is now broad agreement across the infrastructure industry that consolidating
public procurement expertise in an arm’s-length specialist agency is critical
to meeting New Zealand’s investment programme," says Stephen Selwood, CEO
of Infrastructure NZ.
"We’ve seen a
definite shift across industry over the past 12 months. Now, four out of five
of the people most heavily involved in designing, building and providing
infrastructure services to government and councils believe a specialist
procurement agency would be “effective” or “highly effective” in lifting
"A separate poll
conducted at the release of the survey findings found a staggering 96 per cent
believed we cannot continue to procure infrastructure the way we are.
"We have enormous
resource challenges in front of us. If we are to successfully deliver the $125
billion infrastructure programme over the next 10 years and make the most of
new services, the way we plan, fund, procure, deliver and operate these
services must be as good as it can be.
survey identifies major opportunities for improvement across the sector. Many
agencies are excessively focused on price over long term value. Projects are
poorly phased to the market in boom bust cycles. A limited range of procurement
options are being used that fail to draw on the experience and capability of
the industry. Contract law is being rewritten on almost every project and risk
is being unfairly transferred to contractors resulting in poor outcomes and
unnecessarily high costs to the client.
examples of good practice across the country.
"NZTA came out on
top as the country’s top procurer of infrastructure services for the third year
in succession. Its work on bodies like the Road Efficiency Group and SCIRT has
delivered efficiencies through scale, partnership, new delivery models and an
advanced understanding of risk.
"NZTA is held in
high regard by the industry because its staff are experts at what they do. They
understand how best to allocate risk. They focus on value rather than cost and
match the procurement method with the job to be done. They also proactively
engage suppliers to ensure the forward work programme is clearly signalled in
advance to maintain a healthy, competitive
market that has capacity to deliver.
"But with 20
District Health Boards, 78 councils, transport, education, housing and other
public institutions all procuring major capital assets independently, skills
are too widely distributed and processes too fragmented.
"New Zealand does
not have the capacity to harness best practice and transfer it efficiently from
one project to the next.
"Every country we
compare ourselves to has responded to this challenge with a specialised
collaborative procurement body.
Partnerships BC in Canada, Infrastructure NSW in Australia or the Scottish
Futures Trust, other jurisdictions have realised huge benefits by consolidating
expertise in a fit-for-purpose entity which assists public bodies with project
"Public bodies responsible
for delivering services remain in charge. The difference is that they have
experts in project procurement helping them along the way.
"In its first year
of operation the Scottish Futures Trust delivered £111 million of added value
from just a £4.3 million budget. The UK has recently achieved a 15 per cent
saving on infrastructure spending by focusing on best practice procurement and
"If we could
achieve a much more modest 5-10 per cent improvement in delivering New Zealand’s
$125 billion capital intentions plan, we could secure $6-12 billion of
infrastructure value above and beyond what we’re planning.
"That’s five or
six Waterview Connections or enough to address the entire backlog of water
supply and wastewater investment nationwide.
from standardising contracts and processes, picking the right model for the
job, allocating risk effectively between client and suppliers, sequencing
projects to align initiatives and optimise capacity, packaging projects to achieve
economies of scale, and ensuring the whole asset process from planning to
delivery and operation is performed efficiently.
public and private sectors we have the skills and the capability. Experts in
the Ministry of Business, Innovation and Employment, Treasury, NZTA and other
agencies are funded already. Bringing these experts together with procurement
and delivery specialists from the private sector into a dedicated and highly
focused centre of expertise would enable New Zealand to emulate the results we
see in other countries.
"It’s a huge
opportunity and one which the incoming government should embrace
immediately," Selwood says.
For further information and comment contact
Stephen Selwood on 021 791 209