This month’s Infrastructure Policy Watch looks at why asset management needs more attention, and how to engage the private sector.
Is asset management New Zealand’s biggest infrastructure challenge?
The cost of repairing or replacing ageing assets may be “the biggest single challenge” New Zealand faces in infrastructure, a new report suggests.
The review of asset management was published by the New Zealand Infrastructure Commission (Te Waihanga).
Almost all (99%) of the infrastructure New Zealand will need in 30 years already exists. But there’s little awareness across sectors of what should be done to maintain them, and why.
Asset failures are increasingly affecting people’s lives. Recent cases have included sinkholes, poor water quality, persistent water leaks, and rail and ferry service outages.
But asset owners remain too reactive.
Resilience needs to be proactive to reduce long-term costs, avoid negative impacts, and unlock the wider benefits of better service levels for the public.
According to Te Waihanga, investment in resilience delivers benefits in 96% of scenarios. On average, the benefits of investment outweigh the costs by four to one.
Priorities for improvement
The report’s key findings include:
- People are the biggest constraint on better infrastructure management. This includes workforce skills, resource levels and asset management governance and leadership in most sectors.
- There needs to be more transparency around asset management. New Zealand has a lack of user-friendly access to information on infrastructure performance and future funding plans.
- Renewal and maintenance of infrastructure needs more investment. Even where funding gaps are known, there’s often little appetite to invest.
- There’s too little understanding of future infrastructure demand. This could include the impact of demographic change and changing customer behaviour future service levels.
Its recommendations for asset management include:
- Strengthen requirements, including greater oversight and enforcement.
- Require periodic, independently verified assessments of all major public infrastructure and publicly report the results.
- Require all providers of critical infrastructure to explicitly assess and appropriately prioritise infrastructure resilience.
- Invest in training programmes and develop a clear professional pathway for asset managers.
The ICE’s view:
The need to prioritise asset maintenance is a growing issue around the world. But making the case for investing in resilient infrastructure to policymakers and the public is difficult.
The ICE explored how to overcome this at a recent presidential roundtable.
Solutions included relating maintenance to the wider priorities of decision-makers, integrating nature-based solutions, and greater public engagement.
In the UK, the ICE and the National Engineering Policy Centre (NEPC) have launched a joint policy project to explore the options and help make the case for maintenance.
Governments look to boost private infrastructure investment
New Zealand’s government has updated its public private partnerships (PPP) framework.
Under PPPs, government bodies and private parties enter an agreement to provide a public asset or service.
Eight PPP projects have been delivered in New Zealand since 2011. These include three prisons, two highways, and several schools.
Making improvements
The government says PPP projects have often outperformed similar projects delivered using other methods.
However, there have been challenges. For example, the wholesale transfer of risk to private partners has reduced private sector appetite for new projects.
The new framework includes the following updates:
- An expectation that risks should sit with those best-placed to hold them.
- A more collaborative tender process to help bidders and clients develop solutions that better fit the ask.
- Creating more incentives for clients and contractors to innovate throughout project lifecycles.
- More emphasis on ensuring client agencies build the capability and capacity to effectively manage a PPP project throughout its lifecycle.
The government wants to keep its PPP programme’s focus on achieving better outcomes rather than simply lower cost.
The update is part of wider changes the government is making to New Zealand’s infrastructure planning and delivery framework.
South Africa targets more private investment and expertise
Meanwhile, South Africa’s minister of finance recently announced reforms to attract more private investment in infrastructure.
The changes were set out in the Medium Term Budget Policy Statement.
The government sees infrastructure investment as key to achieving more inclusive economic growth. But it needs private sector money and expertise to do that.
The changes would allow public sector projects and workers to benefit from private sector technical skills to boost overall capability.
The government is putting more resources into planning and designing a credible pipeline of projects to attract investors.
It’s also diversifying its financing models, including new build-operate-transfer (BOT) structures. And it will simplify South Africa’s PPP regulations to make it easier to develop projects.
The ICE’s view:
Public finance alone can’t meet the challenges facing governments around the world.
Growing and decarbonising economies, adapting to climate change, meeting people’s everyday needs – these all require huge investment in sustainable, resilient infrastructure systems.
Most of this new investment will need to come from private sources. But the global market is becoming increasingly competitive.
The ICE’s new Next Steps programme is seeking insight into how the UK government can engage private investors to boost infrastructure spending – and what it can learn from other countries.
