How NZ is tracking on infrastructure planning and delivery – with Ross Copland
Ross Copland keeps tabs on the country’s $61 billion infrastructure pipeline as chief executive of Te Waihanga, the New Zealand Infrastructure Commission.
He shares his thoughts on the current shape of the industry ahead of his keynote speech at the Future-Fit Aotearoa conference in September.
What is Te Waihanga’s role in infrastructure delivery in Aotearoa?
We have a three-pronged approach that covers infrastructure policy (three-year horizon), project delivery and the pipeline (10-year horizon) and the 30-year Infrastructure Strategy.
In the policy space we are heavily involved in the Resource Management Act reform process, the various aspects of climate change response, and we have an active interest in discussions over the country’s three waters infrastructure. We are also interested in the role of a population strategy or policy – a piece of work the Productivity Commission is undertaking.
We provide support for infrastructure projects in delivery. This includes supporting agencies where building infrastructure isn’t core business or where well-equipped agencies just need an extra pair of eyes to help steer very large or complex projects in the right direction. The projects we are involved in are typically high-risk or large-scale with special complexities, this is where our team adds the most value. The team also provide advice on system-wide delivery models, risk sharing arrangements, workforce and governance matters and we have a special focus on all facets of government procurement, ensuring that New Zealanders get the best possible outcomes from infrastructure investments.
We publish a project pipeline to inform the building and construction market about what’s coming and when to expect it. The pipeline is essentially an aggregation of the investment intentions of large infrastructure providers. It helps firms to assess their future workforce needs, plan for growth and have visibility of the opportunities they might like to bid for.
The discussion surrounding these issues will play a big part in developing our draft 30-year infrastructure strategy which will be presented to the Minister for Infrastructure in September. The release of the draft strategy is an opportunity to further encourage conversation on how we can improve our infrastructure system to improve the wellbeing of all New Zealanders.
What does the pipeline look like at the moment?
There are more than 2,500 projects in the pipeline at the moment with a total value of around $61 billion. These projects are proposed for development over the next three to five years.
Our tracking shows which projects are fully funded, which projects are proposed but not yet funded, whether they are consented, or whether they are still waiting to get underway. The data is all available for download from our website and is updated every quarter based on the latest market intelligence.
How are the shovel-ready projects progressing?
Te Waihanga is not directly involved in these projects. Our role is to track them through the pipeline – there are filters available to give a quick reference for how they’re progressing.
The most recent quarterly reporting from Crown Infrastructure Partners (CIP) showed limited progress on some projects, while others were well underway.
Overall, the feedback we receive is that it’s been a slower start on the shovel-ready projects than many had anticipated. The construction market has rebounded strongly post-COVID-19, meaning there was much less spare capacity to take on new work in many regions. This is a better problem to have than the situation construction firms were facing in early 2020.
What progress is being made on addressing the skills and labour shortages in the construction industry?
A recent survey completed by ACE New Zealand revealed that around 20 per cent of our current workforce is made up of international workers. Many of these people have not been able to come into the country since COVID-19, as the number of MIQ places available for workers in the construction industry has been in short supply. The lack of workers coming in from overseas is undoubtedly causing some project constraints.
The way the proposed infrastructure pipeline looks in the short to medium term shows several areas where the skills shortage is growing. The supply of people to cover these skill gaps is constrained by our short-term and possibly longer-term immigration settings which remain uncertain.
The Three Waters Reform Programme is one area that is causing particular concern. Considerable investment is required over many years to renew or improve water infrastructure around New Zealand. The numbers suggest we don’t have the skilled workforce needed to undertake this work.
Skills are a structural shortage issue and we’re going to have to come up with some thoughtful plans and strategies to solve this issue.
What is the future of public private partnerships (PPPs)?
We don’t have a preference for any particular form of procurement. The varying forms of procurement have their place depending on the outcomes that clients are looking to achieve, and PPPs are no different.
PPPs can bring specific and positive attributes to a project. They can work well when you have a high OPEX asset that you’re looking to fund, and you are looking to introduce a whole of life cost element through a PPP. On large projects, the designer and concessionaire should consider the whole of life cost when developing a solution and taking this into account can lead to positive outcomes for clients.
However, PPPs certainly don’t suit every project, and our role is to advise when it might be a suitable option. We also offer advice on how to execute the PPP contracts in a way that will protect all parties.
How optimistic is the construction industry in the medium term?
We are receiving strong feedback about the buoyancy of the market at the moment. Residential construction is robust throughout the country, while civil is going well in some regions but not so well in other areas. The Canterbury region appears to be reasonably soft at the moment in the civil space.
There’s plenty of work in the social infrastructure area with projects like Dunedin Hospital, while the Ministry of Education has an extensive programme to replace infrastructure and rebuild schools. Auckland is by far our busiest market nationally with a significant volume of work underway across nearly all sectors.
However, there appears to be some contraction in the commercial sector with the development of new office space and the construction of hotels being put on the back burner.
There is certainly a bit of rebalancing going on, many of the contractors we talk to are pretty comfortable now and feel good about the pipeline of work ahead of them in the short to medium term.
Ross Copland is a keynote speaker at the Future-Fit Aotearoa conference. Register now