A forum brought the public and private sectors together in Wellington yesterday to investigate how capital procurement can be managed to maximise the value of infrastructure investment.
“More than 100 of New Zealand’s capital procurement specialists unanimously agreed that there are significant opportunities to improve value for money for taxpayers and ratepayers through better investment decision making and procurement practices,” says New Zealand Council for Infrastructure Development ceo Stephen Selwood.
NZCID led the forum, ‘Institutionalising best practice in capital procurement’, which was a multi-sector collaboration hosted by Deloitte, and cosponsored by AECOM.
Selwood says central and local government will spend $100 billion over the next ten years, investing in infrastructure, according to the National Capital Intentions Plan.
“It’s imperative that this money goes into projects which meet customer needs and deliver the outcomes intended,” he says
“A five to ten percent improvement in performance outcomes signals an opportunity to provide $5 to $10 billion in value to rate payers and tax payers over the next decade,” says Selwood.
The results of the latest NZCID industry survey of public procurement proficiency, echoed findings from last year’s survey, with the New Zealand Transport Agency emerging again as the top public procurement body.
Virtually all other agencies, from councils to district health boards and other social service providers, were rated average or below average.
AECOM New Zealand managing director John Bridgman says that the cost of procuring professional services in New Zealand is 80% more than Europe, twice the cost of the USA and three times the cost of Asia.
“Much of that is due to major projects being broken into pieces to fit capital budgets and separate bidding processes for design and construction,” says Bridgman.
“Project size is half that of Europe and the USA, one-third the size of China and one-sixth that of the Middle East.
“This data suggests there is potential to drive value through better procurement processes and economies of scale.
Deloitte Partner Linda Meade says that it is critical for testing options before making an investment decision, and that the preferred option must demonstrate that it will deliver the desired outcome.
Hawkins Group chief executive Geoff Hunt says that the greatest opportunity to create value in projects is in the design phase, but the primary focus was so often on squeezing costs through competitive bid processes and without sufficient contractor involvement.
“It is no surprise that when surveyed not a single person in the room considered that continuing along the same procurement path is acceptable,” says Selwood.
“All delegates recognised that Treasury and MBIE initiatives were having a positive effect but much more needs doing. Lifting skills in the sector and expanding professional development was universally supported,” he says.
“There was agreement on the need for active collaboration across central agencies to decide how best to provide support and capability to those who need it most. Ideally, this would be a central and local government partnership,” says Selwood.
“The forum split on whether or not a specialist support agency should establish, but half felt this option should implement. In NZCID’s view, this is sufficient support to warrant Government giving this option consideration,” he says.
