2019 Infrastructure Procurement Survey Results Sarah Lang Project Director Infrastructure New Zealand August 22, 2019
Survey Respondent Statistics • 168 respondents • Respondent demographics: Directors, GMs, Partners, • Feedback collected on 38 procuring Project Managers, agencies Commercial Managers, • 454 individual agency responses Project Directors, Bid Writers, CEOs, Procurement Managers, • 17 minute average survey completion Regional Managers, time Senior Consultants, Civil Engineers, Managing Directors August 22, 2019
Diverse, Senior Participants Other 12% Public sector e.g., central or local government agency Engineering professional 14% 36% services Professional advisory e.g., 14% legal, accounting, economic, property, insurance, planning, industry body 24% Contracting and construction August 22, 2019
Experience with Infrastructure Procurement Process in New Zealand None 2% Greater than 20 years 18% Less than 5 years 28% 25% 10-20 years 26% 5-10 years August 22, 2019
Experience with Infrastructure Procurement Process Internationally Greater than 20 years 9% 24% None 10-20 years 14% 24% 5-10 years 29% Less than 5 years August 22, 2019
Procurement performance has fallen Good 3 2.08 2.28 2.11 Average Performance Average 2 Poor 1 0 2016 2017 2019 Year August 22, 2019
Wide range of performance across agencies Good 3 90 2.5 75 Number of Respondents Average 2 60 1.5 45 Poor 1 30 0.5 15 0 0 Procuring Organisations Average Rating Number of Responses August 22, 2019
Agencies think they’re doing better than they are Good 3 2.5 Average 2 1.5 Poor 1 0.5 0 Procuring Organisations Self-Evaluation External Evaluation August 22, 2019
Ports lead the way on procurement performance Auckland Airport Auckland Council Department of Corrections District Health Boards Ports Housing NZ/HLC Ministry of Defence Auckland Top Above Ministry of Justice Lyttelton Performers New Zealand Transport Agency Median Napier Ōtākaro Ltd Treasury Tauranga Watercare Wellington Airport Wellington Water Rise above median since 2017 No change since 2017 August 22, 2019
Comparison of Best and Worst Performing Agencies using 14 Key Procurement Criteria Treats suppliers/contractors as partners High-level, outcomes-focused approach to projects Understanding of risk allocation and management Committed to continuous improvement Prioritises whole-of-life value over least capital cost Methods match scale, complexities, and risk Best Performers Adheres to published timetables Operates fair and transparent bid processes Worst Performers Adopts reasonable probity requirements Proactively engages with the market Reduces bid costs where possible Informative tender debriefs post procurement Evaluates project performance post completion Uses standard documentation 0 0.5 1 1.5 2 2.5 3 Poor Average Good August 22, 2019
Changes in performance since 2017 Improved • Treats suppliers/contractors as partners • Understanding of risk allocation and management • Reduces bid costs where possible Worsened • Adopts reasonable probity requirements • Committed to continuous improvement • High-level, outcomes-focused approach to projects August 22, 2019
Procurement expertise is falling... both in the private and public sectors Private Sector Public Sector 4% 70% 26% 25% 60% 15% 2016 2016 1% 68% 31% 12% 74% 14% 2017 2017 13% 65% 21% 32% 52% 15% 2019 2019 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% Poor Average Good August 22, 2019
In-Depth Feedback: Public Sector • “ Too much focus on process and not outcomes. • “Very low understanding by the procurers of the Too much emphasis on probity instead of market conditions and the very low margins getting the best outcome for their entity.” that contractors operate under.” • “ Lack of understanding on costs of tendering. • “ Never adhere to schedules. Can be months or Lack of understanding on fair risk allocation. ” years late. ” • “ Often driven by lowest price, rather than • “Procurement is seen increasingly as a lowest lifecycle cost. ” standalone activity, removed from the overall purpose of the organisation.” • “ Evaluation criteria need to be clear. These tell us your priorities and help create an even playing fjeld as opposed to fumbling around in the dark.” August 22, 2019
In-Depth Feedback: Private Sector • “Some private sector procurers are very good , • “ Very good at procuring the best outcome, not much better than the public sector in driving so good at procuring within budget, leaving quality and long term outcomes . Yet some, the contractors exposed to all the risk from cost particularly developers, are very poor and are escalation. If you are being paid for a Mini don’t only focused on a one ofg outcome to the deliver a Bentley without the right variations in detriment of the contractor and the market place.” generally.” • “ Highly variable. Too much risk placed on • “ The private sector is more pragmatic and contractors. Bottom dollar focus.” generally more outcome focused. It is about getting the best result in the quickest time and that means working together and not just following ‘the process’ and being a handbrake on the delivery.” August 22, 2019
Clear Focus Areas for the Infrastructure Commission Publish a major project pipeline of infrastructure projects Support government agencies in project procurement and delivery Interface with the market, providing information to investors, contractors, etc. Monitor project delivery performance and record lessons learned Establish a centre of expertise in project delivery Publish guidelines for best practice project delivery process Interface with equivalent bodies and experts internationally Conduct ex poste project evaluations each year 0% 20% 40% 50% 80% 100% Low Importance Moderate Importance High Importance August 22, 2019
Feedback on the Infrastructure Commission • “ The commission needs to be given some teeth • “ Its role needs to be carefully defjned and so that it can efgect change in New Zealand. promoted within the whole sector; what it is Providing reports and new ideas will not improve accountable for and what it is not accountable delivery of infrastructure in New Zealand.” for. There is a big risk that matters will fall between stools if organisations such as • “Their focus needs to stay at the strategic NZTA, local authorities and KiwiRail do not level and not get bogged in the operational fully understand their respective roles and aspects of procurement.” responsibilities.” • “ Expertise should be drawn from the professional services and industry as well as the procurement side to ensure a holistic understanding of the issues. It should also be committed to the Treaty and take a wider view of sustainable infrastructure (i.e., also social).” August 22, 2019
Agencies Leading Social Procurement in New Zealand • Auckland Council (esp. the Southern Initiative) • Auckland Transport • New Zealand Transport Agency • Housing NZ/HLC • Watercare Early Days, Tentative Start • “Not yet.” • “Only just starting to become a consideration. I can’t say I’ve seen any great examples.” • “I notice these themes are becoming increasingly important across most major projects and organisations in terms of the RFP responses, however I am not sure how much of this translates into any real and measurable gains during or post project. It would be good to have some evidence that these are actually followed through on once awarded.” August 22, 2019
Added costs or unintended consequences when fulfjlling social procurement requirements? • “ No ” • “Yes. Confusion especially from the second tier contractors. They are under tremendous • “Often RFPs ask organisations to describe their pressure to put in the lowest price and meet steps relating to environmental sustainability onerous compliance requirements. Now we or diversity and inclusion, but procurement add social procurement expectations and they decisions are not then made on the basis of struggle to see how they can meet them and these matters. This simply wastes the time of be cost efgective. ” tenderers.” • “The upfront and ongoing cost of managing • “ A lack of clarity from procuring agencies about stakeholders and liaising with iwi was money what those requirements actually involve.” well spent. ” August 22, 2019
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