City Rail Link boss Sean Sweeney slams New Zealand infrastructure costs

New Zealand is the most expensive country in the world to build new infrastructure. That was the charge levelled yesterday by Sean Sweeney, chief executive of the City Rail Link (CRL).

“But,” said Sweeney, “I don’t just want to complain about it. I have some thoughts on how to fix it.”

In a keynote address at the NZ Rail 2023 conference in Auckland, Sweeney noted that the cost per kilometre for building a “metro” or rapid transit rail line in New Zealand is US$922.37 million ($1.493 billion). This is an estimate of the cost of the CRL.

But in the United States, where costs are also regarded as expensive, it’s a third less, at US$601.85m/km.

In Australia, it’s only US$321.43m/km, which is almost two-thirds less than the New Zealand figure. France gets the work done for less again: US$255.55m/km.

And Portugal, South Korea, Spain and Finland manage to build transit lines for around US$100m/km. More than nine times less than New Zealand.

In many of the low-cost countries, the contractors are the same as those that do the work here. The lead tunnelling contractor for the CRL was the French company Soletanche Bachy.

Sweeney’s figures come from research by the Transit Costs Project, a private research company attached to New York University’s Marron Institute of Urban Management.

“This is a crisis,” he told the conference. “Bipartisan political planning is now urgently required and it has to focus on capability and affordability.”

New Zealand doesn’t have enough of the skills and experience to build large infrastructure, Sweeney said, and that makes it expensive when we try.

He asked, “What does a healthy construction sector look like?”

There were three key components to his answer. “The first is profitable companies, the second is a skilled workforce and the third is willing clients.”

An artist's visualisation of the underground train station platform at Te Wai Horotiu, formerly known as Aotea Station.

Speaking to the Herald after his speech, Sweeney noted that Fletcher Building, the biggest construction company in New Zealand, no longer tenders for transport projects. “They say they’re too risky.”

The reason for this, he said, is related to the reason they’re so expensive. “The prevailing approach has been to load risk on to the contractor, even when it’s unrelated to their work.”

He gave the example of contractors being required to carry the risk for “below ground” events. “But they don’t know the local geology. So either they have to take that risk and it could force them out of business, or they charge a higher price.”

Another example is “change of legislation” risk.

“When I started at the CRL I had to argue very hard to prevent contractors being made to carry the risk of the Government changing the regulations. But we’re the Government!”

The CRL is jointly owned by the Government and Auckland Council.

“Why should contractors have to accept that risk?”

Politicians and officials might believe they’re driving a hard bargain on behalf of taxpayers. “But,” said Sweeney, “because they load up their costs, we end up paying more.”

He said he managed to prevent “change of legislation” clauses for CRL contractors.

Sean Sweeney: "We walk into unknowns every three months."

Sweeney is a New Zealander with 20 years’ experience in Australia, and he thinks we have much to learn from Australian states with large transport construction programmes.

“They share the risks with the contractors, so the relationships evolve and there are joint expectations of what will happen.”

Also, he said, “They have a pipeline of projects, so the better builders know they will get more work. And the worse ones, you can hold their feet to the fire.”

The pipeline is critical for Sweeney’s second requirement: A skilled workforce.

“You can get your costs down if the work is not one-off. The long-term proof of concept is the programme to replace level crossings in Melbourne.

“They started with 25, and now they’re up to a hundred. They have alliances with the contractors, so they gain and then retain experience, and everyone saves money.”

At the CRL, in contrast, when the tunnelling was finished, the overseas companies left “and they took 300 highly skilled workers with them”.

Sweeney’s third requirement is “willing clients”. He confirmed he meant the Government.

“I don’t want to sound partisan,” he said. “This is a long-standing issue.”

And it’s an acute problem with officials. “There is almost no major project experience in the public sector here.”

Sweeney issued a challenge. “If New Zealand is to have any chance of addressing the infrastructure deficit,” he said, “We will need a complete reset.”

The Transit Costs data shows that tunnelling is usually more expensive than surface projects. But there are exceptions. In Greece, like New Zealand, 100 per cent of the work has been tunnelled, but Greek projects cost six times less than New Zealand’s.

Sweeney told the Herald there is an underlying problem. “The construction industry has suffered a market failure. Market economics in this industry is a fantasy and the CRL is a living example. We walk into unknowns every three months. ”

Simon Wilson is an award-winning senior writer covering politics, the climate crisis, transport, housing, urban design and social issues, with a focus on Auckland. He joined the Herald in 2018.