Part 4: Working relationships and working together

Crown Fibre Holdings Limited: Managing the first phase of rolling out ultra-fast broadband.

In this Part, we discuss how well Crown Fibre has fostered working relationships with its commercial partners and public stakeholders.

Summary of our findings

Relationships between Crown Fibre and its commercial partners had a difficult start. Early contract negotiations were adversarial and tense. This caused some mutual distrust and set the early tone for the working relationships.

These relationships improved over time, one quite quickly, thanks to efforts on all sides. They are now respectful and largely healthy.

Crown Fibre has always had healthy relationships with its public stakeholders. This has helped Crown Fibre understand stakeholder needs and ensure that the network design and roll-out address them.

There are constructive relationships with commercial partners after difficult starts

Contracts and working relationships are closely related. Contracts provide the foundation for a working relationship. They also help parties reach a common understanding of how they should work together. However, contracts do not deliver on projects, people do.

We expected to see working relationships that were trusting, respectful, and constructive. These are the attributes of a healthy relationship that encourage people to bring their skills and experience to a task. If the relationship is not healthy, the best possible results might not be achieved, to the detriment of the outcome.

Overall, working relationships between Crown Fibre and its commercial partners are now largely healthy, but this was not always the case. Crown Fibre was firm in contract negotiations. This was a deliberate strategy to show the commercial partners that Crown Fibre was commercially minded. Early working relationships between Crown Fibre and the commercial partners were difficult as a result. Over time, the relationships have moved forward constructively.

Crown Fibre has supported the commercial partners' relationships with each other, helping them share what each has learned and how each has dealt with issues that other commercial partners may also face.

Tough contract negotiations set the tone for a difficult start

Crown Fibre was aware that it was representing the taxpayer, who was covering a large part of the roll-out's cost through concessionary funding. Many people told us that Crown Fibre eventually negotiated a financial deal that they would be happy with as taxpayers.

Crown Fibre entered contract negotiations with a "hard-nosed" approach. Crown Fibre (and the Ministry of Business, Innovation and Employment) told us that this was a deliberate and agreed strategy.

Crown Fibre and the commercial partners acknowledged that the contract negotiations were tense and hard. Negotiations have been described to us as "bruising" and as leaving participants feeling "burnt" and "exhausted".

Crown Fibre told us that its negotiating position was that certain core policy matters could not be compromised on, while it had more flexibility to compromise in other areas. In practice, this flexibility was not readily apparent to others involved. We were told that Crown Fibre pressed for "wins" it could have shown more flexibility on (or was focused on not giving any wins away).

We consider that some commercial partners had different expectations of how relationships were to work. They may have had difficulty reconciling a "hard-money contract" approach with the co-investment partnership framework. One representative of a commercial partner thought that the Government would be "the friendly bank". A representative of another commercial partner assumed that Crown Fibre's role was that of a financier, not running work to build the network.

We were told that the early relationships were distrustful and tense. Protracted debate in the Document Finalisation Process did not help. The lack of common ground and understanding between the parties probably contributed to difficulties in finalising the documents. Repairing those relationships took varying lengths of time and required significant effort.

In our view, negotiating purposefully on behalf of the taxpayer is appropriate. All the parties are trying to achieve the best deal for themselves and those they represent. However, the way parties interact should foster mutual respect for the life of the relationship – in this instance, up to 10 years. In our view, parties should look for "win" opportunities on both sides. This helps motivate them to work together and fully contribute towards the common objective.

There is a balance to be struck when agreeing new working partnerships. Discussions need to be purposeful but keep some level of flexibility. We have commented on this before. In our report on the Ministry of Primary Industries' management of the Primary Growth Partnership fund, we said:

When forming new partnerships, managing human relationships in a way that fosters trust and appropriately manages risk is more important than rigidly following a set formula.6

The relationships between Crown Fibre and the four commercial partners are now respectful. They also leave room for healthy challenge. Some of these relationships moved forward quickly from a difficult start, and others took more time. The commercial partners now tend to speak well of Crown Fibre, and Crown Fibre of them.

Actions and approaches by independent people on partnership governance bodies helped. In one example, when there were clear relationship difficulties early in the roll-out, the independent chairperson arranged an open forum to address the tension. The forum involved board members from the commercial partner and from Crown Fibre. We were told that discussion on both sides was blunt with few niceties, but it compelled people to understand each other and work together to resolve issues. The relationship became gradually more respectful and collaborative. It steadily improved and is now healthy.

Another example where the health of early relationships was tested was when another commercial partner made some early decisions outside of the contracted lines of decision-making authority. These decisions caused performance issues that compounded the early tension and distrust. These incidents showed a lack of common understanding of expectations, and the relationship was slower to recover.

The four partner contracts have been, or look likely to be, successfully managed to completion, with Crown Fibre maintaining a focus on the performance results of all commercial partners. People on all sides are committed to a successful roll-out.

Healthy relationships allow commercial partners to share experiences freely

Crown Fibre encouraged the commercial partners to get together to share successes, and to stimulate good performance. Some roll-out progress was needed to learn the lessons and share some success. As relationships recovered and trust developed, the commercial partners and Crown Fibre communicated more openly.

Crown Fibre helped share Northpower's early successes with the other commercial partners. It encouraged commercial partners to visit Northpower's operation to see and discuss its approach. Commercial partners could observe Northpower's technical solutions to deploying the fibre overhead. Northpower also discussed its underground techniques and reinstatement work (where footpaths were returned to their original or better condition). As the commercial partners all made progress, Crown Fibre encouraged them to get together to talk through solutions to common issues.

The commercial partners appear to have always had largely healthy relationships with each other. Communication between them remains regular, open, and positive, even though there have been fewer new lessons to share as the roll-out has progressed. When talking to us, the commercial partners tended to speak well of each other.

Crown Fibre works well with other stakeholders

Crown Fibre has built good relationships with its main stakeholders. Crown Fibre made a good effort to understand priority users' and local communities' needs. It supported these stakeholders in determining for themselves how best to use the opportunities the network offers.

Crown Fibre took an open, proactive approach to working with priority users. It communicated well with the two sectors involved, health and education. Crown Fibre also gave presentations to various business community forums (including the Telecommunications Users Association of New Zealand), particularly early in the roll-out.

People representing local authorities and priority users were complimentary of Crown Fibre. They told us Crown Fibre made good efforts to understand their needs and views. Crown Fibre supported local authorities with advice and encouragement to lead their communities in deciding how to get the best benefits from the network. Crown Fibre also helped local communities set up Digital Leadership Forums.

We saw evidence that Crown Fibre also encouraged its commercial partners to work with local authorities to co-ordinate their work. Northpower gave us an example where council-scheduled upgrading of footpaths in Whangarei was co-ordinated with laying fibre underneath. Northpower and the Whangarei District Council shared the costs, which benefited them and the community. The mutual savings allowed many footpaths in the central business district to be upgraded to better standards than originally planned.

6: Controller and Auditor-General (2015), Ministry for Primary Industries: Managing the Primary Growth Partnership, Wellington.