Ministry of Justice's growing reliance on costly property contractors revealed

Contractors and consultants now made up 17 of the Ministry of Justice property team's 48 members, or 35 percent.
Contractors and consultants now made up 17 of the Ministry of Justice property team's 48 members, or 35 percent. Photo credit: RNZ / Cole Eastham-Farrelly

Phil Pennington for RNZ

A Ministry of Justice team managing a way-overdue, half-billion-dollar rebuild of the country's rundown courts has hired a private contractor at $2000 a day.

Documents released under the Official Information Act shows the property team has been flooded with contractors and consultants. Their median rate is $900 a day.

The ministry says it has to do this to build capacity to cope with a host of big new upgrade projects.

"Our long-term aim is that more large-scale complex projects can be managed within the team supplemented by a smaller number of contractors that support large scale projects or fill short-term capacity issues," it told RNZ on Thursday.

But the documents made clear the property team was central to how half the country's courthouses have been allowed to fall into disrepair.

There had been a "chronic" and "constant" underspend on court properties, a June report said; the property team had been "reactive, unplanned and ad hoc", a review in February said.

Building that team back up was costing dearly, and was being done with recourse to short-term contracts for outsiders.

Contractors and consultants now made up 17 of the property team's 48 members, or 35 percent.

The senior delivery manager hired at a rate of $259.57 an hour, or $2000 a day, was to cover a "short-term vacancy", the ministry said. They were hired 17 months ago.

A year ago the team had only seven consultants and contractors on it; and in 2019-20 it had just one.

The salary bill - split with the recruitment agency - has soared from under $100,000 back then to almost $2 million.

The heat is on Justice because its $5 billion of courts property has been degraded.

"More than 50 percent of our assets are failing," the ministry warned internally in June, RNZ revealed previously.

Meanwhile, its property team had been struggling for years.

"The lack of a framework to guide decision-making for approvals and delivery of capital work leads to ad hoc, uncoordinated projects across the portfolio," the February review by consultants KPMG said, newly released to RNZ.

Turnover had been low among the property team, but recently surged to 24 percent.

The ministry told RNZ it was improving.

"The more recent increase in spending on contractors reflects the increased number of complex large-scale projects that the ministry's property team is working on, and the need to build capacity and capability within the property team to complete this work," deputy secretary of corporate and digital services Kelvin Watson said.

"This includes more than $500m of investment into major upgrades at our courthouses including new courthouses being built in Whanganui and Tauranga, and major seismic remediation work at four of our major courts."

Not cutting back

In the years since the government instructed the core public service to cut back on external contractors, the Justice team's reliance on them has leapt.

Contractors are often ex-public servants who swap in and out of agencies at rates far higher than they used to get as employees.

RNZ understands a lot of the Justice hires are coming across from property work at the Ministry of Education, but court building demands are quite different.

The $2000-a-day person "brought in specific property skills and expertise that are in high demand ... [and] difficult to source through the employment market on short notice and for temporary roles", Watson said.

The ministry had been making its case internally for a $1b, 30-year renewal plan. That will now pass to the incoming government, led by National, which has pledged to slash public sector contractor spending by $400m.

A dozen courthouse projects were underway, though most were running between several years late and some - such as Tauranga's $200m-plus rebuild - are way over budget.

The June report mapped the legacy of the ministry spending just one-eighth of what it should have done on upgrades and maintenance, which had led to "continuous deterioration in condition" of courthouses. Lawyers told RNZ about justice being impeded, and victims, defendants, judges and staff suffering.

An informed source said external hires posed fresh problems: they were less likely than experienced project managers who were on staff to push back against judges, who sometimes wanted a say in designing new courthouses, even if this led to having too much space taken up with judges' chambers.

The KPMG review shed light on the property woes, finding deep-seated problems across the property team's work areas.

"Oversight of project risks is low and insufficient," it said.

A "lack of insight into network demand at the national level" was impairing investment.

Nineteen out of 25 work areas posed a moderate to significant risk, with asset management deficient.

But "new capability has brought a robust understanding of good practice, an appetite to professionalise the function", it concluded.

Watson said: "The review concluded that in the past the ministry's property team was sufficient for a less complex and smaller scale portfolio and was improving to meet the need for increasingly complex projects.

"Since receiving the report, the ministry has continued to improve the capability and capacity in the property team as well as improved governance, risk management and reporting."