Report into infrastructure procurement reinforces need for central leadership

"Major issues affecting the construction and wider infrastructure sector are the result of weak procurement capability across the board and strengthened government expertise and leadership is required to drive an overall lift in industry performance," says Infrastructure New Zealand CEO Stephen Selwood.

This is the overall conclusion from a new Infrastructure New Zealand-commissioned research report by Entwine into major project procurement.

The report draws on in-depth feedback from leading infrastructure procurement experts across the public and private sectors and is supported by the Construction Strategy Group and Civil Contractors New Zealand.

“Poor procurement invariably impacts on every aspect of a project and usually leads to poor quality outcomes and increased whole of life costs. The absence of a strong pipeline of work and the focus on lowest cost has had a massive negative impact on construction industry skills and capability. Improved procurement is the key to resolving these issues and needs to be addressed urgently,” says Civil Contractors CEO Peter Silcock.

"Top performing procurement agencies have specialised staff who manage a long and consistent pipeline of work with transparent, standardised processes but carefully selected models to optimise risk, maintain a competitive market and deliver maximum value from public investment.

"It is clear we need a whole-of-system response to the way public agencies procure services from the private sector and incremental or one off changes to procurement processes will not be sufficient,” says Construction Strategy Group Chair Geoff Hunt.

"What is clear from the research is that a huge amount of opportunity exists within the public sector procurement space. Value is created for New Zealanders during both the asset creation and the asset in use. Smart procurement is the key to maximising this value. This is not a public vs private zero sum game. Instead purposefully managed change can very much be a win-win for all parties,” says report author Leah Singer.

Selwood says, "we've been guilty in New Zealand of forgetting that the purpose of public investment is exactly that – to invest – and we've prioritised cost cutting to the detriment of the bigger picture.

"Fit for purpose has become less important than fit for budget, with the true price being higher long term cost and under-performing public services.

"By following through on its intention to establish an independent specialist procurement agency – an "i-body" – the Government will be able to address the major risks confronting its large infrastructure programme and the wider industry.

"As the repository for procurement expertise nationally, the i-body will harbour and develop career professionals in procurement.

"They can then provide advice and support to all public agencies, leading an immediate and rapid improvement in procurement capability across the entire public service, starting with our biggest, most complex and highest risk projects.

"Combining this technical expertise with a national strategic function, including the preparation of a national project pipeline, will spread the benefit of the i-body across the wider industry.

"A key finding in the report is that private sector procurement capability also needs some support so that the industry can better assess risk and position itself appropriately for the work ahead.

"Lifting procurement expertise across New Zealand is an immediate priority given the huge investment required in coming years. This will help us to both maximise benefits and enable projects to be delivered more quickly and efficiently," Selwood says.

ENDS

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