The construction industry should be back to work in May on a vast infrastructure build that is likely to be the biggest in New Zealand history.
Projects are being evaluated now and plans being made to circumvent the Resource Management Act so the projects can get going quickly.
But the chair of the Infrastructure Industry Reference Group, Mark Binns, is warning that the work will be on what is called horizontal infrastructure.
High rise office and apartment blocks will not be happening.
The Government itself is believed to be looking for landmark legacy projects to be part of the mix.
These could include massive state housing schemes and transport infrastructure to serve them.
Those transport projects might go as far as accelerating Auckland’s second harbour crossing but are likely to include new rail services to west Auckland — either light rail or heavy rail.
Binns told an Infrastructure NZ webinar last Thursday that the funding for the projects would be distributed on an equity basis.
He said this would be done by looking at New Zealand as a whole and breaking it down into regions.
“We’re going to make sure that we provide projects right throughout New Zealand that have some element of equity, “ he said.
“If a region likely Northland is about 3.6 per cent of the population, we’ll look at having around about three or three-point six per cent of the pie in terms of projects available.
“But then we’re going to provide a lens over the top of that in terms of what the Government’s objectives are socially and what other objectives they have around clean energy, etc.
“So we’ll have a decision on how much money we can spend per region and then we are going to look at all the projects that come in and make some decisions.
“Decisions are going to have to be made very quickly.
“And that is something that I need to emphasise.”
What is clear is the objective behind the building.
“It’s jobs,” said Infrastructure Minister Shane Jones
“The reason we’re doing this, of course, is in terms of making sure Kiwis have jobs that we protect,” said Binns.
“Strategically, it’s to maintain trades that are vital for New Zealand.
“I think the early 1990s experience indicated what happens when this construction sector falls in the hole.
“It’s very hard to get up off the canvas.
“And we need to ensure that we can do so.”
However, the build will have strict criteria about what is built. The highest priority will be for what can get started quickly – the so-called “shovel ready” projects.
“We’re doing this is to provide the government with options in terms of infrastructure projects that can be put in front of the government inside a period of very short period,” said Binns.
“We aim to be going to the Government inside a matter of weeks.
“We will have projects available for them to consider early in May.”
The body that Binns heads, the Infrastructure Industry Reference Group, (IIRG) has already contacted local Government and crown entities like DHBs and educational bodies seeking projects as well as working with Government bodies like NZTA asking for project proposals.
“We’re also prepared to look at private sector projects that have a public benefit or can be repurposed for public use,” said Binns.
He explained that could where a developer had gone broke with a project with a public value like student accommodation.
IIRG would finish the project then sell it off.
But he said that from initial replies to the requests “ I think it’s fair to say we’re not going to have any problem in providing the ministers with a very full list of horizontal infrastructure; bridges, roads, water that can be procured right across the country. “
In an email sent to contractors, at the end of March, the CEO of Civil Contractors New Zealand, the industry group for civil engineering contractors, Peter Silcock, said: “We must recognise, however, that most projects will not be able to simply restart.”
“Restarts will be complicated by disruption in the supply chain and the movement of goods, assessment and if necessary remedial works to elements that may have been damaged over the lockdown, particularly as we have transitioned into winter during the lockdown period.
“Consideration needs to be given to the possibility of an early start-up (prior to the Level 4 Lockdown being lifted) of selected priority projects.”
He said his organisation was anticipating a staged return to work following the Level 4 lockdown.
“Under a level 3 regime there will be a prolonged period of restricted movement and social separation,” he said.
An example of the challenges the contractors face is the Transmission Gully motorway project in Wellington due for completion at the end of the year but which is believed to have sent a significant number of its Filipino workforce back to the Philippines.
In some ways Transmission Gully is easy; it’s a publicly funded road; an example of what is called “horizontal “ infrastructure.
Binns is pessimistic about the potential for so-called “vertical” infrastructure, which means buildings and which usually means private sector finance working inside a cyclical property market.
“I think the challenge we’re going to have and I have talked to some of the banks already about this is going to be in the vertical infrastructure space,” he said.
“I think we can probably anticipate that things are going to get pretty tough.
“It will remain tough for some period of time if we have the experience that we had after the 1987 crash because of lead times on projects being just so long.
“The 87 crash really only hit New Zealand property in 1989, and probably the depth of the market was around about 1992.”
Nevertheless, the Government is talking about large-scale housing projects.
But Binns said what worried him with these was the mum and dad builder with no balance sheet “Basically, cash flow orientated in a struggle to just get through to the week’s end.”
“I’m sure I’ll be going to the minister with some subdivisions where land developers might fall by the wayside,” he said.
“And I think it’ll be incumbent on us to probably pick those up and give sections to Kainga Ora (formerly, Housing NZ) and other home developers to ensure that we maintain some momentum in that space.
“But this is a real hard one.”
What may be likely to frustrate Binns and his contractors is the complexities of New Zealand’s planning laws.
It is no secret in Wellington that Provincial Growth Fund staff have found RMA consenting a major frustration to getting their projects up and running.
Jones was happy to give the webinar an example
In 2017, the Provincial Growth Fund approved financing for a roundabout near his home at the intersection of Waipapa Road and State Highway One just north of Kerikeri.
“For those of you who have had the good fortune to go through the north, you’ll see not a single thing has happened,” he said.
“So why can’t we even get a nine million dollar roundabout built in two and a half years?”
Environment Minister David Parker has already asked officials to develop options around how resource consenting processes for certain infrastructure and development projects could be fast-tracked once the recovery phase begins.
Jones has high hopes for this process.
“What I’m about to say is not cabinet policy,” he said.
“But I do believe in Machiavelli saying don’t squander opportunity supported by a good crisis.
“I think that if we approach infrastructure decision making in the way in which we’ve allowed it to grow in New Zealand over the last ten, fifteen, twenty years, then not much of anything is going to happen as we come out of lockdown.”
What Parker is believed to be considering is a process similar to that used after the Kaikoura earthquake where the Government promulgated an Order in Council which effectively allowed it to over-ride the Resource Management and other planning acts.
Jones said he would like to see projects under around $15 million able to be “self consented.”
“I really am pushing as your infrastructure Minister an emergency set of provisions that will give us cut through, and we should be able — and I may get kicked in the bum for saying this — but we should be able to trust in the professionalism and quite frankly, the integrity of those state entities such as Kiwi Rail and NZTA.
“Then we can get on and just get cracking with relatively small projects and offer the work to the small or medium-sized infrastructure companies out of regional New Zealand and get the dough flowing, not just for the big end of town, but to those smaller entities, who quite frankly are really in strugglers’ gully.
“But I’m pretty sure that they will hang on if they can see that speed is actually going to be delivered upon.
“So Cabinet will obviously make a call after Mr Parker serves up his options to a Cabinet Committee.
“And that process is underway.”
This build is likely to be the lasting legacy of both the Labour Government and also Shane Jones who will join Julius Vogel and Bob Semple as one of the great builders of New Zealand.
Meanwhile, for possibly two hundred thousand New Zealanders, it could be the difference between the dole and a wage.
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