Submission on establishing an independent infrastructure body

26 October 2018

Infrastructure Body Consultation
The Treasury
PO Box 3714
Wellington 6140

Email: [email protected]

SUBMISSION ON ESTABLISHING AN INDEPENDENT INFRASTRUCTURE BODY

The Treasury has issued a consultation document seeking feedback on the proposed functions of an independent infrastructure body. This letter is our written submission.

In making our submission, we recognise that there will be several views you will consider to shape the final proposal for Cabinet consideration on the independent infrastructure body. Our submission focuses on areas of concern that we have identified in the way current infrastructure management is working in the public sector, and sets out our observations on the proposed activities of the new independent infrastructure body. We welcome the opportunity to further comment on the final proposal as it is developed.

We support improving infrastructure management across the public sector. For many years our work has recognised that public entities are not managing their assets as well as they should be.¹ In summary, our main concerns are:

• Public entities do not always have the right information, systems, and people to provide a foundation for managing assets well. Many public entities need better information about the condition and performance of their assets.
• In some sectors we have identified inadequate reinvestment in assets. This has occurred over many years.
• Public entities do not always take into account the whole life cycle of the asset when investing in or managing their assets.
• We have commented that the infrastructure planning horizon in some public entities is too short to allow all viable options to be considered.
• In some areas there is a shortage of capability and capacity throughout the public sector to consistently make and carry out good infrastructure investment decisions.

An independent infrastructure body could help to address these issues. However, we have some questions about the operations of a dedicated and independent infrastructure body in fully addressing the weaknesses that have been identified. We set out our comments and questions below.

Independence

We support the need for the infrastructure body to be independent. Independence may help with the infrastructure body’s mandate to collect information from a variety of different organisations and provide advice without necessarily being constrained by the prevailing policy settings in central or local government.

As stated in the consultation document, other jurisdictions have established independent infrastructure organisations. It might be helpful to review how, in practice, their independence has been given effect.

The scope requires clarification

To be effective, the independent infrastructure body needs the appropriate mandate to collect information and to create infrastructure plans that are regionally and nationally integrated. Clarity will be needed about which entities are within scope. For example, is all the infrastructure managed by district health boards or tertiary education institutions in scope?

The independent infrastructure body will need the authority to work with a range of different statutory bodies that have their own, often democratic, mandate (for example, local authorities and district health boards), as well as the private sector.

Even with a broad scope to gather information, consideration needs to be given to any role an independent infrastructure body might have in overseeing the implementation of plans once they are approved.

Role of validating information received from asset owners

A proposed function of the independent infrastructure body is gathering information from asset owners to take stock of existing assets and their condition. Public entities will hold information in many different forms and to different levels of detail. Careful consideration will need to be given to collecting information in a cost effective way.

Although the consultation document is clear about the independent infrastructure body’s role in collecting data, its role in validating that data is less clear. This needs consideration to ensure that decisions are based on reliable information.

The independent infrastructure body would prepare long-term capital intentions. This will be a significant task. There will need to be careful consideration given to the level of reliability required from underlying plans used to prepare an overall capital intentions.

The basis for plans in local government is currently different from that of central government. Local authorities are required to prepare 10-year plans, supported by a 30-year infrastructure strategy. These plans are based on the best available information, and need to be read as such. Each local authority will also prepare these in slightly different ways. Therefore, the collection of information could be challenging (without unnecessarily prescribing this information, which could be costly and time consuming to collect). Longer-term planning requirements for infrastructure in other public entities are currently less consistently defined, which will create other difficulties.

Addressing capability and capacity

Procurement capability and skills shortages are significant challenges recognised in the consultation document. There is a need to retain capability in high-need infrastructure areas. However, it is unclear how trade-offs will be made. This is particularly important given that the independent infrastructure body is seeking to provide an integrated view and will consider infrastructure matters in both central and local government.

Other observations and next steps

Learning from the challenges of the National Infrastructure Unit (and the National Infrastructure Advisory Board), which had some similar objectives to the independent infrastructure body, may be helpful in defining the independent infrastructure body’s operating model.

We acknowledge the statement in the consultation document that there are a number of other Government work programmes under way. We are pleased to note that the Treasury will consider how a new independent infrastructure body will complement this work.

We would be happy to meet with you to discuss our observations in more detail. As noted above, we welcome the opportunity to provide further comment as the final proposal for the independent infrastructure body is developed.

Yours sincerely

John Ryan
Controller and Auditor-General

1: Our most recent observations were set out in our August 2017 report, Reflections from our audits: Investment and asset management.