This advocacy article was prepared by Dentons and is being published by the New Zealand Herald as advertorial.

Simon Wilson’s recent article raises important questions about the models used to deliver infrastructure projects in New Zealand.

New Zealand is playing catch-up in its infrastructure deliverables (at an estimated shortfall of roughly $200 billion). With rising construction costs and inflationary pressures, the most cost-effective project is, in many ways, the one that was built yesterday.

New Zealand must build smarter, including exploring different models for project procurement, delivery, and financing (eg PPPs).

Choosing the right tool for the job

While there may be ideological considerations that drive a preference to use PPPs (ie a preference to increase private sector participation in delivery of infrastructure projects), PPPs are essentially a tool, and choosing which tool to use should be project specific.

Using a PPP model will not necessarily be cheaper, result in effective risk management, create the right incentives to motivate best behaviour, or create enduring institutional knowledge. However, there are a number of potential benefits from using a PPP model including improved whole-of-life outcomes because maintenance budgets are not susceptible to being cancelled by the next Government, greater budget and programme certainty, access to private sector expertise, efficient use of private capital, and economies of scale.

PPPs also enable us to get started with infrastructure developments that we cannot otherwise afford to complete now, and pay them off over time. Much like many Kiwis do with their household mortgages.

PPPs are not a universal solution

The cause of New Zealand’s poor track record of managing mega-projects is multi-layered. From inadequate early budgets, long delays and indecision in business case development, to a complex consenting environment, weak ground conditions and susceptibility to natural hazards: the list goes on.

Using a PPP model will not resolve these challenges. Regardless of the model used, early investment in planning and business case development, then “staying the course” can significantly contribute to project success. A well-planned project, where relationships between the Crown and its delivery partners are collaborative rather than combative, is more likely to be completed on time and within budget.

Choosing the correct model is only one part of the wider equation

The debate surrounding pros and cons of PPPs is illustrative of New Zealand’s current politicised approach to infrastructure which creates uncertainty, and means our local infrastructure sector is not healthy, resilient and able to grow and invest in its people for the projects of tomorrow.

A bipartisan approach to delivery of infrastructure projects would allow the spotlight to be focused on addressing more effective procurement and project delivery and avoid the disruptions in the infrastructure pipeline driven by shifts in political priority.

It is these core issues – rather than a preference for one contracting model over another – that need to be addressed to ensure the essential infrastructure NZ needs is built and maintained.

To read Dentons full article, click here.