Item 28: Pūtangitangi
Greenmeadows Centre Project External Review
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Council
22 September 2022
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REPORT R27038
Pūtangitangi
Greenmeadows Centre Project External Review
1. Purpose
of Report
1.1 To
receive the Pūtangitangi Greenmeadows Centre Project Review findings
report prepared by Klu’dup.
2. Recommendation
3. Background
3.1 The
Pūtangitangi Greenmeadows Centre is a Council-owned community hub, located
on the Greenmeadows Reserve in Stoke. It is an attractive and well-built
facility that is well utilised and enjoyed by the Stoke and wider Nelson
community.
3.2 The
construction project encountered significant challenges including delay,
quality issues and some unbudgeted cost overruns. Construction commenced
in November 2016 and was not completed until May 2019. Council approved
an initial budget of $5.72 million for the project in the 2015-25 Long Term
Plan. Prior to commencement of construction Council agreed to scope
changes, increasing the budget to $6.14 million. During the construction
project, Council agreed to further scope changes, increasing the budget to
$7.349 million. The final cost of the project was $8.041 million. The
difference between the total approved budget and the final cost was $0.692
million, a cost overrun of 9.4%.
3.3 The
final cost of the project was as shown in the table below:
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$
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%
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Initial Approved Budget (2015-2025 Long Term Plan,
approved June 2015)
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5,720,000.00
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Scope changes
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1,629,000.00
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Final approved budget
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7,349,000.00
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Final cost (including unapproved)
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8,041,437.82
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Cost overrun
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692,437.82
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9.4%
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3.4 On
9 August 2018, following significant public, elected member and media interest
in the problems with the project, the Council passed the following resolutions:
That the Council
Confirms
its trust and confidence in the Chief Executive, Pat Dougherty, to oversee all
matters relating to the Greenmeadows project; and
Notes
the Chief Executive’s support for an external review of the process by
which it manages large capital projects, in particular the Greenmeadows Centre
Project, to be commissioned at the appropriate time.
3.5 The
external review could not be commenced until the conclusion of the project and
any settlement process.
3.6 On
14 November 2019, the Council appointed a Greenmeadows Working Party,
comprising the Mayor, Cr Noonan, Cr Courtney and Mr Peters to liaise with the
Chief Executive in relation to settlement matters. Following a
confidential mediation process Council entered into a settlement agreement with
the principal parties to the project, subject to confidentiality obligations
and an agreed media statement. The following agreed media statement was issued
on 19 March 2021:
Nelson City Council has been
in discussions with the principal parties to the Greenmeadows Centre
construction project, following which Council’s concerns in relation to
the project have been resolved to the Council’s satisfaction.
As a result, the sum of
$340,000 will be paid to Council on behalf of the parties (without admission of
liability). The remaining details of the matter are confidential to the
parties.
3.7 Following
conclusion of the mediation process, the Chief Executive, initiated the
external review. With the agreement of the Working Party, the Chief
Executive appointed Ben Coman, of Coman Construction Limited, as an independent
representative of the local construction industry to advise the Working Party
on the external review process.
3.8 The
Terms of Reference for the external review were finalised in March 2022, with
the assistance of the Working Party and Mr Coman. These Terms of
Reference are attached as Attachment 1. Information in paragraph 4.1.10
of the Terms of Reference has been redacted as it is subject to legal
professional privilege.
3.9 The
key objectives of the Terms of Reference are to seek independent reporting on:
3.9.1 What
went wrong specifically with the Greenmeadows Centre Project;
3.9.2 Where
Council processes could be improved to avoid (where possible) the same issues
being encountered on future large building projects;
3.9.3 Whether
Council’s internal reporting as principal during the project was
appropriate from a project risk management perspective; and
3.9.4 Council
building inspection reports and response to those reports.
3.10 Klu’dup,
the Capital Intelligence division of RDT Pacific, was appointed to carry out
the external review. RDT Pacific’s expertise includes project
management, quantity surveying, business case development, technical due
diligence and project delivery system improvement for large scale construction
projects for public and private sector clients.
3.11 The
external review commenced in March 2022 and the findings report was completed
on 25 August 2022. The review process included analysing a large volume
of information that was provided on the project and conducting interviews with
the Working Party and other Council officers or consultants with knowledge of
the project. The findings report is attached as
Attachment 2. Information on pages 18 and 22 of the findings report has
been redacted, as it is subject to an obligation of confidence (being the terms
of the settlement agreement).
4. Findings
and Recommendations
4.1 The
findings report makes numerous findings about the project and recommendations
on improvements that could be made to Council processes for managing large
vertical building projects, such as the Greenmeadows Centre. These are
summarised in section 5 of the findings report.
4.2 The
findings report notes that the recommendations are specific to vertical building
projects and the report has not contemplated the more numerous horizontal
infrastructure (such as civil and utilities) projects that Council undertakes
most often. The reviewers note that while some of their comments may be
applicable to the latter projects, the industries, complexities and risks are
quite different.
4.3 The
findings report also notes that the recommendations are based on “best
practice” models that are designed to cover all situations. It may
be useful for Council to modify best practice to accommodate particular project
characteristics and objectives, but this should be done in a considered manner
and not because it is easier or more convenient.
4.4 The findings report also
notes that following the challenges encountered on the Greenmeadows project,
and prior to completion of this external review, Council has already
implemented a number of changes in its approach to vertical building
projects.
4.5 The
changes that Council has already implemented in its approach to vertical building
projects include:
4.5.1 Delivery
changes to the Infrastructure and Capital Projects teams to improve in-house
resourcing of project delivery (vertical and horizontal);
4.5.2 Assigning
appropriate contingencies at the relevant stage of the project cycle and
reviewing the risk profile as the project progresses;
4.5.3 Understanding
project risks up front better (for example asbestos) and undertaking more
detailed up front assessments;
4.5.4 Non-price
attribute advantages (up to 10%) for local contracting firms;
4.5.5 Increased
due diligence on preferred tenderers, including for example google search of
companies to check for any public record of litigation and credits checks;
4.5.6 Establishing
the Tenders Subcommittee to provide increased governance oversight of
procurement;
4.5.7 Improved
processes for iwi engagement at all project stages.
4.6 An example of
implementation of these changes in Council’s approach to vertical
building projects is the Central Library Development Project. This has
included consideration of best practice delivery approaches, development of
a detailed risk register, assigning appropriate contingencies and development
of a project management and governance structure (including iwi representation
on the Governance Reference Group and Project Control Group) as set out in
Attachment 3.
5. Conclusion
5.1 The
findings report provides a comprehensive and detailed external review of
delivery of the Greenmeadows Centre project, including what went wrong and
improvements that can be made to avoid (where possible) the same issues being
encountered on future large vertical building projects.
5.2 The
Chief Executive will consider the Klu’dup recommendations, alongside
improvements already implemented to date, to ensure that they are appropriately
incorporated into standard Council practice for delivery of large vertical
building projects.
5.3 Authors
of the Klu’dup findings report will attend the meeting to answer
questions on their report.
Author: Pat
Dougherty, Chief Executive
Attachments
Attachment 1: 1016753008-157
Final Terms of Reference Greenmeadows Project Independent Review redacted
version ⇩
Attachment 2: 1016753008-225
Greenmeadows Centre Project Review Findings Report redacted version ⇩
Attachment 3: 1590798627-38
Central Library Development - Organisational Chart ⇩
