New Zealand: how the cost to build infrastructure compares with costs in other high-income countries.

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‘Benchmarking New Zealand’s infrastructure delivery costs’ report released by Te Waihanga explores how the cost to build infrastructure in NZ compares with costs in other countries.

A new Te Waihanga report, “The lay of the land: Benchmarking New Zealand’s infrastructure delivery costs”, explores how the cost to build infrastructure in New Zealand compares with costs in other high-income countries. The report draws upon a companion report by Oxford Global Projects and various other data sources.

“Our statistical analysis suggests that we have similar costs for four infrastructure projects: surface rail stations, electricity transmission lines, onshore wind farms, and hospitals,” says Te Waihanga Director of Economics Peter Nunns.

“Where we appear to face a cost premium for infrastructure projects, however, is with complex, large-scale infrastructure projects,” says Te Waihanga Director of Economics Peter Nunns.

“We identified cost premiums for four complex, large-scale projects: urban and rural motorways, road tunnels, and underground rail projects,” says Te Waihanga Director of Economics Peter Nunns.

Te Waihanga looked at why some countries may build infrastructure more cheaply than others. We identified four overarching reasons why the cost of similar infrastructure projects might vary between countries, including input costs (such as labour, materials, equipment, and land), construction productivity, differences in physical context (such as geology, climate, and built environment), and policy and institutional settings for planning, consenting, and delivering infrastructure.

“New Zealand faces lower construction wages but higher costs for equipment, bare land, and some infrastructure construction materials. Our overall input costs for vertical construction are similar to other high-income countries. However, projects that need to buy a lot of concrete, machinery, or land may cost more in New Zealand,” says Te Waihanga Director of Economics Peter Nunns.

“The physical environment can have a significant impact on project costs. New Zealand is a seismically and volcanically active country, which impacts some of our infrastructure delivery costs. At the same time, in some areas, such as wind power, New Zealand has shown an ability to adopt new technologies and methods quickly,” says Te Waihanga Director of Economics Peter Nunns.

“Benchmarking infrastructure delivery costs is a way to find out how we’re doing and if we can improve the affordability of infrastructure delivery. Knowing what projects should cost to build and maintain can guide us towards better infrastructure decisions.

“The reality is that sometimes, we have no choice but to build an expensive piece of infrastructure – but if we have robustly tested that choice, we can be confident that we are addressing our infrastructure challenges as affordably as possible,” says Te Waihanga Director of Economics Peter Nunns.

The report identifies five ways that New Zealand can lift their game:

  • Ensure government acts as a sophisticated client of infrastructure. This means taking the time to understand what we are building before we build it, establishing good processes and principles for making project scope and design decisions, and investing in the right capability to plan, procure, and manage infrastructure.
  • Strengthen independent advice for infrastructure prioritisation and establish a pipeline of future investment to ensure more certainty in proposed projects.
  • Be open to new technologies and methods. New Zealand’s success in delivering wind farms at a similar cost to other high-income countries and its ability to benefit from global improvements to wind turbine design rapidly highlights the value of adopting new technology.
  • Ensure efficient planning and consenting systems are in place to make it easier to develop cost-effective infrastructure solutions and avoid costs arising from delays or scope uncertainty.
  • Resource Management reform is an opportunity to reduce the delays in project planning and achieve good environmental and infrastructure outcomes more predictably.
  • Conduct ongoing infrastructure delivery cost benchmarking to understand better what projects should cost.

Click here to read the full report of ‘The lay of the land: Benchmarking New Zealand’s infrastructure delivery costs’. 

Source: © New Zealand Infrastructure Commission, Te Waihanga 2022

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