We spend nearly six per cent of GDP on public infrastructure investments – the highest in the developed world – but get some of the poorest returns, AQA CEO Wayne Scott told the 2025 Future Roads conference.
Wayne says our difficult terrain and small population spread over a large land area are factors, but we get poor value for money.
Consenting costs amount to 5.5 per cent of the cost of our road construction and can add years to delivery times. The EU’s consenting costs are 1.5 per cent and its pre-construction costs overall are 3-5 per cent. New Zealand’s is 10 per cent.
Temporary traffic control costs amounted to more than six per cent of a road project’s cost.
Wayne told the Future Roads audience that work on procurement models suggested the competitive tendering model does not work. Australia had done some roading projects on a cost-plus basis where once design and capability are established the parties agree on a margin to be paid above costs.
He says large highly complex roading projects are one area in particular where our roading project costs don’t compare well with other OECD countries.
Central government, as the owner of 60 per cent of all our infrastructure, makes political decisions that don’t help. A cost benefit analysis was done hurriedly over two months for Transmission Gully in 2013 due to a political decision. Within a year, a more detailed analysis had increased the cost by $77 million.
Procurement practices drive low pricing and overpromise. There are no incentives for good performance, very little oversight during projects and no accountability for overruns (time or cost).
Moreover, Wayne says there is no post-project analysis of what went right and what didn’t.
“We are in a state of ‘optimism bias’. We are told projects can be done cheaper and quicker. In fact, too often projects overpromise and under-deliver.”
“Everyone is optimistic about what they can do, often ignoring the reality of previous projects or justifying why this one is different.”
Rising labour costs for infrastructure were not usually taken into account. Engineering costs are escalating as most “easy” roading projects have already been completed.
“We already have 110,000 kilometres of roads and most of the new roads will be in more difficult terrain.”
Wayne says there is often a failure to consider if there is enough local aggregate available for a project. If not, it will add considerably to the cost. Three weeks before paving was to start on Transmission Gully, a project manager asked where he could source 600,000 tonnes of GAP 65!
Then, there were over-the-top regulatory and environmental requirements such as spending millions of dollars on penguin protection for the Wellington-Petone cycleway.
By way of contrast, Wayne pointed to the construction in seven months (half the usual timeframe) of a section of State Highway 25A in the Coromandel which had been destroyed by a landslide.
Emergency legislation slashed consenting requirements; an existing bridge design was used; and repurposed steel plates from another project sped up the supply chain. Flexible working hours allowed 24/7 operation.
“Would a long-winded consenting process or issuing of a wildlife permit have changed anything for the better on this project?” he asks.
“The slip probably killed a lot more wildlife than a project like this ever would. We need to get out of the way and let road builders build roads,” says Wayne Scott.