Contractor

Tackling future challenges

This article first appeared in Contractor Perspectives 2017.

We are a small nation, with global ambitions. Achieving those ambitions means we need to focus on the triple helix of infrastructure effectiveness: productivity; innovation; and collaboration. Robert Jones, Chief Executive, Fulton Hogan NZ.

THE FINAL SCENE in the 1985 film Back to the Future captured the imagination of many kids – including the adult ones – when one of the characters declared that “where we’re going, we don’t need roads”.

Cut to their DeLorean car lifting off the ground. That scene hit a fantasy hot button for futurists who believed that flying cars would solve our 21st century urban mobility problems.

More than 30 years later, drones are commonplace – but flying cars are still on the drawing board. Meanwhile, electric and self-driving cars are a big part of today’s chatter about tomorrow’s modes of transport.

While it’s easy to get carried away by the wave of optimism about new auto technologies solving the mobility issues plaguing our big cities, there is little doubt that we have entered an era of disruptive change in the transport sector.

Like many others Fulton Hogan is committed to researching and developing ways to make our national road network safer, more efficient, and responsive to new vehicle technologies and environmental standards. We want to do all that, while also respecting budgetary constraints and the careful use of tax and ratepayer dollars.

We are a small nation, with global ambitions. Achieving those ambitions means we need to focus on the triple helix of infrastructure effectiveness: productivity; innovation; and collaboration.

The productivity challenge

Infrastructure productivity is a challenge here, and in most advanced economies. A recent McKinsey report claims that cost overruns for some large international projects average 20 to 45 percent. Fortunately in NZ this is the exception rather than the norm. Often it’s taxpayer money that’s wasted, meaning other projects miss out. But the reality is that construction productivity in many advanced economies is either flat, or falling.

The report had a long list of reasons for flat-lining performance. Industry fragmentation, skills shortages, poor planning, limited use of new technologies, and risk aversion were among them – along with ineffective procurement processes and contracts. McKinsey went on to say that “improving project selection, delivery, and management of existing assets could translate into 40 percent savings”.

The NZ Transport Agency’s new Network Outcomes Contracts model was introduced with the aim of “efficiency and effectiveness through better asset management and service delivery”. It’s still early days but our gut feel is that this is driving the right outcomes towards smarter asset management.

Increased certainty and longevity is a big step towards wiser purchasing and deployment of plant and equipment as we have also seen on operational alliances such as the Auckland Motorway Alliance and the operation of SCIRT in Canterbury.

The innovation challenge

In our age of disruption, we soon grow weary of current technologies and train our eyes on the likely next big thing. The pressure to innovate is huge.

There is already a lot of discussion about what we must do right now to get ready for the age of the driverless car. Quite often there is media focus on the shock of the new.

Driverless cars sound exciting. But we can’t afford to pin all of our hopes on them. The pragmatic, proven way forward for transport infrastructure – particularly in our big cities – is the same as it’s always been. Give people transport choices by investing in proven technologies like bus rapid transit, cycling infrastructure, rail, and well-maintained roads.

Even though it is not exciting or new, we need to optimise the use of our existing assets. It is way cheaper than reconstruction, and helps to keep our cities moving.

We can do this by making our existing assets more efficient by investing in smart technologies that we know work well elsewhere. In Europe, for example, there is much that we can learn about managing our roads so they are safer for both motorists and cyclists.

At Fulton Hogan, we strive for a balance between R&D, innovation, and collaborating with those who have products and technologies that would benefit Australia and New Zealand.

The collaboration challenge

When it comes to infrastructure innovation, we need to decide if we go it alone or leverage global leaders. Kiwis are a stubborn breed. Our long-standing tradition of DIY often comes to the fore when seeking international expertise could save us from the need to re-invent the wheel.

Disruptive change is going to present some huge challenges for our sector in the future. We need to apply some fresh thinking to how we get ourselves match fit for new modes of transport. Most of us tend to hunt alone to meet the specific needs of our customers. This is frustrating. We are only a small country, and it’s time our sector came up with a smarter way of doing this.

McKinsey identifies the desire to embark on unique projects, or provide unique solutions to clients as one of the factors that can contribute to slow infrastructure productivity growth. It can also discourage contractors and owners from drawing on lessons learned across projects.

The establishment of the National Infrastructure Unit and its action plan was a welcome step in the right direction. The actions outlined in its 2015 report are focused on what central government, local government and infrastructure peak bodies will do to change how infrastructure is planned, developed and managed.

But what are those of us in the private sector doing to bridge the productivity challenge that arises from competing to be unique?

Perhaps it is time that we engaged in some collaborative disruption on our R&D and innovation efforts. With some mature thinking we as an industry can work together to coordinate and prioritise our efforts to determine what is best for NZ Inc.

Over the summer ahead we should all give some time to thinking about the options in 2017 to drive greater productivity, leverage the innovation leaders, and join forces to lift our infrastructure to world class more quickly.

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