A risk based approach

Introduction

The Transport Agency and all organisations allocated funding from the National Land Transport Fund (NLTF The fund established under section 10 of the LTMA ) are expected to develop processes to assess and manage risk that is appropriate to the level of investment.  This risk based approach applies to all transport activities funded from the NLTF and includes the risks arising from growth and changes in land use. It also includes assessing and confirming the eligibility of activities proposed for funding from the NLTF.

Activities must be defined in a GPS A Government Policy Statement on Land Transport Funding issued under section 86 of the LTMA activity class to be eligible for funding assistance

To ensure that investment using NLTF The fund established under section 10 of the LTMA funds is directed to the impacts sought by the government, only those activities defined in an activity class in the current GPS A Government Policy Statement on Land Transport Funding issued under section 86 of the LTMA will be eligible for inclusion in the NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied and funding approval. This means:

• transport infrastructure that is vested in public ownership may be considered for NLTF The fund established under section 10 of the LTMA investment, but not new land transport infrastructure directly serving a new development, e.g. construction of new roads and footpaths That portion of the road reserve set aside for the use of pedestrians only. /cycle ways within subdivisions
• construction of footpaths That portion of the road reserve set aside for the use of pedestrians only. may be considered, but not their maintenance and renewal

• public facilities that serve a transport function, and are not solely or predominantly for recreational or private use, may be considered

The Transport Agency may encourage non-transport or ineligible activities, where these integrate with the land transport system, and may provide partial funding assistance where one or more components of an investment proposal are eligible.

Funding to be used on eligible activities and for approved purpose

Funding from the NLTF The fund established under section 10 of the LTMA must be used only to purchase eligible activities, as defined in an activity class in the current GPS A Government Policy Statement on Land Transport Funding issued under section 86 of the LTMA , and must be applied only for the purpose they were approved. Any funding that remains after the purchase of the activity or activities to approved scope must be declared surplus.

Public ownership expected

The Transport Agency expects that property and infrastructure for which it provides funding assistance will be in public ownership.

The Transport Agency will consider funding of infrastructure not in public ownership for transport purposes but will do so only on condition that the use of the facility for transport purposes will endure and that the Transport Agency right to compensation, should the purpose or ownership of the facility change, is protected.

Transport Agency compensation when purpose or ownership changes

The Transport Agency must receive compensation for property and infrastructure it has funded from the NLTF The fund established under section 10 of the LTMA if the purpose or ownership changes. The compensation that the Transport Agency receives will be in the same proportion of the current value of the property and infrastructure as its contribution was to the total funding of the property and infrastructure when procured.

The Transport Agency may waive its right to compensation in the event that ownership changes but the purpose and use of the property and infrastructure remains intact. The Transport Agency expects that the provision of service through use of the facility would be delivered at a similar cost prior to the change in ownership.

Tailored engagement

The Transport Agency(planning & investment) will tailor its level of engagement and monitoring of Approved Organisations and the Transport Agency(state highways) based on its assessment of its investment risk.

In practice, the Transport Agency(planning & investment) will not involve itself at an individual activity level where activities are low risk and cost and where the Transport Agency has assessed that Approved Organisations and the Transport Agency(state highways) have the capability to deliver their programmes effectively.  In such cases, the Transport Agency will delegate the delivery of programmes of low risk and cost activities with as few compliance requirements as possible.

Apportioning of risk

The Transport Agency's Procurement Manual requires that all risks should be appropriately apportioned to the party (contractors and Approved Organisations/the Transport Agency) best able to manage it.  

Unless otherwise agreed at the time of funding approval, the Transport Agency’s acceptance of project risks will be in the same proportion as the Transport Agency’s total funding of the project, from all funding sources.

Exercise of delegated authority

The Transport Agencyhas delegated authority to its partners to make investment decisions for specified programmes within set funding allocations. These delegations will continue and may increase, where our investment partners demonstrate the capability to manage delegations prudently.

The Transport Agency requires its investment partners to take full accountability for all decisions and actions made under delegation. Investment partners should apply the Transport Agency’s Assessment Framework to achieve desired outcomes and the best value for money Selecting the right things to do, implementing them in the right way, at the right time and for the right price. .  The Transport Agency reviews a sample of investment decisions made under delegation and expects that its investment partners will monitor and report their performance under delegation.

Readiness for funding

Activities are only approved for funding when they are ready for implementation.  The Transport Agency considers the type of activity (or combination of activities) when ascertaining readiness for funding approval. For instance, it will consider that:

• the construction/implementation phase of an improvement project is ready when all previous phases have been completed, all planning approvals are in place and there is a commitment from the activity owner to implement the phase within three months of funding approval

• a programme of routine, low risk activities is ready when the Transport Agency considers that it is backed by robust activity management planning and that the NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied negotiations between the programme owner and the Transport Agency are concluded.

No retrospective funding

The Transport Agency does not provide funding assistance retrospectively, unless by prior agreement. Any organisation that commits or commences a new activity prior to Transport Agency funding approval or specific agreement, or commits expenditure on an activity in excess of the funding approval, does so at its own risk. Exceptions to this are:

• activities within a delegated allocation where the Transport Agency approval permits adjustment of funding to activities within the total allocation and where over-expenditure on some activities can be offset by under-expenditure on other activities, and

• fees for the investigation and design phases of small improvement projects, which may be claimed when the construction/implementation phase of the project is approved.

Costs of finance

The Transport Agency will not fund depreciation, interest costs or any other financial servicing costs of capital projects, directly or indirectly, unless by specific agreement, and will not meet such costs when it funds the direct capital cost of the project itself.

The Transport Agency will only provide funding assistance for the cost of insuring or hedging against inflation, damage or disruption to transport activities, operations or facilities when it considers that it is most likely that the long-term costs to the NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied will be reduced.  The Transport Agency will not also directly fund remedies or costs arising from events covered by the hedging or insurance.

Payment on delivery

Payment will only be made when the completed portions of approved activities have been delivered as specified in the funding approval. Exceptions to this policy must be individually agreed between the Transport Agency and the investment partner.

The Transport Agency will pay claims on an accrual basis, i.e. based on evidence of work completed without requiring a supplier invoice.

Action in the event of breaches

The Transport Agency may reduce, refuse or withhold payment for any approved activity if it considers that (in relation to an approved activity) an Approved Organisation or person:

• is in breach of a procurement procedure A procurement procedure approved under section 25 of the LTMA. , or
• has been or is or will be likely to be in breach of any other provision of the LTMA The Land Transport Management Act 2003, as amended from time to time. relating to payments from a land transport disbursement account, or
• has already constructed or undertaken the activity, or
• is proposing to construct or undertake the activity to standards that are excessively high or unsatisfactory.

If the Transport Agency makes any payment for an approved activity that is based on information that is subsequently found to be erroneous or inaccurate, the payment is recoverable in any court of competent jurisdiction as a debt due to the Transport Agency.