Specialised procurement agency key to unlocking value across $125 billion infrastructure programme
"There 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 performance.
"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.
"The industry 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.
"There are 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.
"Whether it’s 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 procurement.
"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 collaborative working.
"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.
"Benefits come 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.
"Between the 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.
ENDS