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The value of sharing international perspectives on infrastructure delivery costs

16 December 2022

Peter Nunns from Te Waihanga/New Zealand Infrastructure Commission describes the value of collective global insight in reducing infrastructure costs.

The value of sharing international perspectives on infrastructure delivery costs
Forums like the ICE Presidential Roundtable really help to bring recommendations alive. Image credit: Filip F/Shutterstock

In recent decades, New Zealand has spent around 5.5% of gross domestic product building new public infrastructure and renewing or replacing existing infrastructure.

To build our way out of the challenges facing us – from population growth, to renewals and addressing climate change – we would need to nearly double investment, spending around 9.6% of GDP every year for the next three decades.

This is unlikely to be viable in an environment of rising interest rates and workforce capacity pressures.

Simply put, we cannot address our infrastructure challenges unless we can build good infrastructure at a more affordable price.

Benchmarking New Zealand’s infrastructure delivery costs

This week, Te Waihanga/New Zealand Infrastructure Commission published a report titled “The lay of the land: Benchmarking New Zealand’s infrastructure delivery costs”. It explores how the cost to build infrastructure in New Zealand compares with costs in other high-income countries.

Our aim in undertaking this research was to identify where we have opportunities to improve by drawing on international lessons.

The picture that emerges from this analysis is nuanced.

New Zealand doesn’t appear to have high infrastructure construction costs across the board, relative to other high-income countries.

If we face a cost premium for infrastructure projects, it primarily relates to complex, large-scale infrastructure projects, such as major transport projects, rather than smaller or more standardised infrastructure projects, like wind farms.

Statistical analysis only takes you so far, of course. It can help identify where there might be differences in costs, but it isn’t as useful for diagnosing root causes – or finding solutions.

Bringing together global views

On 9 November 2022, the ICE hosted a Presidential Roundtable session on this piece of research.

The roundtable discussion was a true highlight for me and my colleagues in attendance.

The collective insight and experience of attendees, and their generosity in sharing lessons and perspectives from multiple countries and sectors, was invaluable.

What we heard in the discussion was that there are practical measures that countries can take to deliver good infrastructure at a more affordable price. These include things like:

  • Acting as a sophisticated client of infrastructure and investing in the right capability to plan, procure, and manage projects, programmes, and networks.
  • Strengthening independent advice for infrastructure prioritisation and establishing a pipeline of future investment.
  • Openness to new technologies and methods to lift productivity and reduce costs.
  • Efficient planning and consenting systems to avoid costs arising from delays or scope uncertainty.
  • Ongoing infrastructure delivery cost benchmarking to guide us towards better infrastructure decisions.

At Te Waihanga, we’re already pulling on some of these strings.

Our recently published 30-year infrastructure strategy, Rautaki Hanganga o Aotearoa, makes recommendations in each.

However, forums like the ICE Presidential Roundtable really help to bring these recommendations alive, demonstrating that the challenges we’re all facing have solutions that can be put into practice.

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  • Peter Nunns, director, economics at New Zealand Infrastructure Commission