Filling the pipeline: How to prime the pump
Pipeline, pipeline, pipeline. Perhaps the single biggest enabler for an industry charged with supporting the country’s post-pandemic recovery and delivering the Government’s wellbeing outcomes for New Zealanders.
Much criticism has been directed at New Zealand’s lack of a visible, coordinated pipeline of infrastructure projects in the past. However, the New Zealand Infrastructure Commission Te Waihanga seeks to address this by the building of its online pipeline to act as a single, trusted source of information for the sector. The pipeline will enable the sector to plan and better invest in capability and capacity.
While good progress is already being made on a pipeline to support the sector, MinterEllisonRuddWatts asked Ross Copland of Te Waihanga, and Brian Harrison of InfraRed, to share their perspectives on building a predictable pipeline and what more is required to prime the pump more effectively.
From ad hoc to planned
Ross Copland says that announced projects being part of a reliable, signalled pipeline is preferrable for the wider sector compared to the ‘surprise’ nature of some recent project announcements and allows a more systemic and planned approach to building infrastructure.
"There’s an enormous productivity cost to the sector, and the country, from constantly being reactive.” - Ross Copland, New Zealand Infrastructure Commission Te Waihanga
“There’s an enormous productivity cost to the sector, and the country, from constantly being reactive. Work that comes to market through surprise ad hoc announcements is not going to be delivered in the timeframes anticipated, simply because the inertia in the system is so great that it takes time to mobilise and react.
“One of the most powerful insights a pipeline offers is looking at different parts of infrastructure, and the lumpiness or smoothness of workflows. To combat this lumpiness, we should be looking at other sectors who are building pipelines in a structured, realistic, and linear fashion to see what we can learn.
“We can learn from regulated sectors that are required to understand their assets and to have an asset management plan in place for renewals and on-going maintenance. This discipline provides a degree of investment autonomy and an obligation to consistently plan for the future.
“If you consider infrastructure funding over the last 12–24 months, we’ve had non-standard funding allocated through New Zealand Upgrade Programme at scale, a NZD700 million water stimulus investment, and NZD3 billion allocated across a whole range of infrastructure shovel-ready projects and through the Provincial Growth Fund, which went predominantly into the port sector, transport, a little bit into energy, and some into tourism infrastructure. If we could turn this into a more reliable and dependable pipeline of work, everyone would win.”
Somehow, he says, the norm within infrastructure has become developing bespoke, non-standard funding models for core infrastructure funding at scale.
“We should be working on a percentage of depreciation-based automatic baseline funding, which then allows empowered institutions to get on and procure that work in a sensible manner.”
Consistent workflows: a remedy to attracting investment?
Brian Harrison adds another challenge to the mix. In his view there is no domestic infrastructure organisation with the requisite balance sheet, depth of experience and capacity able to deliver the largest projects. This creates a need to attract capable and experienced foreign corporations in sufficient numbers to establish a competitive bidding market. However, he says, without a clearly articulated pipeline this is already difficult and will become more so in the future. Many offshore infrastructure players currently view New Zealand on a one-off project basis because there is no evident national forward pipeline or plan.
“This is not an attractive proposition to them, as the establishment capex and opex costs of doing one-off projects in New Zealand is high, because there is no certainty that there is any ability to recover these costs and investments in supply chains and personnel on possible future projects.
"Cost of doing one-off projects in New Zealand is high, because there is no certainty that there is any ability to recover these costs and investments in supply chains and personnel on possible future projects.” - Brian Harrison, InfraRed
“Contrast this with Australia (a competitor for talent in this sphere) which has an announced infrastructure pipeline and it is not hard to see why it is difficult to attract the best in class international contractors to New Zealand in sufficient numbers to create a competitive market.”
Predictability is key to a sustainable workforce
Copland agrees, pointing out that a transparent and stable pipeline adds an important overlay between continuity of work and the ability of the market to respond with sustainable workforce development.
“I’m often asked what I think the most important training, upskilling or workforce initiative is, and my answer is unequivocally, sort out the pipeline. If we can have a reliable, steady, and predictable flow of work, then firms can invest, they can hire, and they can train.
"If we can have a reliable, steady, and predictable flow of work, then firms can invest, they can hire, and they can train.” - Ross Copland, New Zealand Infrastructure Commission Te Waihanga
“If you’re working job to job, and the project is six months out from completion, the project managers, engineers and carpenters and so forth have no certainty what the next job is because there isn’t either a pipeline or the work is not released far enough in advance. This is when we lose people. The market starts to leak, then hemorrhage our skilled workforce to overseas and other industries. It creates unnecessary stress and impacts wellbeing, making our industry less appealing.
“A predictable pipeline with realistic timeframes is what is required to support the sector’s workforce and achieve the country’s infrastructure outcomes.”