Local Government Magazine

National infrastructure review looks at a cross-Tasman market model

The National Infrastructure Unit within Treasury is conducting a wide-ranging review into the country’s infrastructure institutional settings.

Jon Grayson outlined ideas at the recent IPWEA NZ 2018 Conference in Rotorua. He said the review will consider whether there are better fits in aggregating central government infrastructure procurement and transactional capabilities.

He also said the review will investigate whether that approach should also be offered to the local government sector and other agencies.

NZ Local Government Magazine understands a paper may be presented to Cabinet in August. A number of industry bodies have been talking with the National Infrastructure Unit behind the scenes about some of the ideas.

Jon is responsible for financial operations, commercial operations, and the infrastructure and housing group at Treasury.

He said this review is at the highest level. “How do we organise the system so that the incentives produce the right outcomes? Are those incentives right throughout the system from planning right through
to delivery?

He told delegates the review will consider whether the way the government currently plans its own infrastructure investment is conducive to good long-term outcomes. It will also look into whether incentives are right for other infrastructure providers, “like local government and the private sector,” to produce the right outcomes.

The review will also examine how our country can “get the settings right to build capability and innovation across the value chain, and whether we can get a good handle on the pipeline of projects coming up and understand its impact on the market”.

Jon said “the seeds” of this idea are already manifest in the Australian / New Zealand Infrastructure Pipeline.

“We want to build on that, strengthen that, give it greater credibility to excite the market about the opportunities in this country.

“In terms of encouraging a competitive market to ensure value for money, can we develop a single cross-Tasman infrastructure market?

“A potential outcome of this review – and something that government will consider – is whether we should have an independent infrastructure entity.”

This could be similar to the various infrastructure bodies at the Australian state and federal level, he added.

“Those Australian infrastructure bodies are showing promising signs of taking a more long-term approach to infrastructure planning and investment, a focus on the highest-priority projects that have the greatest value, improving the standard of analysis to get those priority projects further up the list, and ensuring that planning is joined up.”

During question time, Jon was asked how New Zealand contractors could compete for work in an Australasian market.

“That is something I do hear quite a bit… that the action is in Australia. It’s a much bigger market.

“I don’t buy the premise that investors, contractors, all participants in the infrastructure sector won’t be attracted to New Zealand. If you took that concern to its logical extent, we would only see activity in Sydney and Melbourne.

“These players are rational. They will go where the business is, where the demand is, and where there is a conducive business environment. They [will] have confidence to invest in capabilities here if they have the confidence that projects will be delivered.”

“A credible pipeline is an important part of that… that allows them to plan and invest in capability here with some certainty.

“But that pipeline itself, to be credible, needs to have a robust strategy behind it so people have some confidence that those projects will be delivered.

“Simple things like a consistency of approach in the way we look at risk allocation between the government and private sector; documentation; seeing the same people across the negotiation table.

“There are other things that we could look at like harmonising standards between Australia and New Zealand; mutual prequalification; ensuring the bidding rules are transparent and encourage innovation.

“I’m quite optimistic that if we get those things right, investors and contractors will come.”

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