A multi-billion dollar infrastructure boost is being hailed as “a good start” but also as “predictable and frustrating”, “bait” and “not even a wish list”.
At the Half Year Economic and Fiscal Update (HYEFU) on Wednesday morning Finance Minister Grant Robertson announced an additional $12b would be spent on infrastructure over the next five years and beyond.
“What we inherited was a wish-list of projects, these were not funded, in many cases they were not even consented and so what you’re seeing today is actual funding for actual projects,” Robertson said.
Of that funding, $6.4b is earmarked for transport projects.
The sticking point for many, like Auckland Chamber of Commerce CEO Michael Barnett, is the shortage of detail on what that money will be spent on.
An announcement on specifics has been pushed into next year.
“The bait’s been dangled out there, the promise has been made… we expected more from the announcement today but we can certainly wait into the New Year to get something specific,” Barnett said.
Road Transport Forum NZ Chief Executive Nick Leggett said he wanted to hear more detail on the split between transport modes in the package.
“The $6.4b that’s been promised for road and rail is very specific so we’re not quite sure why project announcements are being delayed until next year.”
Civil Contractors NZ Chief Executive Peter Silcock said the lack of detail meant those in the industry couldn’t plan or make decisions based on the announcement – the opposite of the Government’s stated goals with its infrastructure pipeline announced earlier.
“We keep talking about everything without any specifics, it doesn’t allow you to plan it doesn’t allow you to consider your options, it doesn’t provide certainty.”
He warned that if more details weren’t given on what these projects might be, the country could start to lose some of its skilled infrastructure personnel to Australia despite the size of the investment.
“We’ve been raising concerns about these major transport jobs that we’ve got finishing over the next 12 to18 months and where are the people going to go that are working on those.”
Silcock said the industry needed to hear the details on projects soon so it could transition employees from existing projects that were wrapping up into the new projects – before those employees left.
Infometrics Economist Brad Olsen said Wednesday’s announcement wouldn’t allay any of those concerns as it was “not even a wish-list”.
“We keep talking about everything without any specifics, it doesn’t allow you to plan, it doesn’t allow you to consider your options, it doesn’t provide certainty.”
Infrastructure NZ CEO Paul Blair said an announcement on project details needed to be made by the end of the first quarter of next year .
“The industry’s really keen to see the next level of detail.”
The “shovel-ready” projects and the “little bitty” ones
The transport projects on the list to be funded by the infrastructure plan are “shovel-ready”, according to Robertson.
Transport’s share of the fund would be for investments in road, rail, cycleways and walking infrastructure but not for mass transit.
Robertson said the money was not a top-up to the National Land Transport Fund (NLTF) – where the Government’s share of funding for projects like the Auckland Transport Alignment Project (ATAP) is coming from – and would be doled out separately.
But he said the extra funding could have an impact on the Auckland Transport Alignment Project and Let’s Get Wellington Moving by freeing up cash from the NLTF.
It is understood that “shovel-ready” means projects that will receive the funding are known projects that have had business cases approved and, in some cases, are already consented.
Questions remain about whether the timelines that accompanied those projects at the business case stage are still accurate given severe constraints within the construction industry. That is part of the reason for the delayed announcement on the number of projects involved and other details.
Blair said that was fair reason for the delay but classed it as a “chicken and egg” scenario.
It was only possible to overcome some of those capacity constraints with greater certainty around what upcoming infrastructure projects were.
“If you have a certain pipeline you’re going to have a lot more capacity.”
Another way in which capacity constraints could be fixed is if procurement of infrastructure projects within the package was done at scale, Blair said.
An Infrastructure NZ biannual procurement survey across the industry found the Government’s effectiveness at procuring projects had deteriorated since 2017 in the eyes of the industry.
“The industry finds it hard to respond to lots of little bitty jobs.”
This infrastructure boost was an opportunity to procure projects differently. He gave the example of the $400m set aside for school asset maintenance and repairs as an example.
If different schools procured for different categories of “little bitty” infrastructure projects the work should be combined and put out as one big tender.
A decade of work tendered by Watercare as one package – a contract awarded to Fulton Hogan and Fletcher Construction – had resulted in cost savings of 20 percent across the whole contract, Blair said.
“Rather than 50 schools in Canterbury demanding 50 toilet blocks, roll those into one procurement contract and have three designs.”
Blair said another $300m in the infrastructure announcement for maintenance of assets at District Health Boards could be procured the same way.
“The industry finds it hard to respond to lots of little bitty jobs,” Blair said.
“It’s much better to have certainty that you’re going to be investing in apprenticeships and specialised equipment for five years rather than ‘one day I’m doing a roof, the next day I’m doing a gutter, the next day I’m painting’.”
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