New thinking to solve old problems

This is a time of unprecedented change in how we live, how we do business, and what is possible with the clever use of technology.

Imagination, and the innovation it brings, is creating enormous leaps forward for every industry.

In the world of Engineering, Procurement and Construction (EPC), bold ideas are transforming the cities we build, the transport networks we connect people with, and the infrastructure that keeps everything working.

Major infrastructure projects involving transport, housing or the provision of essential services and utilities are typically complex.

They are resource-hungry, fraught with risks and subject to cost overruns, timing delays, design compromise and the consequences that result.

These problems are particularly acute in markets like New Zealand that don't have the scale or resources to support the best of contemporary international EPC capability.

In today's resource constrained NZ market, and particularly in high growth locations, we need to think differently about the challenges in front of us.

The challenge in planning, and funding growth is multi-faceted. A shortage of houses in Auckland, growing congestion and increasing unaffordability are compounding problems.

To successfully deliver infrastructure at greater scale and pace we must take a new approach to procurement, and funding large-scale projects. There are significant opportunities in the form of global EPC best practice that new market entrants can bring for the benefit of all New Zealand.

We need access to the latest thinking and innovation in system design if we are going to succeed in the modern age.

There is much to learn from those international EPC contractors and consortiums who have successfully delivered some of the largest and most challenging infrastructure projects in China, Asia and around the world.

This ability to design and build transport systems, major construction and infrastructure projects can deliver both quality and cost efficiency beyond what we are used to in New Zealand.

There are also considerable efficiencies to be gained from alternative funding models. It is no longer enough (or often possible) to access land at an affordable price.

We must also create commercial structures that carefully balance innovation and constructability.

This all then needs to be directed by a project management and compliance team that delivers time and cost savings within the confines of approved, safe, environmentally sound, and accurately verified methodologies.

Local authorities in high growth areas face the common constraint that their current funding tools do not enable them to keep pace with infrastructure requirements.

This results in housing deficits, congestion, and water quality issues. On-balance sheet borrowing cannot provide the full answer because of the debt ratio limits applying to local government entities.

This all means that councils in high growth areas are systematically underproviding growth infrastructure, resulting in an ever-expanding range of economic, social and environmental problems. The slope of "catch-up" requirements gets ever steeper.

Internationally, there is a trend to alternative, and robust off-balance sheet funding models that maintain high public acceptability. Internationally, there is a plentiful supply of capital so long as an appropriate transaction structure, cashflow model and projects can be found.

The ideal operating environment for to attract such international funding includes the following:

• The ability for the structure to be duplicatable and transferrable to other projects of sufficient scale.
• A structure and processes that doesn't inhibit business as usual for existing Government agencies.
• Compatibility with other programmes of work, and other long-run government (central and local) projects which span the next 30 years.
• Allowing innovation and constructability to be realised early in the planning and development process. It also provides a form of direct foreign investment that is nation-building rather than being more speculative in nature.
• Provides a robust and bankable cashflow to the contracting parties who are procured in a competitive market environment on a level playing field. This enables the Government to draw together all available funding sources and these must include capturing an appropriate share of the value uplift around the infrastructure project.

CadeNZA is an EPC consortium that is able to bring these innovations to New Zealand.

CadeNZA is a blend of local New Zealand know-how and experience, with the best international minds, capability and funding to address modern infrastructure challenges.

Their strategic partners include companies like CMEC, CTCE, CEC and Chun Wo that have created the infrastructure to facilitate growth in today's mega-cites in Asia and other parts of the world.

Across the group of partner companies CadeNZA has access to vast resources in engineering design, construction capability, transport technology, and funding.

This includes world-class performance in zero-harm, health and safety practices, and building information management (BIM) systems that are superior to what New Zealand is used to.

We also bring global expertise in operations and maintenance, including whole of life asset management through the advanced use of BIM technology, to provide optimal total lifecycle costs, as well as quality assurance and product traceability.

New Zealand's future is one of growth and prosperity if it is driven by innovative and efficient means.

- John Dalzell is Managing Director of Silk Road Management