The high cost of building nothing

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1. 0:06Speaker 1: Kia ora, I'm Katie Bradford and this is The Front Page, a daily podcast presented by the New Zealand Herald. New
2. 0:16Speaker 1: Zealand has no shortage of infrastructure projects that need doing, but the industry responsible for building them is running out of work. A new survey from Infrastructure New Zealand paints
3. 0:26Speaker 1: a worrying picture. with more than half of respondents expecting the next year to be even tougher financially. And with the election looming, uncertainty over which projects will go ahead
4. 0:37Speaker 1: is making matters worse. Now the industry is calling for a cross-party agreement on what New Zealand needs to build.
5. 0:44Speaker 1: Today on the front page, Infrastructure New Zealand Chief Executive Nick Leggett joins us to explain what's at stake if
6. 0:51Speaker 1: the work doesn't start flowing. So thank you for joining me, Nick.
7. 0:57Speaker 1: This survey, The Pulse, you talked to just under 300 people in the industry. What did it find?
8. 1:03Speaker 2: It's really, Katie, the tune, I think, that the infrastructure industry has been singing now for a number of years.
9. 1:10Speaker 2: But essentially that 93% of infrastructure... Deliverers in New Zealand
10. 1:18Speaker 2: say that cross-party agreement on major infrastructure priorities is extremely or very important. There was no other question that drew
11. 1:28Speaker 2: that same amount of agreement.
12. 1:31Speaker 3: And, you know, it's unsurprising.
13. 1:33Speaker 2: We've talked now about getting a much stronger bipartisan approach to not agreeing on every project, but on the system
14. 1:42Speaker 2: that designs... builds, funds infrastructure delivery in New Zealand. And when you talk to people across the industry, those are
15. 1:53Speaker 2: people that finance, people that design, people that project manage or contractors that build, they essentially say the same thing.
16. 2:04Speaker 2: That long-term sequenced funded pipeline over many years is the best way to get costs down and And it's the
17. 2:12Speaker 2: most effective way to get clarity for industry. So it's got the confidence to grow its workforce, to invest in equipment.
18. 2:23Speaker 2: And we know from the survey as well that a large chunk of the industry have lost staff. Over 40%
19. 2:33Speaker 2: have lost staff to overseas in the last year. And That has certainly been consistent over the last three years that we've run the survey.
20. 2:44Speaker 1: The big change we've probably seen since the last election is that we're actually hearing a relatively bipartisan approach from both parties. We've been hearing it for a couple of
21. 2:54Speaker 1: years now, right? You've got Chris Bishop and Kieran McAnulty sitting there saying, hey, we know we've got this wrong in the past. we are going to do what we can to have a bit of an agreement on this area.
22. 3:05Speaker 1: Has that soothed industry at all? Because it kind of doesn't feel like it, given they're still saying this is their biggest issue.
23. 3:12Speaker 3: Look, I think, yes, I think it has. And look, credit where credit's due.
24. 3:19Speaker 2: There's sort of been an outbreak of kumbaya, really, amongst infrastructure spokespeople of the different parties, including the minor parties.
25. 3:29Speaker 2: And I think that's a genuine commitment. But we won't know until we have.
26. 3:34Speaker 3: A new government.
27. 3:34Speaker 2: Now, whether that is this government returned in perhaps slightly different form, whether they're going to change a whole lot of things up, reprogram whores or... or cancel projects, or
28. 3:46Speaker 2: whether there's a change of government and they do the same. Now, Labour has said they will not do that, but I think what we want to avoid are any great lurches,
29. 3:54Speaker 2: you know, and I think we have... politicised, party politicised, particular types of projects, particular ways of delivering projects. And what we want to do, I think, is agree on
30. 4:06Speaker 2: the fact that we need to invest in roads, we need to invest in rail, in public transport, in pedestrian areas and cycleways.
31. 4:16Speaker 3: Sometimes the mix might.
32. 4:18Speaker 2: Vary depending on the political stripe of the parties in government.
33. 4:21Speaker 2: But ultimately, we need to get agreement on roads, where things fall broadly.
34. 4:27Speaker 3: And once again, it's the system.
35. 4:30Speaker 2: New Zealand is unique in that we don't involve the private sector in funding a lot of our infrastructure. And what you look at overseas, even centre-left governments are open
36. 4:39Speaker 2: to that because they know, particularly in these times when money is scarce, right? The government, now this whole campaign is about the fact the government can't write a cheque for as much as it would like. So how do
37. 4:50Speaker 2: we sensibly connect private sector businesses investment into infrastructure or different procurement models like PPPs or perhaps look at ways
38. 5:01Speaker 2: where you could sell existing public infrastructure or parts of it and use that money to build new public infrastructure.
39. 5:10Speaker 2: We're very, very conservative on the way we approach that.
40. 5:14Speaker 2: We don't want to take major steps and actually if we want to build better and we want to build more and we want to renew and maintain the infrastructure we've already got, we've got to look at more creative
41. 5:23Speaker 2: ways to fund and finance and ultimately deliver on that because unless we're prepared to charge it up, we're going to keep getting poor results and I think that this
42. 5:34Speaker 2: election gives us a chance. You know, we need some bravery from politicians.
43. 5:38Speaker 3: Now look, I think.
44. 5:40Speaker 2: Once again, giving some credit, Chris Bishop's done a good job with the infrastructure delivery system. He's empowered Infrastructure Commission.
45. 5:48Speaker 2: He's created NIFCO, which really looks at ways of helping local government fund, but also how we structure finance for
46. 5:59Speaker 2: infrastructure projects.
47. 6:01Speaker 3: And he's also reformed the RMA.
48. 6:04Speaker 2: Now, Labour has actually quietly supported many of these things.
49. 6:07Speaker 2: They don't make a big deal out of it because, you know, they want to preserve the sort of opposition aspect, but they are quietly getting on with agreeing on the system,
50. 6:18Speaker 2: and I think we've got to have some coherency. But we've also got to have an attitude to build and to deploy projects into the market. Now, a lot of
51. 6:28Speaker 2: the scepticism and, I guess... the hurt that this industry survey conveys is the fact that we've been in a constrained international economy.
52. 6:39Speaker 3: That's really the biggest thing. And so it's been, you know, we have.
53. 6:43Speaker 2: Seen the private sector reduce confidence or reduce, should I say, the amount that's investing in infrastructure. Although I want to say to you as well that the thing that we're
54. 6:52Speaker 2: hearing anecdotally is that energy projects, and when you look at things like Auckland Airport and Watercare, the tap is remaining on those projects that infrastructure that isn't controlled by central government.
55. 7:04Speaker 3: And that's certainly injecting a bit of confidence into the industry.
56. 7:07Speaker 1: And because one of the key points in this was that election years always create a pause in the delivery of contracts. And over half the people are worried about that, right?
57. 7:15Speaker 1: That you basically, and we see this across the wider economy, but basically everyone goes, I don't know what's going to happen.
58. 7:20Speaker 1: Let's just, wait and see. And so in the meantime, these businesses stay in limbo. I think it said 91% say the election creates uncertainty for investment decisions. And 91%
59. 7:32Speaker 1: also think a change of government would likely change priorities or projects. You know, we see Mill Road has just been re-announced, which was a re-announcement of a re-announcement of a re-announcement. I think that's the most cancelled road in
60. 7:42Speaker 1: the country, right? And so it's really hard to just keep seeing that uncertainty every couple of years as soon as an election runs around.
61. 7:51Speaker 3: That's the problem we've got, isn't it?
62. 7:52Speaker 2: That in a constrained capital environment, rows of national significance, which were sort of talked up when the reality of
63. 8:02Speaker 2: office set in, the government realised it was unable to potentially deliver those as planned. Although we do have significant
64. 8:10Speaker 2: roading projects happening. If you look at continuation of the Waikato Expressway and the Northland Corridor. But, you know, I
65. 8:19Speaker 2: feel like governments have the right to announce projects. I think what the public and the sector are wanting more is, well, tell us how you're going to fund it.
66. 8:30Speaker 3: So, yeah, elections create uncertainty. They shouldn't.
67. 8:34Speaker 2: Now, we've got to have elections and it's not politicians' fault that we have elections and that uncertainty is created.
68. 8:41Speaker 2: But if we had less political fingers into projects, because politicians are not project managers, if we had a more
69. 8:49Speaker 2: consistent funded programme that goes over years, I think we could reduce some of that uncertainty. And as I say, what's great is the private sector, private sector infrastructure owners
70. 9:01Speaker 2: and developers are saying, look, we can't, if we sit around and wait for the election and pause our project now, might be an energy project, for instance, you know, it
71. 9:11Speaker 2: might be a solar farm. If we sit around and pause, we're just going to lose time and that's going to cost money. There is good anecdotal evidence that they're continuing full steam ahead on those.
72. 9:22Speaker 3: That's great. It's good for the economy. It's good for New Zealand. But You know, elections do, ultimately, a government could change.
73. 9:33Speaker 2: Even, as I say, an existing government, if this government has a greater Act and New Zealand First component.
74. 9:40Speaker 3: Priorities might change. That's democracy. But democracy sometimes brings uncertainty.
75. 9:46Speaker 1: And one of the, I think the quote that stood out for me was the one that said, I've been working in the infrastructure industry in the same business for 53 years and I've never been so short of work.
76. 9:57Speaker 1: So neither the private sector or the public sector are able to pick up.
77. 10:00Speaker 3: Up that.
78. 10:01Speaker 1: I assume some of that's due to international factors, but that's a real damning indictment of where the industry's at.
79. 10:10Speaker 2: It is, and where New Zealand is at. And this is the, I guess, I think parties are showing.
80. 10:20Speaker 2: The right kind of caution. You know, we're not seeing a lolly scramble, are we, in infrastructure, really, this election.
81. 10:26Speaker 2: And so the parties aren't just, you know, talking a good game. They're actually not going out and promising spending sprees.
82. 10:36Speaker 2: The problem with that is, though, we've got to have a plan for growth. We can't cut our way to prosperity.
83. 10:42Speaker 2: And so I think understanding, you know, I think we've got some fairly clear ideas from many of the parties around where they would invest, I think. We want the
84. 10:53Speaker 2: new government to come in in that first hundred days and signal, here is our programme for growth, and here is where infrastructure fits in, and hopefully a lot of that will be, you know, push and go on projects
85. 11:04Speaker 2: that have already been planned and designed, because a lot gets designed in this country and then just stays on the shelf, costs us massively. A lot of projects progress
86. 11:14Speaker 2: beyond design, And then they're paused. We've got to get out of that hapa. And that's what you're seeing in the survey. is that the industry reflecting that. And, you know, there is a real feeling in the survey as well.
87. 11:28Speaker 2: When you look at the sector's confidence in the business environment for the next 12 months, they're giving it about a 5.4 out of 10.
88. 11:35Speaker 3: Which is treading water. Those are the words we've used.
89. 11:40Speaker 3: They're looking, it looks slightly brighter over three years, but there isn't confidence in the immediate.
90. 11:47Speaker 2: And, you know, I just think having the clarity of, And the feeling that shivers, there's stuff coming down the pipe, we can see it. We've got the confidence to build a business around what's coming.
91. 11:57Speaker 3: We're not there yet.
92. 11:58Speaker 2: And look, the industry only exists to build and maintain and supply and, you know, infrastructure for New Zealand. But we all know that infrastructure, and, you know, we know, Katie, that,
93. 12:11Speaker 2: you know, 70% of New Zealanders.
94. 12:13Speaker 3: think we should be investing more in infrastructure.
95. 12:15Speaker 2: They know that it's the way, because it's not just roads or rail, it's homes, it's energy, it's telecommunications, those
96. 12:24Speaker 2: things that allow us to live our everyday lives well and prosper and connect to families, to community. That's what a good infrastructure does, and we want it to be affordable.
97. 12:36Speaker 2: We ultimately want it to be delivered. So I think that whoever is the government, whichever form it takes, there is an assurance piece to the public and to the
98. 12:47Speaker 2: infrastructure industry about this is our programme for growth, this is how we're going to do it.
99. 12:54Speaker 3: Obviously, the industry needs.
100. 12:56Speaker 2: Signals about when that might occur and be delivered, because we do risk losing more people to overseas. And you'll
101. 13:04Speaker 2: see from the survey as well that 44% of organisations that answered have cut staff in the last 12 months. Now,
102. 13:14Speaker 2: a quarter of them actually grew.
103. 13:16Speaker 3: Their numbers too. This isn't a smooth, it isn't a universal.
104. 13:21Speaker 2: Reduction, but There are large firms in the infrastructure industry that have reduced headcounts by hundreds of people each over
105. 13:33Speaker 2: the last three years.
106. 13:34Speaker 1: And on that delivery, National, in their fiscal plan, they've said here's the amount of money that's going to cost
107. 13:44Speaker 1: to do Belfast to Pegasus on the South Island, Mill Road in Auckland. Do those communities and the industry have any faith that those projects will happen, given everything you've
108. 13:54Speaker 1: laid out, which is one, National has to be re-elected, two, its coalition partners have to agree to it, that those figures need to be correct, it needs to be fully funded,
109. 14:04Speaker 1: or they need to find partners. There's a lot in there.
110. 14:07Speaker 1: And Mill Road, as I said, is the most cancelled road, I think, in the country. You know, how does the industry have confidence seeing this, knowing the history of this going? Actually, this is actually going to happen now.
111. 14:19Speaker 2: I mean, look, for all the reasons you've just outlined, I don't think there would be a lot of confidence at the moment. That doesn't mean, though, that National, as the largest party of a new government, couldn't give that
112. 14:30Speaker 2: assurance because it has commenced roads in this term of government.
113. 14:33Speaker 2: But when you, you know, take Mill Road, Take the second Waitemata crossing. The more you navel-gaze and think about
114. 14:43Speaker 2: a project and the years it takes to go around in circles and doing that, oh, we're going to do it, no, we're not, the escalation of costs is massive. And I
115. 14:53Speaker 2: think we've got to be much clearer at saying it's time to, forgive me, but piss will get off the pot. Like, do it and get your coalition partners on board and
116. 15:05Speaker 2: make it happen. Um, because this is the stuff that, you know, we want to build confidence in people who
117. 15:15Speaker 2: infrastructure and, and delivery expertise to infrastructure, both in New Zealand and overseas. If we, if we turn it into a sort of an election by election lolly scramble, um,
118. 15:26Speaker 2: then we're never going to give that confidence and we're ultimately going to continue to pay more and not deliver the infrastructure that we need at the right time. If we can say, look, we're going to put more faith
119. 15:36Speaker 2: in the Infrastructure Commission and the different parts of the public service to come up with the infrastructure, recommend the infrastructure we need, plan it, design it, deploy it at
120. 15:46Speaker 2: the right time, make sure it's funded, I think there'll be more confidence. The confidence does not come from merely
121. 15:54Speaker 2: political promises. It comes from a stronger system, that system that I've just outlined, that offers up the projects, that listens to the government of the day and its priorities,
122. 16:06Speaker 2: but ultimately says, this is what we're going to do.
123. 16:08Speaker 2: This is how we're going to do it. Please, Mr or Mrs Minister, tick it off and we can get going with it. We've got to fundamentally change the way we do things.
124. 16:17Speaker 3: We've turned.
125. 16:18Speaker 2: We've politicised infrastructure. We've politicised infrastructure projects. You know, I heard someone say from the United Kingdom that New Zealand's the only country in the world where ministers just sit
126. 16:27Speaker 2: there and tick off the individual projects. In other countries, mature countries, that get better value for money and better delivery.
127. 16:34Speaker 3: In most cases....
128. 16:36Speaker 2: They actually, the system offers them up and the government or the parliament agrees. In some countries of the world, they're even in proper proportional systems that don't have, you know,
129. 16:47Speaker 2: the kind of politics that we've got over infrastructure. The parliament will make the decision on the infrastructure programme and the government might tick off the actual infrastructure projects. We've
130. 16:59Speaker 2: got to get to that point if we want to do better. I think Kiwis do want.
131. 17:03Speaker 3: To do better.
132. 17:03Speaker 1: Do you really think that will ever happen? That we'll have a situation where Parliament, all that, all that, they've been independent. There doesn't seem to be any appetite from political parties to allow that complete independence on decision making
133. 17:15Speaker 1: of projects.
134. 17:17Speaker 3: Complete independence. It's just more independence. It's about shifting things a bit.
135. 17:22Speaker 2: And yeah, I do reckon we can do that because other nations have made that change. We're running a campaign at the moment called Let's Build NZ. Let's build dot NZ.
136. 17:31Speaker 2: And That's sharing some of the realities of infrastructure costs and projects that have worked and some that haven't. But we've attached that to a manifesto of eight points. And
137. 17:43Speaker 2: the second point is a 12-year funded programme across different parts of public infrastructure. That's Parliament setting there, you know,
138. 17:54Speaker 2: a proper, stronger select committee process. The Government of the day will still have the sign-off, but it involves all of our elected Parliament in coming up with priorities. And
139. 18:04Speaker 2: what that does is, when the Government changes, it means that all parties are better bought into the funding and ultimately the results and the outcomes that we get from infrastructure.
140. 18:16Speaker 2: There isn't you know, a national way or a Labour way to deliver most infrastructure.
141. 18:22Speaker 3: There's a good way and a bad way.
142. 18:24Speaker 2: And what we want, I think, is for political parties to take ownership, irrespective if you're Labour or National or New Zealand First or the Greens. that you buy into
143. 18:35Speaker 2: a pretty common way of planning and designing and delivering.
144. 18:38Speaker 1: And one of the things National has talked about is what you've called is fixing how the government buys. But Chris Luxon has talked a bit about this, about saying, hey,
145. 18:47Speaker 1: we can actually build schools cheaper because we're buying differently, we're standardising building, all of the things that sound like
146. 18:54Speaker 1: better procurement practices. the really, really not sexy part of infrastructure, but actually really important, right? We could build more if we spent less doing it and did it quicker.
147. 19:03Speaker 2: That is something I talked about, the fact we get silver medal in the world for the value we get out of every dollar. I think there has been a
148. 19:12Speaker 2: tendency for bespoking every bit of, you know, whether it's a bridge or a school building. And, you know, we shouldn't discount good design. And I think you'll see that,
149. 19:23Speaker 2: for instance, you know, it's the CRL in Auckland's been attacked for the cathedral-like stations well good design helps good
150. 19:31Speaker 2: passenger movement it creates the safety in a space we should not chuck out and we should value good design but at the same time we've also got to get
151. 19:43Speaker 2: better value from what we build and so that standardization is really important and the infrastructure industry has shown where
152. 19:52Speaker 2: if it works together, if it relaxes some of the
153. 19:57Speaker 2: sort of false expectations, requirements around procurement that often sit above it, that it can deliver stuff faster and cheaper, but ultimately retain the quality. And that should always be
154. 20:09Speaker 2: the question. Yep, you can halve the cost for schools, but are you comparing apples with apples? Was the higher cost that you were comparing to, were you getting a
155. 20:19Speaker 2: better product, or is it the same product? Now, We've got to have a conversation, particularly in a cost of living crisis. We don't want the flashiest of everything. We
156. 20:29Speaker 2: want quality. We want quality learning environments for kids to be able to excel so we can lift our education results for all kids, not just some. And a learning
157. 20:40Speaker 2: environment properly procured and designed and built school helps that.
158. 20:45Speaker 2: And we've just got to make sure we don't compromise on those things. But yeah, I mean, I think that The government should be congratulated on that. Once again, though,
159. 20:56Speaker 2: if there's a change of government, we don't want to swing back to how it was being done. We've got a new government might come and say, well, this is not good enough, but let's look at what works. And
160. 21:07Speaker 2: we shouldn't have ministers diving down into operations, as I think has become the habit of not just this government, but the previous government, focus on governing, focusing on expecting
161. 21:18Speaker 2: the results, and then, you know, Get the capability and the people and the experience and fund it in the
162. 21:26Speaker 2: system to be able to deliver on what you expect.
163. 21:31Speaker 2: Having ministers on the whiteboard directing operations is exactly the sort of thing that causes problems in infrastructure delivery. That's
164. 21:39Speaker 2: what creates problems in projects. What we have to do is get ministers governing to get the right results. And that's a discipline. Once again, it's something the public should expect.
165. 21:52Speaker 1: And just quickly, a very clear message in this survey, do you think the politicians are listening?
166. 21:57Speaker 3: Yes, I do.
167. 21:59Speaker 2: I think you've heard that, and Katie, you've observed it yourself as an infrastructure reporter, that.
168. 22:07Speaker 3: The tone, the language, the big promises have changed.
169. 22:11Speaker 2: I think we've we've collectively worked to get politicians to understand the system thing, not the projects thing. And I
170. 22:21Speaker 2: think all sides have done that, but the real proof of that will be the behaviour of politicians after this election,
171. 22:32Speaker 2: after the election in three years, and the one after that.
172. 22:34Speaker 3: Can we.
173. 22:37Speaker 2: Can we resist the urge to make big promises, to politicise particular projects and cancel them? Can we keep that smooth pipeline? We've got to increase the amount that's being
174. 22:48Speaker 2: delivered and we've got to maintain it over time.
175. 22:51Speaker 3: That's how we're going to get better value for money.
176. 22:52Speaker 2: And ultimately get better infrastructure delivered faster, which is what I think New Zealanders expect, deserve, and they can have
177. 23:02Speaker 2: that if we can all sing from the same song sheet. Great.
178. 23:06Speaker 1: Thank you, Nick Liggett, CEO of Infrastructure New Zealand.
179. 23:11Speaker 2: Cheers.
180. 23:11Speaker 3: Bye.
181. 23:14Speaker 1: That's it for this episode of The Front Page. You can read more about today's stories and extensive news coverage at nzherald.co.nz. This episode of The Front Page was hosted
182. 23:25Speaker 1: and produced by me, Katie Bradford. It was produced and edited by Richard Martin with studio operations from Kane Dickey and executive production by Jane Yee. Subscribe to the front
183. 23:36Speaker 1: page in the iHeart app or wherever you get your podcasts and tune in tomorrow for another look beyond the headlines.