New Zealand can curb rising infrastructure costs by taking a more disciplined approach to project scope and design, according to new research from the New Zealand Infrastructure Commission.
The Commission’s Making every dollar count: A review of the drivers of infrastructure costs in New Zealand report examines why infrastructure costs change and where there is scope to improve affordability.
New Zealand Infrastructure Commission chief executive Geoff Cooper says the country invests heavily in infrastructure but does not always get strong results.
“Compared with other high-income countries, we spend more but achieve less,” Cooper says.
“Our findings challenge the idea that infrastructure will always get more expensive over time. At some points over the last 150 years, we have evidence that infrastructure prices actually fell.”
The research points to significant differences between infrastructure types. The price of solar panels fell more than 90% between 1980 and 2012, while wind turbine costs declined more than 30% between 2005 and 2017 after adjusting for inflation.
Motorway construction has moved in the opposite direction, with costs per lane kilometre more than tripling in real terms over the past two decades.
The Commission examined three main drivers of infrastructure costs — materials and labour, construction productivity, and project scope and design.
Cooper says material costs can change quickly and are largely influenced by global prices, while labour costs tend to reflect wider labour market conditions. Productivity can be improved but meaningful gains can take years or decades.
“In the short to medium term, our research highlights that the scope of projects and how we design them are particularly important levers for improving affordability,” Cooper says.
“The research points to making greater use of standardised and repeatable approaches, improving how projects are planned and sequenced, and taking a disciplined approach to scope and design to keep costs down.”
However, Cooper says infrastructure cost increases are rarely attributable to one factor, meaning improvements will require action across the infrastructure system.
“New Zealand faces significant future infrastructure demands. Without improvements in productivity and the way we plan and deliver infrastructure, meeting those needs could require an increasing share of our resources, placing greater strain on the wallets of New Zealanders.
“This research improves our understanding of the actions we can take to get better bang for buck,” Cooper says.
The findings will also feed into the Commission’s Government-directed work examining the drivers of cost growth in New Zealand’s land transport sector.
Read the full report here.
