Specialised agency key to infrastructure programme

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

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