The infrastructure industry broadly agrees that consolidating public procurement expertise in an arm’s-length specialist agency is critical to meeting New Zealand’s investment programme, an industry expert insists.
“We’ve seen a definite shift across industry over the past 12 months,” says Stephen Selwood, CEO of Infrastructure NZ.
“Now, four out of five of the people most heavily involved in designing, building and providing infrastructure services to government and councils believe a specialist procurement agency would be “effective” or “highly effective” in lifting performance.
“A separate poll conducted at the release of the survey findings found a staggering 96 per cent believed we cannot continue to procure infrastructure the way we are.
“We have enormous resource challenges in front of us,” Selwood explains.
“If we are to successfully deliver the $125 billion infrastructure programme over the next 10 years and make the most of new services, the way we plan, fund, procure, deliver and operate these services must be as good as it can be.”
The industry survey identifies major opportunities for improvement across the sector, he notes.
“Many agencies are excessively focused on price over long-term value.
“Projects are poorly phased to the market in boom-bust cycles.
“A limited range of procurement options are being used that fail to draw on the experience and capability of the industry.
“Contract law is being rewritten on almost every project and risk is being unfairly transferred to contractors resulting in poor outcomes and unnecessarily high costs to the client.”
There are examples of good practice across the country, Selwood admits.
“NZTA came out on top as the country’s top procurer of infrastructure services for the third year in succession.
“Its work on bodies like the Road Efficiency Group and SCIRT has delivered efficiencies through scale, partnership, new delivery models and an advanced understanding of risk.”
NZTA is held in high regard by the industry because its staff are experts at what they do, Selwood believes.
“They understand how best to allocate risk.
“They focus on value rather than cost and match the procurement method with the job to be done.
“They also proactively engage suppliers to ensure the forward work programme is clearly signalled in advance to maintain a healthy, competitive market that has capacity to deliver.
“But with 20 District Health Boards, 78 councils, transport, education, housing and other public institutions all procuring major capital assets independently, skills are too widely distributed and processes too fragmented.”
New Zealand does not have the capacity to harness best practice and transfer it efficiently from one project to the next, Selwood maintains.
“Every country we compare ourselves to has responded to this challenge with a specialised collaborative procurement body.
“Whether it’s Partnerships BC in Canada, Infrastructure NSW in Australia or the Scottish Futures Trust, other jurisdictions have realised huge benefits by consolidating expertise in a fit-for-purpose entity which assists public bodies with project procurement.”
Public bodies responsible for delivering services remain in charge.
“The difference is that they have experts in project procurement helping them along the way.
“In its first year of operation the Scottish Futures Trust delivered £111 million of added value from just a £4.3 million budget.
“The UK has recently achieved a 15 per cent saving on infrastructure spending by focusing on best practice procurement and collaborative working.
“If we could achieve a much more modest 5-10 per cent improvement in delivering New Zealand’s $125 billion capital intentions plan, we could secure $6-12 billion of infrastructure value above and beyond what we’re planning.
“That’s five or six Waterview Connections or enough to address the entire backlog of water supply and wastewater investment nationwide.
“Benefits come from standardising contracts and processes, picking the right model for the job, allocating risk effectively between client and suppliers, sequencing projects to align initiatives and optimise capacity, packaging projects to achieve economies of scale, and ensuring the whole asset process from planning to delivery and operation is performed efficiently.
“Between the public and private sectors we have the skills and the capability.”
Experts in the Ministry of Business, Innovation and Employment, Treasury, NZTA and other agencies are funded already, Selwood notes.
“ Bringing these experts together with procurement and delivery specialists from the private sector into a dedicated and highly focused centre of expertise would enable New Zealand to emulate the results we see in other countries.
“It’s a huge opportunity and one which the incoming government should embrace immediately,” Selwood says.
The need to lift procurement performance by New Zealand’s public sector was highlighted at last week’s Procurement Forum in Auckland.
Findings on how to drive better outcomes through improved procurement of public infrastructure will be recommended to the Minister for Infrastructure Steven Joyce.
Procurement and tendering is also under the spotlight in the lead-up to the inaugural GovProcure New Zealand 2017 conference later this month.
Clever Buying’s Caroline Boot was present at the conference, and says, “In addition to improving strategic procurement capability, we also need to build capability from the ground up in order to make a real difference in procurement efficiency.
“There’s a need to focus on the practical skills of procurement planning: RFT development, scoring systems and transparent evaluation,” Boot adds.
Tendering specialist Kerrie McEwen from Plan A sees an opportunity in greater procurement efficiency.
“While the introduction of the government RFx template is a step forward, we still regularly see RFx processes which drive rushed decision-making, and recycled all-purpose tender documents which have irrelevant questions.
“The time spent on generic areas – from both respondent and evaluator perspective – would be better utilised on focused questions which will differentiate suppliers and deliver better overall value-for-money for taxpayers.”
Infrastructure New Zealand is New Zealand’s peak infrastructure body.