How To Be A Better Infrastructure Client
Two new pieces of research from the New Zealand Infrastructure Commission | Te Waihanga highlight some failings in our approaches to infrastructure delivery and where we can improve.
The papers, Delivering Better Value and Better Outcomes and Towards Better Contracts, suggest new ways that can bring us better value and better outcomes from what we build, the Commission says.
Delivering Better Value and Better Outcomes looks at the challenges with traditional project-by-project, outsourced procurement models and identifies seven principles that delivery agencies can utilise to become more sophisticated clients. It makes the case that longer-term more collaborative partnerships can improve outcomes, subject to infrastructure clients retaining the appropriate in-house capability and expertise to manage contracts effectively.
Towards Better Contracts provides a summary of interviews conducted with infrastructure contracting professionals in the public and private sectors around current practices, and barriers to better contracting and contract management as a means to better project outcomes. It aims to increase transparency and awareness of current procurement practice challenges.
Delivering better value and better outcomes
New Zealand's traditional approach to infrastructure delivery has often relied on lowest-price tenders to deliver public value. We have pursued a project-by-project process, focused on lowest price, risk-transfer and adversarial commercial relationships – an approach which has not delivered efficiency, stability or reliability of results.
This report looks to international approaches to infrastructure delivery, with a focus on the best practices principles that have emerged from the UK. The UK has created a collaborative framework for delivery, which better leverages the experience and ability of construction partners. This reduces costs and improves infrastructure outcomes.
The paper is aimed at public sector organisations who manage, plan, deliver, and maintain infrastructure – particularly decision makers responsible for or involved with procurement decisions and/or supply chain management. It will also interest suppliers and advisors of infrastructure client organisations.
Towards better contracts
This report provides a summary of interviews conducted with infrastructure contracting professionals in the public and private sectors around current contracting practices. It aims to increase transparency and awareness of current procurement practice challenges.
Te Waihanga interviewed 26 government construction contract participants to investigate current contracting practices. This included people working in the legal, procurement, project management, and design/engineering space.
The interviews were conducted in 2023, and found that agencies' capability as infrastructure clients was generally limited and lacking across the sector.
Key findings:
The knowledge, level of experience, capability, and behaviours of individuals acting in key contract administration roles has a significant impact on project outcomes. However, few agencies had any strategic processes or evaluation structure in use when selecting individuals for key contract delivery roles.
Despite an increasing general awareness of the benefits from fair and clear risk transfer and collaboration, little has changed in procurement and contracting practice between 2018 and 2023. Special conditions are still being used extensively to customise contracts to specific agencies, rather than having a standard set of special conditions across government.
Collaborative contracting can lead to improved contract performance and better project outcomes, but uptake is low.
A sense that procurement, specifically the tender stage, was somewhat disconnected from the overall project delivery, and all interviewees (client and contractor) considered continuity of representation throughout the procurement and delivery process to be beneficial to the contract outcomes.
Dispute resolution processes within contracts are seen as a last resort, expensive, and often producing unsatisfactory outcomes.
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