The NZTA is the largest single client for the civil contractors, spending $4 billion per year per from the National Land Transport Fund, influencing another $1.5 billion of local government spending, and investing another $0.5 billion of Crown funds.
When Government signals a change to how that much money will be spent it has massive impacts across the industry from tier 1 contractors through to some of our smallest companies.
The release of the Draft Government Policy Statement (GPS) on Land Transport signals a quantum shift.
While the industry will welcome the additional $500 million per annum to be invested by 2020/21 how that money will be invested requires a step change from contractors and the agency.
The new GPS focuses on the much publicised shift from investment in new four lane state highways to safety improvements, rail and light rail and regional and local road improvements and maintenance.
|Transport GPS Strategic Direction|
|Economic Growth and Productivity||Safety|
|Road Safety||Access (including economic and social opportunities, choice and resilience)|
|Value for Money||Environment|
|Value for Money|
With over $2 billion proposed as the upper range of funding on public transport, rapid transit, walking, cycling and transitional rail by 2020/21 contracting companies need to be looking at how they can realign their capability and capacity to do this work.
We need to start now to plan how we will use our resources and people and how we will access the people from offshore with the skills needed to deliver this work.
Over the next three years (2018/19 to 2020/21) the proposed upper funding levels in the activity classes related to local and regional road improvements and maintenance increase by $300 million or 25 percent overall pa.
This will be welcome news to the regions that have seen the state of their roads deteriorate over the past few years. Adding in the historical 50 percent local government funding, we will see up to $600 million spent on our local and regional roads. With debt caps and rate payer resistance to rates rises the big question is where will local government get it’s additional $300 million pa share?
The issue of Funding Assistance Rates which are set by the NZ Transport Agency (not by the GPS) is mentioned in the GPS Q&A sheet it says that the new priorities “create an expectation for greater expenditure from activities where local government is required to provide a share. The NZTA is considering how to support the Governments new priorities.”
It will be interesting to see where this consideration gets to but adjusting the Funding Assistance Rate is not the only one option, but the GPS also flags that the new Provincial Growth Fund (PGF) can be used to:
- provide a top-up of local share for projects that will receive funding from the NLTF, but where local councils are financially constrained
- bring forward projects which are not priorities for NLTF investment, but are strategically important to a region’s productivity potential
- fund projects outside of the scope for NLTF investment, but which contribute to the objectives sought through the PGF and are aligned with the region’s transport strategy.
The biggest concern is that the change of direction outlined in the GPS potentially creates a two year gap in our construction pipeline between the completion of the large state highway projects and getting the new public transport projects up and running.
It is very concerning that few new projects of any size have progressed over the past eight months and it will take years before construction on the proposed new public transport projects begin.
We have highlighted this issue with Minister Twyford and the critical need to retain our construction capacity and capability to deliver our future infrastructure programme.
He has listened and has undertaken to ask the NZTA to identify any construction ready jobs that clearly meet the priorities of the Draft GPS that could be bought forward to fill the gap.
Our message is that the civil construction industry is adaptable and innovative and can deliver on this change of focus provided there is continuity of work during the transition.