When you're only seeing one job at a time, it's harder to justify tooling up, Steelpipe's CEO tells Jennifer Dann.
Auckland infrastructure providers need to improve their supply chain leadership and procurement models if the city is to get ahead of its projected growth curve, says Peter Alexander, chief executive of Steelpipe.
The trans-Tasman manufacturing firm supplies steel pipe to infrastructure projects for NZTA, Watercare, Contact Energy, Kiwirail and the Auckland Council.
"We have seen NZTA was leading the way in supply chain leadership, followed by others like Watercare and Contact Energy," he says. "NZTA has actively engaged with its suppliers, telling them what's required and helping them come up to speed. It's providing visibility of future workloads to reduce the risk contractors face in investing to lift their game. When you're only seeing one job at a time, it's harder to justify tooling up."
The transport agency has designed its procurement model to encourage competition. Contracts are often broken up so smaller local players are able to compete for a wider range of projects.
"They've ensured greater competitive tension."
Watercare has shown supply chain leadership by introducing the British-designed NEC3 contracting framework for the Hunua 4 watermain project. "Their objective is to get different players working together to identify and reduce the cost of risk to the whole project. They've organised workshops for their suppliers in how to thrive under that framework."
"I think that sort of initiative is the way forward. Watercare will get a better project because they made that investment in their supply chain. And the ultimate client, the ratepayer, has got better value for money."
Alexander says the increased range of procurement models now seen in New Zealand is good value for customers and supply chains. "No one size fits all. It's a case of what is best for each project. There are not a vast number of new models arising around the world. People are improving the models and getting better at using them."
Procurement expertise is often imported from Britain and would take time to bed in here, he said. The Treasury had produced guidelines for Public Private Partnerships in the past few years, but suppliers still needed to gain experience with them, he says.
Since returning from Britain in 2010, Alexander has noticed an improved ability of infrastructure providers to look at whole life costing and wider aspects of value beyond headline price.
The 45-year-old spent 14 years in Britain. His career spanned infrastructure, construction, and corporate restructuring, including senior roles with construction group Laing O'Rourke, Le Meridien Hotels and Severn Trent Water. He returned home to the joint roles of McConnell Group commercial manager and Steelpipe chief executive.
"One of the things that stunned me when I came back was how much variety this country has in everything. We have an unbelievable number of SKUs (stock keeping units, a unique identifier for distinct products)." There are more types of hummus in the supermarkets here than London. But it's not just the hummus." The low level of standardisation has pervaded everything from housing, to building products like plasterboard, to component sets for rail bridges, he says. Because of this, building costs are higher in New Zealand than countries like Australia and the United States.
"Standardisation, where appropriate, is an important part of the conversation around getting better value for money," he says.
The New Zealand Productivity Commission's recent report on housing affordability found a predominance of houses with one-off, bespoke designs. Building costs could be reduced through greater uptake of standardised designs and building techniques, the report said.
"I'm not talking about everyone living in a house that looks the same. It just means there are components you buy or produce in bulk," Alexander says. Good examples are the Stonefields development in the former Mt Wellington quarry and the Addison development in Takanini. Christchurch has streamlined part of the housing consent process for its rebuild with CT3, a model that can be taken elsewhere.
The scale of the challenge facing Auckland, based on projections of an additional one million people in the next 30 years, means government finance alone will not be enough, he says. "We need a conversation about funding models that might come into that market."
He says disagreements between central and local government on major projects like the Auckland's central city underground railway loop impede the decision-making process. A better quality and more transparent debate is needed around priorities.