New ICT systems to support the merger of 67 water utilities as part of the government's Three Waters reforms could cost from $300 million to $500 million.
Under questioning by National MP for North Shore Simon Watts, minister of local government Nanaia Mahuta told Parliament's governance and administration committee a business case was being prepared to establish the cost of new software systems for the four regional water utilities planned under the programme.
"If you have visited Watercare, you will have seen how integral it is to ensure that the backroom functions in the technology, data, information, intelligence space are core to delivering efficient water-service delivery," Mahuta said.
"Yes, there is a cost, but that cost ultimately will be truncating or pulling together across 67 councils a system that will sit under a large entity, which is why we’re taking our time to ensure that the business case and the assessment are being achieved to give us the best information about how we do that, how we consolidate the necessary architecture for the four of the water-service entities."
Pressed for a ball-park figure, deputy chief executive of local government at Internal Affairs Michael Lovett said an ERP system of that size was going to be of considerable cost.
"However, it’ll be commensurate with ICT systems of a similar order," he said. "So there are a number of indications of cost models out there that gives us a good benchmark on how to cost an appropriate model.
"Watercare is, obviously, an operating model, and that has come at a cost to consumers which is competitive and efficient.
"We’re at a point where we’re in some commercial conversations with vendors. So for this time being, we are keeping that quite close around costs so that we can maximise the efficiency for taxpayers and consumers."
Lovett then went on to offer a cost range in the order of $300 million to $500 million, which he said was "pegged at an appropriate cost for an ERP for a utility ... of that size and order".
Paul James, chief executive of the Department of Internal Affairs added the business case had options from high tens of millions into that $300 million to $500 million range.
"You have to tie it to questions of scope," he said. "So what’s needed for day one and then once you move past that?"
It was still too early to be clear about where the cost would likely land, he said.
"We have the former CIO from Watercare as the lead inside the department on this," James added. "So we’ve got knowledge and experience, and there is a lot of external expertise being applied in to assure that there’s government scrutiny and input into this; we’re very focussed on it."
"Three Waters" refers to the delivery of drinking water, wastewater and stormwater services.
The government argues New Zealand hasn’t adequately maintained and improved its water service infrastructure and structural reform was needed.
"Without change, the safety, reliability and affordability of these services will lead to more New Zealanders getting sick from contaminated drinking water, more sewage spills and increases in cost," it argued.
Four new water services entities would take over responsibility for existing council infrastructure, people, and expertise. These would be designed with the financial flexibility to make the necessary upgrades more affordable overall.