In the days before privatisation and tendering almost all NZ’s transportation infrastructure was built by the Ministry of Works. The ubiquitous orange and white dump trucks and earthmoving equipment roamed the country. Although it was often the subject of much ridicule, under this old fashioned Govt Department most of the national highway network and rail network was constructed. In the mid 1980s with the move to market reforms, the Ministry was swept away and transport infrastructure construction was thrown open to any contracting company with the promise being lower costs and speedier rates of construction. However, it appears as though neither of these objectives have been met. Construction costs have spiralled up relentlessly and thanks to the Resource Management Act it can often take longer for a project to gain approval than actual construction.

Many Profit Margins. It is clear some of the blame for spiralling costs of construction of road projects in particular can be laid at the door of the regime under which projects are now built. The old Ministry was not obliged to make a profit so presumably project budgets reflected at cost prices. There was also vertical integration so not only did the Ministry own all its own equipment, it also owned all its own gravel pits, bitumen plants and associated plant and equipment. This is not the case today. If a company wins a contract to build a roading project it has to buy in raw materials such as hard fill or gravel from another company with its margin added on top.

Look Overseas. A return to a centralised Govt department taking care of road construction is unlikely in today’s political environment. However, with growing concerns about rising costs, perhaps it is time to look at putting tenders out to global construction companies as is common place with railway or airport construction works to see how their prices compare with those offered by local companies. I wonder if the Waterview motorway project would still work out at a whopping half a billion dollars per metre if this was done?

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