New Zealand is the most expensive country in the world to build new infrastructure. That was the charge levelled recently by Sean Sweeney, chief executive of the City Rail Link (CRL).
“But” said Sweeney, “I don’t just want to complain about it. I have some thoughts on how to fix it.”
Speaking to the Herald after his speech, Sweeney noted that Fletcher Building, the biggest construction company in New Zealand, no longer tenders for transport projects. “They say they’re too risky.”
The reason for this, he said, is related to the reason they’re so expensive. “The prevailing approach has been to load risk on to the contractor, even when it’s unrelated to their work.”
He gave the example of contractors being required to carry the risk for “below ground” events. “But they don’t know the local geology. So either they have to take that risk and it could force them out of business, or they charge a higher price.”
Another example is “change of legislation” risk.
“When I started at the CRL I had to argue very hard to prevent contractors being made to carry the risk of the Government changing the regulations. But we’re the Government!”
The CRL is jointly owned by the Government and Auckland Council.
“Why should contractors have to accept that risk?”
Politicians and officials might believe they’re driving a hard bargain on behalf of taxpayers. “But,” said Sweeney, “because they load up their costs, we end up paying more.”
He said he managed to prevent “change of legislation” clauses for CRL contractors.
He listed the three key components we can address it:
- The first is profitable companies,
- the second is a skilled workforce and
- the third is willing clients.”
I’m sure we have all wondered just why our infrastructure costs so much. He demonstrated the challenge we have as a society by comparing us with the rest of the world.
Ministry of Works
Again, I reflect on just what we did by destroying the Ministry of Works. There we had generations of engineers and planners who had the long view and the experience of building big infrastructural projects. I know I harp on about this but it was yet another example of neo-liberal thinking which threw the baby out with the bath water.
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