Waimea dam – Page 4

P95 Probability or Implausibility

07/07/2018

For the past 18 months or so I have heard a lot about the P95.

What is a P95?
Good question!

Homer Simpson Doh — Waimea Community Dam quote = $120 million

I was told that it was a 95% likelihood that the Waimea dam would be built on or under budget.

Given the current state of press releases coming out of the Tasman Council, I thought it would be timely to delve a little deeper into this magical assurance while we await the next announcement. Incidentally, press releases are the only way anyone gets any information regarding the dam (not as big an exaggeration as you might imagine, councillors are just privileged to receive their copy 15 minutes ahead of the general ratepayer).

Back in January 2016, we read in the Nelson Mail the following:

The dam’s estimated cost rose to $83m last year after costs were revised by the council’s consulting engineers…

The council’s $83m figure is based on a risk factor which assumes there is a 95 per cent probability the dam can be built for that amount of money or less. It’s known as P95.

WCD project manager Nick Patterson said the dam can be built for $73m, including the $6.5m already spent. This was using a P50 risk factor that assumed the dam could be built for that amount of money or less.

There was a lot of confidence around what price the dam could be built for and the level of certainty once we added a few extra million and called it a P95. These confident assertions have continued right up until the press release on July 5 2018.

The Mayor was an early adopter of this confident boast as is recorded in articles such as this Stuff article on September 2017:

Richard Kempthorne said the dam costing was based on a “P95” confidence level, which meant the council could have 95 per cent confidence the dam would be constructed at or below the estimated cost.

“At or below the estimated cost” was the catchphrase that echoed the Council chambers every time anyone questioned the possibility of cost overruns. We have used a P95 to arrive at the budgeted figure.

On the 10th of August 2017 Natasha Berkett is quoted in the Farmers Weekly as saying:

However, there was also a $13 million contingency allowance in the $80m project for further increases.

“We are working to a P95 standard that is where we are 95% certain about the cost of the project.”

Waimea Irrigators Ltd advocates John Palmer and Murray King scoffed at any hint that there would be any budget blowout. The Waimea Water site boasts the following:

Are the cost estimates for the Dam accurate?

A great deal of work has gone into the current cost estimates for the dam construction and project leads are currently undertaking another robust analysis.

The base cost estimate for the Dam construction is $50m. On top of that there is $13.5m included in the project estimate for changes in scope and unexpected cost increases. This raises the level of confidence in the estimate to a very high level – there is only a 5% probability that the costs will exceed the $63.6m budgeted and a 95% probability the project will come in on or below budget. That level of confidence is far higher than the typical estimates you might see in other construction projects (emphasis added)

I hope you are feeling convinced in the level of confidence that we have that the dam will come in on or under budget. That is the completed dam, including construction cost blow-outs. We are 95% certain in our facts.

Just in case you still had a few doubts we put out a Dam Straight fact campaign at the ratepayer’s expense of almost fourteen and half thousand dollars (which I realise is chicken feed compared the ten million, in round figures, lost on the project to date).

To prevent large cost overruns, Council is doing all it can to keep risks to a minimum including:

using a p95 level for construction costs, meaning that there is a 95% probability that the project will come in at or under budget;

using modern engineering and risk management approaches and external professional advice; and

$13.5 million contingency for changes in scope and other unforeseen eventualities.

Can there be any doubt as to the robustness of the budget after we used a P95 level, modern engineering and risk management approaches, external professional advice, and even a whopping $13.5m contingency figure for good measure?

Well, some people thought so. One such person is Paul MacLennan who indicated:

TDC’s own recent admission they have never priced the civil cost of the 87 Hectare Reservoir and sealing of the lake bed to hold the 13.4 million cubic meters of water is appalling and makes the TDC claim $76.9 million at P95 a gross misrepresentation.(emphasis added)

A rather strong assertion. He claimed that “clearing 87 Hectares of steep, sloping, and fractured terrain will cost $30 million plus.” I tried to follow up on his concerns with staff only to receive repeated replies attesting to the robustness of our P95. A P95 that it seems, from reading between press release lines, was so grossly inadequate that it didn’t even cover the quote, never-mind the inevitable construction overruns.

In his submission, during the Waimea Dam consultation process, Dr. Roland Toder questioned the P95 claim.

A so-called ‘P95’, as mentioned by TDC is misleading. In project management, percentiles are expressed by P followed by the percentile. A P95 estimate of $82.5million means that the project has a 95% chance of being completed with this or less amount of money. Normally one uses data one has from similar activities (like executed several dams of similar size before). Ideally, if you have a number of similar activities (many dams of similar size) that would be best, because from this data, you need to find the mean (expected value) and the standard deviation (to determine the range of error) for each activity. THEN you can calculate cost and timing estimates for the entire project.(emphasis added)

People from the Water Information Network Inc also protested the validity of the P95 figure sold by WIL and Council staff.

Tasman District Council (TDC) admit they have never priced the clearing cost of the 87 hectare reservoir.

With steep, sloping and fractured terrain clearance of the area is likely to cost over $30 million.

Similarly, no costing has been made for the sealing of the lake bed to hold 13.4 million cubic metres of water.

Removed trees, bushes, shrubs, detritus, topsoil, and stumps will add up to a metre-high pile.

This will amount to around one million cubic metres to shift from the Dam’s footprint area to a stockpile area where run-off can be managed until final disposal.

Silting up risks and decommissioning costs have not been taken into account.

Suitability of rock fill ‘borrowed’ for the Dam wall has not been accurately assessed. So it may not be suitable.

All of this indicates that TDC’s claim of $76.9 million at p95 (95% ‘accurately’ costed) is a gross misrepresentation. (emphasis added)

I repeat that when I questioned the validity of these claims I was told that we had sufficiently budgeted all aspects of the dam, and early indications on pricing confirmed the validity of the budget.

When I questioned the age of the original estimate given that all our current contracts are experiencing a premium in a high demand marketplace I was again assured that the estimated budget for the Dam was adequate.

At the councillor 15-minute-advance-notice-of-the-press-release meeting, I asked TDC engineering department head Richard Kirby which aspects of the dam quote were currently running over budget he said he didn’t know. When asked what was the range of budget blowout on the figures that had come in to-date he responded that he didn’t know. When I questioned that they had called an extraordinary briefing and are about to send out a press release announcing that there are significant challenges with the contract price meeting budget and yet you are telling me that you have no idea what the overrun gap is? He confirmed that was correct.

The head of Engineering doesn’t know the figures.

The Mayor doesn’t want to know the figures.

I want to know whose head is going to roll for misleading the Council over the 95% certainty of the price for building the Waimea Community Dam. Information that resulted in the Council spending the best part of ten million dollars of ratepayer’s money progressing the project to this point. Whether deliberately misleading councillors or doing so through incompetence someone has to be held accountable.

Dam Budget Bombshell

05/07/2018

Early indications of huge blowout in the Waimea Dam price call into question the entire dam process to date.

Today, Councillors were called into an extraordinary briefing session ahead of the Community Development Meeting where we were informed of a press release going out within minutes stating that there are “significant challenges” with the early dam pricing to achieve a within budget price.

I asked for an indication of what aspects of the dam they had an indication were running over budget – they could not tell me.

I asked what kind of budget blowout range we are talking. Again, they were unable to tell me.

I stressed that they felt it important enough to call an extraordinary briefing and go out with a press release and yet they are telling me that they have no idea of what kind of early indication budget blow out we are talking about. They confirmed that was the case.

We were told that the press release was to address the fact that there is already information “on the street” about the dam budget being insufficient. This is interesting given the ridiculous conditions that they suggest at the last council meeting be imposed on Councillors wishing to view the dam Term Sheets with our partners. It also supports the Councillor’s decision not to accept personal liability for the leaking of information when this dam is already full of leaks. Leaks that could not have come from Councillors as we are not allowed to know any information at all around the current pricing of the dam.

The fact that staff were unwilling to suggest any kind of price range leaves one to speculate that is so far away from the budgeted figure that there is no likelihood we are going to be able to achieve a dam. If that is the case then there are some serious questions that need to be answered.

Do council staff have the experience to manage a project of this magnitude?

When the current members of the Council table wished to revisit the “plan B” options a revised estimate of each project was produced. Without exception every other option had the budget increased by 2, 3, even 4 times the budgets originally presented to council. It turns out that the projects were not fully scoped and there was an array of reasons why the budgets had to be revised to be accurate in the current market.

I asked for a similar review of the Waimea Community Dam as my own assessment, and the advice that I was receiving from experts in the fields of forestry, earthmoving, and even dam building was that aspects of the budget were seriously deficient. The assurance that I was given by staff on numerous occasions was that we are confident that the pricings were accurate. Various aspects of the project along the way we were told were coming in within the budget range. We have been repeatedly assured by our staff, and by the likes of John Palmer, that this budget was so robust we could be 95% sure it will come in on budget.

Why this is important is because Council has elected to continue spending money on the Dam project based on this advice. I am sure it was this advice that the Mayor relied on when he used his casting vote to increase the dam budget by $3million dollars. It was also on the back of this information that the Council elected to proceed with the early contractor engagement process (ECI) to get a finalized quote for the dam – also costing the Tasman ratepayers a significant amount of money.

If the dam fails to proceed due to excessive budget blowouts I feel somewhat responsible as a Councillor. I have failed in my role as governance to monitor the process adequately before we ended up with a $10million bill for a dam project that was not affordable. However, I have been asking questions for the past 2 years, I just have not been getting all the information to make a better-informed decision.

When the irrigators were telling us that they could not afford their share, and urban water users and ratepayers who already paying some of the highest rates in the country could not afford more than their share, I questioned how we could proceed with the project. I should have insisted more strongly that we revisit the viability of the dam.

When I was repeatedly told that we had sufficient budget for aspects of the dam that were clearly under budgeted I should have insisted on further investigation. When I was told that I could not view Term Sheets or the Schedule of Risk I should have insisted as governance that I have a right to view such crucial information before making decisions around the dam.

Mayor with his head in sand — Mayor takes stand on Dam

Alarm bells should have gone off when the Mayor insisted that he did not want to see Term Sheets or the Schedule of Risk. As someone who reserves the right to vote twice (despite my attempt to remove that right) the Mayor should be extra well informed on significant projects that he is voting on, and yet he does not even want to know how much the early quote indication is over budget (as quoted here). Questions have been raised in the community if he is up to the task and I am struggling to find evidence to suggest that he is. Certainly, Mayor Kempthorne’s current approach of burying his head in the sand at every given opportunity does not suggest he is capable of leading significant projects.

Now that we have been given no indication of how much the budget is looking likely to blow out by we are left in the position of assuming that it is as stated in the press release a “significant challenge.” My next line of questioning is how can we trust any figures that we are presented with in the future. If they manage to get the price within budget (or close to it) I will be wondering what corners have been cut to achieve it? What risks have we taken onboard that will result in huge overrun expenditure that the ratepayer is solely liable for because the irrigators have capped their liability?

If the initial estimate was only marginally overbudget you could imagine that things could be tweaked to bring the quote into alignment with the budget. However, a “significant” (staff wording) gap can only be closed by taking shortcuts or a complete redesign. We only have to look across the boundary at the Stoke Greenmeadows project to see where corner cutting and budget skimping leaves a project

I have to say that I have gone from dam sceptical to thinking that those members of the community who have been calling for a judicial review into the process may indeed be barking up the right tree. Ratepayers have a right to know how 10 million dollars of their money could possibly have been wasted on a project that had no way forward. Land acquisition is still far from a certainty, the initial budget was apparently woefully inadequate, consultation and deliberation was dubious at best, what else is yet to be shaken out of the tree?

Like all other ratepayers, I will eagerly wait for a council press release to find out what is going on with the dam!

Grandstand Dam Long Term Plan

04/07/2018

The 28^th of June full Council meeting should have been about Council adopting the Long Term Plan. However, it was overshadowed by a couple of other agenda items. View the agenda here.

A surprising turn of events saw those on council who wanted to raze the Takaka grandstand to the ground do an about face. One wonders what persuaded the change of heart when a petition of over a thousand signatures, a demonstration outside council, a multitude speaking in the public forum, and numerous emails wasn’t enough last time we voted. Maybe the TV cameras filming people in chains was a little harder to ignore?

While the Grandstand execution order has been lifted there is a long way to go before the old lady of the Bay can rest in peace. There are a lot of issues to come out of the woodwork to satisfy the Council compliance team. The success of the in-situ restoration bid will largely depend on the ability of all the stakeholder groups to put the past and egos behind them and find enough common ground to work together for the good of the grandstand.

Other agenda items were no less surprising. Councillors were recommended by staff to sign a waiver of councillor privilege and take on personal liability if we wanted to view the Term Sheets in relation to the dam. They stopped short of insisting on a strip search but required that we book a time to view the documents. We would then be allowed access to them in a secure controlled room where we were not to take any copies, electronic or otherwise, of the individually identifiable documents. If our document was proven to be leaked then we would be personally liable for the breach.

dodgy salesman picture — Sign Here … trust me, its the best deal for us.

What staff didn’t explain was how our personally liable documents would be securely stored, who would have access to them, what supervision would be in place for anyone that had access to them. They also admitted that our staff that had access to the current documents did not have similar requirements, nor did the members of WIL that had access to the documents – even the Term Sheets between CIIL and TDC (rather bizarre I would have thought).

This overreaction in it self leaves one wondering what they are hiding. An earlier version of the Term Sheets was circulated with councillors without such extraordinary security precautions, so what has changed? According to the staff report councillors have “previously been made aware of the key conditions in the Term Sheets” so this is rather extreme to be protecting the non-key conditions surely?

Of course, there were those around the table that did not want to see the Term Sheets. Although, at least one of those councillors wanted “all the information” before making a decision on the Grandstand. A cynical person might say that this selective interest in getting all the information on topics seems to be related to the outcome desired by the individual councillors rather than a reasoned and fair-minded approach.

Another example of this would be a referendum on the Waimea Dam, twice denied by Mayoral casting vote. Yet on the topic of the Public Water Supply Bylaw Review the Mayor is recorded in the latest Engineering Committee minutes as saying “… that without the Waimea Dam there will be significant changes to the District’s water supply during dry summer months. He said that the proposed bylaw clarifies those changes and that it was important to consult with the community.”

It is very important that we have all the information, and the community have a voice, when it comes to water restrictions applying particularly in a no dam scenario. I can hear that cynical ratepayer making a snide comment about this being an attempt to scare them into paying for the dam. However, the current Tasman Resource Management Plan provisions in the event of a no dam scenario will require drastic water cuts should we face dry weather.

It is a pity the community doesn’t have a voice when it comes to expressing an opinion over water restrictions verses unaffordable rate increases when the dam runs over budget don’t you think? The Mayor doesn’t think so.

No Vote On Dam

25/05/2018

Mayor Kempthorne confirmed that there would be no vote for the ratepayers on the Waimea Dam in the Council meeting 24.5.18. Not once, but twice, he used his casting vote to ensure that there would be no referendum on the dam. This despite assuring people around the district at the last Annual Plan consultations that they would get a Yes/No vote on the dam.

Councillor Greening moved that we hold a binding referendum on the receipt of an accepted tender price.

Councillor Bryant seemed to be confused at to what an accepted tender price meant which is a little concerning given that he is Chair of Engineering.

Councillor Brown said the community couldn’t be expected to be well enough informed to make a decision on whether or not we should proceed with the dam.

The vote came in 7 for 7 against. The Mayor voted again to bury the motion.

I had foreshadowed that I would move, that we hold a non-binding referendum on the receipt of a successful tender price, in the event the first motion failed.

Again, we got to hear how disappointed some councillors are that there is a need to waste $80,000 on hearing from the ratepayers (the same councillors that I believe voted to spend $80,000 on temporary seating for a rugby game).

There was also discussion that as councillors we are called to make governance decisions. Apparently, we don’t need all the information to make those calls.

Councillor Greening asked why they were afraid to consult the district if they believed that there was genuine widespread support.

Again, when the motion was put to the vote it was tied 7 for 7 against, and again the Mayor voted twice to kill the motion.

We will now be in a position where we have to vote on the project without a mandate from the district. The Long Term Plan feedback that we received was a majority (around 80% of the 1,300 plus submissions received) against the dam. We were encouraged to ignore these submissions because they are such a small representation of the population in the district. But the Mayor will not allow us to poll the whole district.

This is in my opinion a poor display of leadership. The same poor leadership that refused to allow a referendum to be held in conjunction with the next Council elections over whether or not we switch to the STV style ballot (the same as the health board use) for future elections. This was rejected despite the fact that the Mayor knew there was a petition circulating that would force a referendum on the topic if they achieved the appropriate number of signatures.

We are now in a situation where the petition is likely to have the signatures required and if they present that petition then Council will be forced to go to the polls within 3 months (at the cost of $80,000). The petition holders could be forced to present their petition sooner than 3 months prior to the next election or it could be invalidated. This whole debacle could have been easily resolved by council agreeing to hold the referendum anyway – this option is no longer available to council because of electoral act regulations.

Win/win solutions are not our strong point. As the bulldozers line up against the Golden Bay Grandstand we can mourn another lost opportunity to find an amical solution. Had this been the Richmond Grandstand I am sure we would have worked harder to solve the problem before we were left with a divided community and a pile of rubble. There were no winners in today’s vote.

The adoption of the Long Term Plan by the majority of the Council signalled the continued willingness by the majority to spend money on a dam project that has taken on Lotto-like odds of achieving successful completion. The risks surrounding the project are growing by the day. The proposed governance structure has little if any benefit for the ratepayers footing the majority of the expense both in construction and in ongoing maintenance.

While only a relatively small portion of our overall expenditure in the 10 year plan as the Deputy Mayor repeatedly points out, the dam is the project that carries the most risk, consumes the most discretionary budget (such as the income from forestry), and rates people the hardest (especially those within the zone of benefit and those connected to the already expensive-by-national-standards urban water club).

What started out as a good idea has become an endless pit into which we are prepared pour money. I questioned months ago how we could continue with a project that the irrigators claimed they couldn’t afford their share, the urban water club couldn’t afford their share, and we had general ratepayers telling us they couldn’t afford their share.

Our LTP clearly states that debt, rate affordability, and a financially prudent strategy are our goals. Our actions do not deliver that in my opinion, hence my futile vote in protest against adopting the LTP.

Dam What Is It Costing Me

14/11/2017

Number Crunching the Dam

One of the main questions arising around the dam is “How much is it going to cost me?”

I will endeavour to unpack the figures as they have been presented. One staff member was explaining that these are the worst-case scenario, these are not the worst-case scenario, these figures are the total currently budgeted cost should the dam come in within the $82 million figure (that includes a $13m contingency).

In this world of what I would call best-case scenario:

The Government will pay $7m from the Freshwater Improvement Fund.
Nelson City Council will contribute $5m (or TDC will contribute an extra $5m).
Crown Irrigation (CIIL) will loan TDC $10m interest free.
Waimea Irrigation (WIL) will contribute $15m.
CIIL will loan WIL $22.12m – up to $23.62m with over-runs (that TDC will underwrite to the value of $29m including costs).
TDC (you the rate-payer) will contribute $16.8m.

Total costs to the rate-payer should everything fall within contingencies is $16.8m + $10m (+ $29m underwrite).

These are the figures used to calculate how much rate-payers around the district will be contributing. Should NCC not contribute $5m that will be additional to the figures quoted, as will any cost over-runs.

To date TDC has contributed $6.5m according to figures released.

This figure includes money gathered through a targeted rate on irrigators. It does not include contributions from the Government and other sources by way of grants, and a lot of staff time and miscellaneous costs that were not directly billable. In other words, the dam project has had well over $6.5m invested in it to date, a significant portion of which has been contributed by the general rate-payer. Something to consider when contemplating should we proceed with the dam.

What Does It Cost Me?

This will depend on where you live and whether you are a water user.

The following chart gives an indication of what you might be expected to contribute by way of rates depending on your circumstances.

Everyone can expect to have the Fixed District Charge of $29 added to their rate bill each year once the dam has been constructed. Remembering that these charges will be phased in during construction so will not appear in full should a green light be given to go ahead.

Those who live in the “Zone of Benefit” can expect a charge related the capital value of your property of around $56 per million of capital value (a calculator is available on the TDC website). This zone of benefit is an arbitrary line that has been drawn approximately around the rate-payers that could potentially be supplied with TDC reticulated water from bores benefiting from the dam. The location of this zone is not an exact science and will undoubtedly cause discussion wherever it is drawn from people just on one side of the line or the other (especially if your property fall just on the rated side). It is an attempt to justify that some people will receive greater benefit than others in Tasman region.

The map of the Zone of Benefit is as follows:

If you are unsure what side of the line your property falls TDC staff will be able to clarify this for you.

On top of the District Wide $29 and the Zone of Benefit charge is also a Water User charge. For those on a council reticulated water scheme that is included in the urban water club/co-op (Motueka urban supply is not) there will be a 10% increase in your water meter charge and your per m³ charge.

In short, everyone will be paying the district rate (proposed $29) and some people will be paying either the urban water charge or the zone of benefit charge, and some people will be paying all of the above. A small minority will be paying a selection of the above AND the not insubstantial cost of affiliating to WIL.

Remember that these charges do not include an NCC failure to contribute, nor do they include the potential for the dam to over-run by an unlimited figure. Another point to remember when calculating your rate bill is that they do not include the impact that the current round of property re-evaluations will have on rates, nor do they include the effect of any other capital expenditure that the council will be budgeting for.

As a council we have been looking at the projected budget for the next Long Term Plan and it will be a challenge to put it politely for the council to remain within the 3% rate increase cap over the short term. It will also be a challenge for council to remain within the $200m self-imposed debt cap.

One of the points I disagree with the staff position on is that the money robbed from the commercial accounts to pay back the $10 million CIIL loan to council is keeping down the amount rate-payers are paying. While this money may not be charged to rates directly, it has historically been used to pay down debt (and technically it is still paying debt – dam debt) which has in turn reduced rates, or it had the potential to be used to pay for other projects. Either way, it is a cost (or loss) to rate-payers and to explain it as a saving to rate-payers is misleading in my books.

The figures quoted above, while optimistic, are the figures that Council is consulting on for your support. This round of consultation is not the final hurdle for the dam. We also have to receive confirmation that the irrigators are able to sign up 3000ha of paying customer equivalents, then we have to receive a quote that fits within our budget (probably the biggest hurdle).

In this round of consultation (which is likely the final chance for the general public to have a say) you are being asked in a somewhat indirect way if you can live with the costs as suggested. If you can, then the council would appreciate your support.

What you are not being asked is the direct question of would you like a dam? Which the mayor was publicly indicating would be asked – as late as the last round of informal consultations on the annual plan this year. Why the about face on that decision I have no idea, other than that as every good salesman learns, you don’t ask a question that has a potential “no” for an answer.

What is also not being asked in so many words, is do you approve of the irrigator subsidy in the currently proposed model. While the irrigators continue to publicly deny that they are being subsidised, this model is far from a user pays model. The irrigators are contributing nothing to the “environmental flow” portion of the dam running costs, which added up over the expected 100 year life of the dam is not insignificant. Nor are they paying their full costs of the CIIL loan because of the generous offer of the rate-payer at large to underwrite their loan saving hundreds of thousands in interest.

The impact of the irrigator subsidy is that the burden of paying for the dam has been shifted to the general ratepayer, the cost of urban water security is double the cost of irrigator supply based on the dam running costs. The question then becomes should the general ratepayer subsidize businesses that will generate almost a billion dollars to the local economy over the next ten years if the dam goes ahead?

Another point raised by staff to council in 2015 (page 20 of this agenda) was that “Council would not be acting prudently unless it ensured that all parties would be able to meet their obligations and not leave Council as the last man standing if costs exceed estimates.” The current proposal is exactly that imprudent situation where council is the last man left standing for cost overruns!

What you, the ratepayer, have to decide is can you live with the proposal as presented (as ugly and biased as it is) in order to achieve the overall benefit for the community that the end product presents? Or should you cut your nose off to spite your face (as some might describe) by making a principled decision to not support the dam model as presented – which the council will tell you is the best deal that we are ever likely to get.

The choice is yours – I look forward to hearing from you over the coming weeks.

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P95 Probability or Implausibility

Are the cost estimates for the Dam accurate?

Dam Budget Bombshell

Grandstand Dam Long Term Plan

No Vote On Dam

Dam What Is It Costing Me

Number Crunching the Dam

What Does It Cost Me?

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