Infrastructure industry forum highlights opportunities to improve capital investment in New Zealand

24 May 2016 12:41 PM | Anonymous

A major gathering of 100 of New Zealands capital procurement specialists yesterday in Wellington unanimously agreed that there are significant opportunities to improve value for money for tax payers and rate payers through better investment decision making and procurement practices, says New Zealand Council for Infrastructure Development CEO Stephen Selwood.

The NZCID led forum, Institutionalising Best Practice in Capital Procurement, was a multi-sector collaboration hosted by Deloitte, cosponsored by AECOM and opened by Finance Minister Bill English. It brought together many of the best minds across the public and private sectors to investigate how capital procurement can be managed to maximise the value of infrastructure investment.

Central and local government will spend $100 billion over the next ten years, $10 billion per annum, investing in infrastructure, according to the national infrastructure Capital Intentions Plan. Its imperative that this money goes into projects which meet customer needs and deliver the outcomes intended.

A five to ten percent improvement in performance outcomes, similar to that being achieved in other countries, signals an opportunity to deliver $5 to $10 billion in value to rate payers and tax payers over the next decade.

The results of an NZCID industry survey of public procurement proficiency, released at the forum, e choed findings from last years survey, with the New Zealand Transport Agency emerging again as the top public procurement body. Virtually all other agencies, from councils to district health boards and other social service providers, were rated average or below average.

John Bridgman, the New Zealand Managing Director of global engineering services giant AECOM, observed that the cost of procuring professional services in New Zealand is 80% more than Europe, twice the cost of the USA and three times the cost of Asia.

Much of that is due to major projects being broken into piecesto fit capital budgets and separate bidding processes for design and construction. Project size is half that of Europe and USA, one third the size of China and one sixth that of the Middle East.

This data suggests there is potential to drive value through better procurement processes and economies of scale.

"Deloitte Partner Linda Meade emphasised that it is critical all options are tested before an investment decision is made and that the preferred option must demonstrate that it will deliver the desired outcome.

"Geoff Hunt,Chief Executive Officer of Hawkins Group,noted that the greatest opportunity to create value in projects is in the design phase, but the primary focus was so often on squeezing costs through competitive bid processes and without sufficient contractor involvement.

It is of no surprise that when surveyed not a single person in the room considered that continuing along the same procurement path is acceptable.

All delegates recognised that Treasury and MBIE initiatives were having a positive effect but much more could be done. Lifting skills in the sector and expanding professional development was universally supported.

There was agreement on the need for strong collaboration across central agencies to decide how best to provide support and capability to those who need it most. Ideally, this would be a central and local government partnership.

The forum was split on whether or not a specialist support agency should be established, but half felt this option should be implemented. In NZCID's view, this is sufficient support to warrant Government giving this option serious consideration. Selwood says.

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