Covid-19

A Ministry of Works for post-Covid NZ

Government could enter the construction market in a way not seen in several generations, Dileepa Fonseka reports

Ministers are rushing to prevent the country's construction sector hollowing out under lockdown. 

However, they've also admitted the state's role in construction will massively expand in a way unheard of in several generations. That could include turning Crown Infrastructure Partners into a new Ministry of Works-style government department.

Government ministers announced two measures aimed at shoring up confidence within the country's construction sector on Wednesday morning. The first was the establishment of an Infrastructure Industry Reference Group to pick out "shovel-ready" projects exceeding $10 million that could be taken up within six months.

The second was a move from Minister of Transport Phil Twyford to make advance payments to construction companies who were on contract to the NZTA, but unable to work during the lockdown.

Both measures are aimed at encouraging the construction sector not to let sub-contractors and others go as construction work grinds to a halt. 

"I don't think it's credible for us to run infrastructure ... where essentially NZTA has no workforce that actually does the work. It's all outsourced. That model is defunct. It's gone."

"I think some of the most grave situations are half-complete projects. The cash-flow has dried up as demand thins," Infrastructure Minister Shane Jones said.

He believes in a post Covid-19 world the Government will have to greatly expand its involvement in the construction sector. 

"Phil Twyford and I are working through some scenarios that would change the character and the purpose and the size of Crown Infrastructure [Partners]," Jones said.

"I don't think it's credible for us to run infrastructure in the way [we have] where essentially NZTA has no workforce that actually does the work. It's all outsourced. That model is defunct. It's gone."

Answering questions on whether the Ministry of Works would be revived at the end of the country's Covid-19 recovery Twyford said he "wouldn't want to rule out that more hands-on approach", and Jones said he was strongly in favour of it.

"We're receiving a great deal of advice. And I have to say quite a lot of senior identities in the infrastructure community have already put forward the notion of something akin to the Ministry of Works," Jones said. 

Shane Jones says some within the infrastructure community are heavily in favour of a 'Ministry of Works' style agency being set up again. Photo: Lynn Grieveson

"The term Ministry of Works I realise might lead to allergic reactions. I'm far more allergic to the prospect of 15 percent of my fellow New Zealanders being consigned to joblessness," he said.

"I don't want to be engaged in ideological tussles with people who have a hang-up about the term 'Ministry of Works'. I'm saying show the hang-ups you've got for the 15 percent of Kiwis that are likely to be in the ranks of the jobless." 

The old Ministry of Works and its predecessor the Public Works Department constructed much of the country's core infrastructure including electricity and rail infrastructure. Its operations were also a major source of employment. 

'It cannot be business as usual'

Crown Infrastructure Partners Chairman Mark Binns was announced as the head of the Infrastructure Industry Reference Group on Wednesday morning.

Twyford said the group's main role would be to pick out projects that were ready to go and where much of the planning work had already been done.

Members of the reference group include NZTA chairman Sir Brian Roche, KiwiRail chief executive Greg Miller, and Infrastructure Commission chairman Alan Bollard.

A member of the Construction Industry Accord will join the group at a later date.

The group will work alongside the Provincial Development Unit (PDU) and the Infrastructure Commission.

"My view is that in a new economic environment we need to be able to really revisit the assumptions that we've had in the last few decades."

Ideas for projects would be solicited from a range of different agencies including councils. 

Employment and the "multiplier effect" of certain infrastructure investments would be a key consideration where funding was concerned, Twyford said. 

He said "three waters" assets could also be eligible for consideration. Those assets have been highlighted as a major future cost for councils. 

All investments will come on top of already-announced infrastructure investments like the $12b New Zealand Upgrade Programme.

Jones said the group would also explore the answer to a deeper question too: "What is to be the role of the Crown in a recessionary environment in infrastructure?"

"Because it cannot be business as usual," Jones said.

Twyford believes a major lesson learnt from past failures to get big infrastructure projects off the ground was that there has been a lack of capacity to drive them forward at the scale needed.

"Government needs to have strong organisations capable of making these big projects happen," Twyford said.

"That capacity simply didn't exist. We didn't have the levers to do what we wanted to do," he said.

"That's why Kāinga Ora was created. So that we had an organisation with the balance sheet, values and the ambition to drive a massive government build programme."

"My view is that in a new economic environment we need to be able to really revisit the assumptions that we've had in the last few decades."

'Timid' days are over

Jones said tourism and international education would no longer be major industries for New Zealand. He believed manufacturing and other forms of industrial production based in the provinces would pick up the slack.

However the turmoil will take a toll. He cited estimates that unemployment would rise to 15 percent and noted that rate would likely be higher for Māori and Pacific Island workers.

"Over 200,000 New Zealanders will be out of work...we cannot leave such a large number of, largely, young people on the scrapheap," Jones said.

He said an infrastructure financing and construction model "mired in red tape" was no longer fit for purpose in those circumstances.

"The equation is quite simple. Why would we allow projects to be hampered at a time when 15 percent of the population will be in the jobseeker queue. What political fool thinks that's a good idea," Jones said. 

"I can guarantee this 'business-as-usual' of us timidly sitting by managing contracts, those days are over," he said. 

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