry of Business, Innovation and Employment as well as Simon Allen (contracted by DPMC as agent for the Crown) are scheduled to meet with the Ōtākaro project team on 19 May.
This will allow officials to discuss the negotiations, and any outstanding issues, provide Ministers with a more detailed briefing on these, and propose next steps.
Next Steps s9(2)(j) s9(2)(j) . This covers the following possible areas:
• Scope/design of the Convention Centre; • Financial parameters; and • Commercial terms.
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s9(2)(b)(ii)
We will inform Joint Ministers (Prime Minister, Minister of Finance, Minister for Economic Development and Minister supporting Greater Christchurch Regeneration) of officials’ discussions before seeking approval from shareholding ministers for this, or any other adjustment to the parameters previously agreed by Ministers and Cabinet.
Process to Contractual Close Under the Services Agreement with Ōtākaro for the Convention Centre, Ōtākaro is to inform the Crown when the project agreement is ready for execution. s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j)
When both the Crown and Ōtākaro agree that the project agreement is ready for execution, the assets and liabilities associated with the project will transfer to Ōtākaro, which will allow the company to enter into the contract in its own right.
Once officials are informed under the Services Agreement that the project agreement is ready for execution, we will brief you on the key aspects of the final deal. At this point, Joint Ministers will be invited to:
• agree/disagree that the project agreement is ready for execution; • agree/disagree that the project agreement is within the fiscal parameters previously agreed by Cabinet; and • approve the transfer of the assets and associated liabilities to Ōtākaro.
Once we have Ministerial approval and have informed Ōtākaro, within 15 business days the assets and associated liabilities will transfer to Ōtākaro.
DPMC is reporting separately to the Minister supporting Greater Christchurch Regeneration on the approvals required for the ongoing transfer of anchor project assets to Ōtākaro Limited.
Elizabeth Scurr, Team Leader, Fiscal and State Sector Management, 04 917 6190 Angela Graham, Acting Manager, Commercial Operations-Commercial Advice, 04 917 6115
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COMMERCIAL-SENSITIVE
Reference: T2016/940 ST-4-8-2
Date: 20 May 2016
To: Minister of Finance (Hon Bill English)
Minister supporting Greater Christchurch Regeneration (Hon Gerry Brownlee)
Deadline: None (if any)
Aide Memoire: Update on Christchurch Convention Centre Precinct negotiations
The purpose of this paper is to inform you a legal process has been triggered in the course of negotiations on the Christchurch Convention Centre.
This paper provides you with the facts as we understand these, informs you about our Good Faith obligations, and summarises the history of the convention centre project.
Background
CERA officials, and later Ōtākaro representatives, have been negotiating on behalf of the Crown to conclude a Project Agreement with Plenary Conventions New Zealand (PCNZ) for development of the Christchurch Convention Centre Precinct. These negotiations are subject to a Process Agreement, which sets out obligations for both parties.
On 11 May, during a negotiation session focussed on the Balance of Precinct and overall design, PCNZ tabled information indicating pricing pressures of around s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) as a res ult of a pricing update.
On 12 May, PCNZ issued Ōtākaro with written notice under clause 5.6(b) of the Process Agreement. This notice advises that PCNZ considers it unlikely that the parties will reach agreement within the Affordability Threshold by 31 May, considering:
• The results of the pricing update • Commercial positions still outstanding, and • Balance of Precinct issues still outstanding.
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Project Agreement
The Project Agreement, once complete, will set out how PCNZ will design and build the Convention Centre and maintain it for 10 years, and develop the Balance of Precinct in accordance with the Crown’s Requirements.
The Project Agreement is outcome-based, whereby the Crown specifies the functional and design quality that is required from the facility, and a price the Crown is willing to pay. It is the responsibility of Plenary to find a design solution that provides for the specified outcome.
The Balance of Precinct minimum opening day requirements s9(2)(j) s9(2)(j) can be met, but the parties are still negotiating the price of the land. Additional requirements and land prices are also under discussion.
Plenary would be obliged under the Project Agreement to deliver the Convention Centre within a specified build period. The most recent estimate for this would see completion in May 2019 (previously December 2018) if detailed design begins on 1 June. This now seems unlikely to occur as planned, which may push completion dates out further.
Process Agreement
The notice issued by PCNZ under the Process Agreement triggers an obligation on the Crown and PCNZ to “meet and negotiate in Good Faith with a view to agreeing a basis on which the parties will continue with the procurement process” over a 15-business day period (by 2 June).
“Good Faith” is contractually defined, and requires each of the Crown and PCNZ to act “collaboratively and in an open and transparent manner” in seeking to agree a basis on which the procurement process can continue.
It is also important that those connected with this project avoid prejudice, and do not engage with others in the market, even informally.
In addition to the obligations of Good Faith, the Crown is obliged under the Process Agreement to negotiate exclusively with PCNZ with a view to agreeing the terms and conditions for carrying out the Project.
If the parties fail to agree a way forward by 2 June 2016, PCNZ has the right from that date to terminate the Process Agreement. In any event, and as a separate right, each party has the right to terminate the Process Agreement if the Project Agreement and associated documentation is not agreed by 31 May 2016.
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s9(2)(i) & 9(2)(j)
Next Steps
Our priority is to commit all appropriate resources to consider how the procurement process can continue, within the negotiating mandate approved by Cabinet. This is consistent with our obligations under the process contract, and our preference that the procurement process continues. The Ōtākaro project team have already begun engagement with PCNZ on this basis.
Officials from the Treasury, the Department of the Prime Minister and Cabinet and the Ministry of Business, Innovation and Employment will continue to meet regularly with the project team to help provide timely updates to Ministers.
Risks
The Project team will continue to manage risks in relation to the Project, including risk mitigation and contingency planning. Contingency planning does not extend to market engagement, but will include refreshing earlier work on alternative procurement paths.
Liz Innes, Senior Advisor, Investment Management & Asset Performance, The Treasury, 04 917 7029
Elizabeth Scurr, Team Leader, Fiscal and State Sector Management, The Treasury, 04 917 6190
Kelvan Smith, Director, Greater Christchurch Group, Department of the Prime Minister and Cabinet, 03 903-0578
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Annex – Chronology of the Christchurch Convention Centre Precinct Project
Early Planning
1. On 30 July 2012 the Christchurch Central Recovery Plan provided for a Convention Centre Precinct as a major anchor project contributing to recovery as noted by Cabinet. At this time the initial cost estimate for the Project was s9(2)(i) & 9(2)(j) (including land). The scope, funding, and benefits of investment were not fully explored, though the cost excluding land was estimated at s9(2)(i) & 9(2)(j) . Cabinet appropriated $10 million for the precinct. [CAB Min (12) 26/8 refers].
2. In July 2013, the Crown-Christchurch City Council Cost Sharing Agreement was signed, s9(2)(j) s9(2)(j) . [CAB Min (13) 21/3 refers].
3. In 2013 a detailed business case for the Convention Centre was presented to Cabinet, which estimated a budget of s9(2)(i) & 9(2)(j) would be needed to deliver the convention centre only (without the balance of precinct). [CAB Min (13) 41/2 refers].
Procurement – Approach to Market
4. In 2013 the Project began a procurement process for its Preferred Operator, responsible for the business plan and business operations of the facility, and its Preferred Developer, responsible for the design and construction of the facility and wider precinct.
5. In May 2014 Cabinet noted that four of the five shortlisted consortia had withdrawn from the procurement process (although one of these parties had re- engaged by joining the remaining consortium) and how CERA would proceed with procurement. [CAB Min (14) 17/6 refers].
6. In July 2014 Cabinet noted anticipated issues in the next stage of procurement s9(2)(i) & 9(2)(j) and agreed to the release of $4 million from the Convention Centre tagged contingency for procurement costs. [EGI Min (14) 178 refers].
Procurement – Selection
7. In 2014 two contracts were awarded to Accor Hotels Ltd (operator) and PCNZ as development consortia consisting of Plenary Conventions from Australia, Ngai Tahu Property Ltd and Carter Group. The primary outcomes from the procurement process found that:
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a. s9(2)(i) & 9(2)(j)
b.
8. Following appointment of the Preferred Developer and the Preferred Operator the Project commenced design and business planning concurrently. PCNZ undertook 11 months of design leading up to the second quarter of 2015.
Mid-Stage Review
9. In March 2015 PCNZ submitted their mid-stage review design package which collated all design documentation into a stage gate approval package.
10. The mid-stage review design collateral and supporting construction cost
estimates for both the facility and the Balance of Precinct totalled s9(2)(i) & 9(2)(j) CERA paused the project while the strategy for delivery was reconsidered.
11. CERA decided to re-set the project against a new delivery model based on the Treasury’s PPP precedent contract and tested requirements. This led to reduced scope (the hotel and carpark were removed) and a smaller facility to manage cost pressures.
Revised Delivery Approach
12. In August 2015 a new project Director and Project Manager were brought in together with renewed contracts for key suppliers and advisors to commence the detailed design of the Project’s new delivery strategy.
13. In September 2015 the project team revised a business case and prepared a Cabinet paper seeking approval to the following:
a. A fixed budget (Fiscal Envelope) for the whole project; b. A master contract (Project Agreement) and risk transfer model that sought to transfer all design, construction and asset/ facility management risk to the developer; c. A set of Works Requirements (Functional Out Put Specification) detailing the functional requirements of the facility
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14. In November 2015, Cabinet agreed funding for the Convention Centre of s9(2)(i) & 9(2)(j) (excluding land) and directed officials to report to Joint Ministers with advice on the specifications for the Convention Centre and Balance of Precinct supported by an updated Business Case. [CAB-15-MIN-0094 refers].
Initial Negotiations (informing Go/No-go decision)
15. In December 2015 PCNZ submitted an interim proposal that consisted of 3 options; but none of these could both meet requirements, and be delivered with the level of funding agreed by Cabinet. An extensive list of commercial and technical derogations accompanied the interim proposal which applied to all 3 options.
16. The Project Team sought sufficient clarity from PCNZ as to the implication each held to the overall commercial/ technical proposition. This proved difficult, and on 16 December 2015 the Minister agreed to delay the interim decision so all positions could be clarified.
17. CERA continued to negotiate with PCNZ and on 12 February presented 3 revised options for consideration by Ministers:
a. Option One (5 star facility) s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) It. met most requirements with minor compromises.
b. Option Two (4.5 star facility) s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) as it has an iconic facade (though not wrapped around the entire building) and high-quality finish, met most requirements with some compromise to size and scope, but still retains the ability to host 1400 delegates, which was considered a key requirement by CERA.
c. Option Three (3 star facility) s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) btu, CERA advised this was not considered acceptable as it compromises the quality of finish, the size of the venue, and the ability to hold events concurrently. CERA considered this option would reduce revenue, and expected economic benefits associated with precinct activation and international conferences. This option also carried more commercial risk for the Crown than the others, where more risk would be transferred to PCNZ.
18. On 16 February 2016, Ministers agreed to proceed to negotiations, (Go decision) s9(2)(i) & 9(2)(j)
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Detailed Negotiations
19. On 21 March 2016, Cabinet authorised Joint Ministers to have Power to Act to take decisions to conclude the negotiations on the development of the Christchurch Convention Centre. [CAB-16-MIN-0123 refers].
20. On 6 April 2016, CERA reported to Joint Ministers regarding the Christchurch Convention Centre and negotiations with Plenary Conventions New Zealand (PCNZ) and Accor. Joint Ministers noted that the total cost of land and development would be s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) r Ministers were invited to authorise the Acting Chief Executive of the Canterbury Earthquake Recovery Authority to sign an agreement with PCNZ on behalf of the Crown, but they declined to do so.
21. On 15 April 2016, the responsibility for the Christchurch Convention Centre transferred to Ōtākaro Limited under a Services Agreement between the Crown and the company. The majority of the core project team from CERA was retained by Ōtākaro.
22. The project team has continued to negotiate a contract with Plenary Conventions New Zealand (PCNZ). Significant progress has been made in increasing the specificity of the contract, and design of the Balance of Precinct.
Notice Received Under Process Agreement
23. On 11 May, s9(2)(i) & 9(2)(j) s9(2)(i) & 9(2)(j) well out,side the level of funding agreed by Cabinet.
24. On 12 May 2016, PCNZ issued Ōtākaro with a notice under the contract, triggering 15 business days of negotiation in Good Faith to agree a basis on which the procurement process will continue.
25. From 31 May 2016, both parties have the right to terminate the process agreement.
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