New infrastructure agency announced
Minister for Regional Economic Development Shane Jones has announced the formation of a new independent infrastructure entity to help drive economic growth.
Speaking at the Infrastructure New Zealand ‘‘building nations symposium 2018’’ yesterday, Jones said the new Government had quickly discerned a major infrastructure deficit when it came into power, with no plan to tackle it.
‘‘We’ve struggled to get a clear picture from officials of its scale, when it would hit us the worst and in which sectors.
‘‘Treasury is currently unable to properly quantify the value of the deficit we’re facing – it doesn’t hold accurate or up-to-date information about all infrastructure projects across all sectors and advises that agencies themselves may not necessarily know the extent of their future capital needs.’’
The sector needed greater visibility of government’s infrastructure needs and the new entity would provide that, he said.
Prime Minister Jacinda Ardern, also present at the forum, urged companies concerned about the Government’s procurement process to let her know directly, as risk in the construction sector reaches ‘‘intolerable levels’’.
Ardern said the Government wanted to work with the private sector to better manage risk in construction.
The Government, which makes up about 18 per cent of vertical construction work in New Zealand, has Ministry of Business, Innovation and Employment procurement guidelines all ministries must follow when deciding who to choose for projects. But some agencies had been ignoring the rules.
‘‘We know we have issues with contracting and we’re working to address it,’’ Ardern said.
Earlier this month Ebert construction company went into receivership. Major developer Hawkins came into financial difficulty in 2017 and in February Fletchers announced it was pulling out of the vertical construction sector completely.
Some Government agencies had been fuelling a race to the bottom in the construction sector by following a lowest cost procurement process.
Ardern said an order had gone out to government agencies to adhere to the guidelines.
‘‘And when those aren’t being used I ask you to make sure we know about it,’’ she told the forum yesterday. ‘‘We know we can model best practice so come tell us what’s needed and let’s work together on that.’’
The Government had already sought feedback from the sector and would continue to do so. ‘‘We pride ourselves on being accessible.’’
When risk challenged the viability of the infrastructure industry we should all be worried, Ardern said.
‘‘Risk is the enemy of certainty and yet it has increased in this industry to what I understand to be intolerable levels.’’
At a speaking event last week Finance Minister Grant Robertson said a lot of the problems that arose in the vertical construction sector were driven by fixed price offerings, triggering a ‘‘race to the bottom’’.
‘‘We’re taking a look at our procurement practices to make sure we’re not contributing to that race to the bottom,’’ Robertson said.
Robertson, who also spoke at the infrastructure forum, said a best practice procurement process helped provide certainty for the construction sector.
Ardern said the Government had a long-term infrastructure programme planned and it had been looking to overseas countries that did infrastructure well for inspiration.
‘‘We are not looking at infrastructure projects in isolation,’’ Ardern said. ‘‘We want to put in place an ambitious programme of investment over the next 10 years that will help address the infrastructure deficit.’’
The Government planned to spend $52 billion in infrastructure over the next 10 years. Local government would also be spending about that, she said.