YEARBOOK 2017
RECOVERY PLANNING ESSENTIAL With natural disasters impossible to predict and an increased risk from terror attacks playing a major role, the need to have an established workplace recovery plan is greater than ever
Artificial Intelligence pg 10
Local Government year in review pg 12
Cost of Kaikoura pg 16
NZ’s great rock venues pg 23
How to protect your business from a catastrophe and why business continuity plans must consider the needs of people is essential reading for management from SMEs to major corporations. It is not just your IT systems that need to be recovered - your most important assets, your employees, must also be prioritised. The case for business continuity was well made by the seminal research by Knight and Pretty The Impact of Catastrophes on Shareholder Value. This showed that shareholder value was lost in the long-term by the poor response to a catastrophe, but conversely it was actually improved by responding well. Many think they are prepared, or can get by, but it is crucial to remember that dealing with a disaster well wins the loyalty of your customers; dealing with it badly can put you out of business. The report says that traditional workplace recovery takes no account of employees’ emotions or their journey to work. It is designed for an era when both IT and people were more static. Most businesses are confident they can recover IT. Regus research revealed that about one in three of IT recoveries are fully successful, but one in 16 completely fails. This focus on IT has come at the expense of people. Modern workforces are increasingly mobile – the practice of herding workers into a ‘one-size-fits-all’ facility is outdated, the report says. The report notes that while technology continues to change how we work, traditional recovery solutions have not kept pace. Mobile working solutions have fundamentally changed the workplace. People can work wherever they sit down, accessing services and data as needed. Cloud computing provides scalable
solutions without the need for heavy investment in IT equipment and capabilities, and if disaster strikes, new technology gives us far more options. But despite companies beginning to embrace new working practices, with an increased reliance on co-working and shared spaces, recovery methods are lagging behind. Gone are the days when we have to stop work or move an entire company, en masse, to a large static recovery location. Today, it is much easier to simply head for the local coffee shop or work from home. But, if not considered properly these solutions bring with them a multitude of additional problems. The fastest growing business continuity strategy is to work from home. Regus research has shown that this is the preferred option for 39 per cent of businesses, with 75 per cent of these expecting to see an increased reliance on it. When you consider that PwC clients have reported being able to make savings of 50 per cent of their business continuity budget by adopting this strategy, this is hardly a surprising statistic, the report says. Businesses need to strike a balance between the old-style recovery and full-on mobile working, the report says. That balance should take the form of a toolkit of strategies that allows them to pick the right mix of approaches for different types of needs. Most importantly, it should address the needs of people, and not just IT and business functions. The report concludes with advice on making a continuity plan and a valuable checklist of things to include in your planning and preparation. To download the white paper http://www. regusworkplacerecovery.com/research/ Continued on page 6
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FIRST WORD
TOTAL PACKAGE: a fully integrated planning, governance, funding, regulation, delivery and resource management system more responsive to change is needed, says Infrastructure New Zealand CEO Stephen Selwood
New Zealand’s infrastructure priorities for 2017 Responding to Auckland’s growth challenge and fixing planning legislation and local government funding and structures are the top infrastructure priorities for New Zealand in 2017, says Infrastructure New Zealand CEO Stephen Selwood “Congestion in Auckland is disproportionate to the city’s size and is rapidly deteriorating,” he notes. “Of greatest concern, travel times along the State Highway 1 motorway corridor have increased by 30 per cent in just the last three years and are projected to get much worse." Earlier this year Infrastructure New Zealand produced a video of the already unacceptable state of congestion. “Major works underway on the Central Rail Link and motorways must continue at pace and the next tranche of projects to deal with 50,000 more people per annum brought to market,” he maintains. Chief among these is the East West Link. “The Onehunga Penrose manufacturing and industrial zone employs approximately 68,000 people and contributes $4.6 billion a year to New Zealand’s economy, but the current transport connections into and through the area are either incomplete or highly congested.”
Selwood says the East West Link is essential to enabling movement between State Highways 1 and 20 and fixing congested access into and out of Auckland’s premier industrial zone. “When the Waterview Connection comes on early next year, it will be vital for resilience and efficiency of the network that traffic can move between the two key corridors as easily as possible,” he insists. “But we mustn’t forget that efforts to deliver on Auckland’s transport priorities can only be successful if we have an aligned growth plan which focuses development in areas where the transport system can accommodate it. Guest speaker at Infrastructure New Zealand’s Annual General Meeting, Deputy Mayor Bill Cashmore, highlighted the financial constraints facing the city and how these are impacting the ability to fund the transport investment needed to support Auckland’s growth.
“A first principles review of our governance, funding and institutional structures should be a priority for the newly elected government in 2017”
“Infrastructure New Zealand favours capturing value created by public investment in infrastructure and putting tolling in place to both raise funds and manage demand,” Selwood says. “These are among options that need to be explored sooner rather than later.” Beyond Auckland, he believes “fragmented and unnecessarily complex governance structures, complicated and disintegrated planning laws and insufficient funding” are frustrating local
government’s ability to deliver the infrastructure needed to support regional development and growth. “A freshly elected parliament in 2017 provides an opportunity to undertake a first principles review of our infrastructure and local government, planning, governance and funding arrangements nationwide,” Selwood maintains. He believes what’s needed is a “fully integrated planning, governance, funding, regulation, delivery, and resource management system that is much more responsive to change”, which will drive regional social and economic development, improve environmental outcomes and strengthen local democracy and community engagement. “This will require much more than constant tinkering with existing legislative, governance and funding systems,” Selwood admits. “A first principles review of our governance, funding and institutional structures should be a priority for the newly elected government in 2017.”
INFRASTRUCTUREBUILD.COM YEARBOOK 2017
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CONTENTS
Future cities pg 40
Cover Story
Construction
Property
The need to have an established workplace recovery programme is greater than ever in the face of unpredictable natural disaster and terrorist attacks – Regus 1, 6
The potential efficiencies of new technologies could lead to further growth for a booming construction sector – Brian Clayton & Bruce McClintock Chapman Tripp 10-11
Corporates reap benefits of shared office space paying for what they need and only when they need it – JLL 6-7
Cities
Engineering
Legislation, planning and funding for infrastructure is needed to encourage world class property development – Connal Townsend Property Council NZ 18-19
Government restoring Kaikoura coastal route and Wellington buildings subject to new targeted checks for public safety – IPENZ SESOC NZSEE 17
Whatever happened to New Zealand’s great rock venues – Bayleys Realty Group 23-24
Megacities, innovator and observer cities of C40 rise to the Paris Agreement challenge to ensure sustainable cities and economic growth – Arup & C40 Group 20-22
Compliance & legal
Local Government Review of 2016 shows the regulatory and legislative burden on local government imposes unnecessary costs on local communities and new national council confirmed – Lawrence Yule Local Government NZ 12-14
Flexibility and global connectivity drive office leasing solutions – Regus 7-8
Relocation Having the right building in the right location is part of the puzzle but putting a deal together than works for both parties makes the difference – PFI 14-15
Industry insured losses from earthquakes may reach $5.3 billion – Air Worldwide 16
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YEARBOOK 2017 INFRASTRUCTUREBUILD.COM
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Autonomous Vehicles pg 9
Security
First Word – The Auckland challenge, planning legislation and local government funding top priorities for 2017 3
The vexing question of managing risk in a local government environment thrown into stark relief by the Kaikoura quake 44-45
On the surface 2016 showed significant steps in infrastructure but dig a little deeper and a year of much less progress emerges – Stephen Selwood Infrastructure NZ 42-43
Transport
Energy Natural gas and zero-carbon fuels are expected to satify 60 per cent of the rise in global energy demand by 2035 – Wood Mckenzie 33
Management Pipeline forecasts will drive better procurement planning for clients and suppliers – Caroline Boot Plan A & Clever Buying 34-37
Autonomous vehicles are a future fact of life but how they are used is the key to their success or failure – Praveen Thakur KPMG 26-28 Electric Vehicles may become popular much faster than expected fuel distributor Z has produced a report on the issue 29-32
Water Hawkes Bay District Council sets the standard for efficient and economic water supply for small towns 38-39 Kaikoura quake a sharp reminder of the need for greater pipeline resilience 40-41 Bayer spend $3 million on new water treatment station 41
Check out the following Best of the Best AsiaPacific Infrastructure articles of 2016 at infrastructurebuild.com
CONTENTS
Cover stories
Cities: Nelson Street Cycleway Communication: Local telecommunications world-class Construction: Isaac Theatre rebuild project Energy: Petroleum Conference report Environment: Urgent action needed to keep the temperature down Local government: Evolution or revolution Training & Management: Tips and tricks to avoid tender template traps Transport: Electric vehicles Water: Getting and keeping it clean
Supporters Autonomous Vehicles Asia ����������27 Chapman Tripp ������������������������������������ 9 Clever Buying ��������������������������������������37 DiveCo ��������������������������������������������������41 Infrastructure New Zealand ���������� 2
Iplex Pipelines ������������������������������������46 Kliptank ������������������������������������������������39 New Zealand Red Cross ����������������47 PFI ����������������������������������������������������������15 Plan A ����������������������������������������������������35
Procurement & Contract Management Summit ��������������������36 Quest Apartment Hotels ��������������48 Regus �������������������������������������������� 29-30 Skyscrapers Asia Summit ������������17
Street Lighting Conference 2017 ����������������������������28 Sub Surface Detection ������������������45 Thrifty Car Rental ������������������������������32
www.infrastructurebuild.com www.propertyandbuild.com Free access to searchable archives in key categories such as Local Government, Construction, Cities, Energy, Environment, Transport, Water, Communication, Property Development, Investment & Policy, Training & Management, Technology and Innovation. Free online access to daily news features, case studies and events. Original material may be reproduced with permission and acknowledgement. mike@infrastructurebuild.com ISSN 2324-3163 (Print) ISSN 2324-3171 (Online) PROPERTYANDBUILD.COM YEARBOOK 2017
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Continued from Cover
PROPERTY
Failure to plan could cost you your business Prior to the 1980s, if you lost your place of work you would simply take a few days off. Businesses were vulnerable to disruptive events that were out of their control, with lost revenue, diminished reputations, and even the threat of closure. But, during the past 30 years, companies have realised the value of having a disaster recovery plan that includes fully equipped alternative premises to work from. Unlike the 1980s, customers today expect an uninterrupted service even during a disaster, whatever the size of the business – and now there is an expectation to have an effective plan in place. When Superstorm Sandy ripped through the east coast of the US in 2012, the US Chamber Foundation’s Business Civic Leadership Center estimated that 60,000-100,000 small businesses were negatively affected. Some 30 per cent of them were expected to fail within months as a direct result of the storm, according to a report by Forbes. A National Hurricane Center report concluded that severe damage to small firms occurred in New Jersey, with nearly 19,000 businesses sustaining damage of $250,000 or more. Total business losses are estimated at $8.3billion. In 2011 Japan was hit by an earthquake, which affected 740,000 small businesses, and a tsunami, which took out 80,000 companies. While no price can be put on the human losses, conservative estimates suggested that the disaster displaced more than 300,000 employees across 715 industries, costing $209bn in lost sales. Due to a lack of planning by businesses themselves, the Organisation for Small and Medium Enterprises and Regional Innovation in Japan arranged for temporary offices. It’s not just widespread natural disasters that pose a threat. Smaller-scale man-made incidents, whether unintentional or intentional, such as terror threats, can also have a significant impact on business continuity. In the aftermath of the Paris terror attack in November 2015, Brussels was put on a heightened state of alert and local officials recommended a full lockdown, with several facilities across the city ordered to close. When a cable fire blazed for 36 hours under the pavement in London’s Kingsway in April 2015, several businesses lost electric, gas and broadband services. Some 5,000 employees were forced to evacuate their offices, with more than half of them experiencing disruption or several days. The estimated cost to London’s economy was £40m. A study by the Federation of Small Businesses in January 2015 found that 59 per cent of the small businesses that they questioned in the UK did not have a plan in place to deal with extreme weather such as flooding or snowstorms. Under this heightened state of alert across the globe, companies must be prepared to relocate their staff at a moment’s notice due to a terror alert or even attack. But, astonishingly, despite significant changes to working practices and mobile technology during the past 30 years, recovery methods have largely remained static, and the plight of workers has remained largely ignored. 6
YEARBOOK 2017 PROPERTYANDBUILD.COM
Corporates reap benefits of shared office space Users have the option of shared office space, private offices, meeting rooms and business lounges. They pay for what they need, and only when they need it
Co-working was the buzzword of the commercial property industry in 2016. The serviced office concept has come a long way, and today’s iterations are funky and modern, with all of the top-class facilities you’d expect in a multinational company. It can work for sole traders who need to get out of the house; people who travel constantly and need an office in every port; and companies that need extra space but don’t want to move or commit to a new lease. When something unexpected happens and the company’s office is out of action, a co-working space really comes into its own. That was true for several Wellington businesses in 2016, after the Kaikoura earthquake on November 14 closed a handful of office buildings. Over the past 30 years, companies have started to realise the benefit of having a disaster recovery plan that includes fully equipped alternative premises to work from. Reducing the size of fixed offices and completing a real estate portfolio with flexible workspace solution enables businesses to tackle the disaster recovery issue, but also increase employee satisfaction, reduce risk and balance sheet impact of traditional leases, along with overall cost savings and increased agility.
In the US, Verizon made the decision in 2016 to let go of all of its traditional office leases. Their employees now choose from a network of co-working locations provided by Regus. In the UK, Shell did a similar thing back in 2000. They had 35 offices and got rid of them, choosing to use Regus’ facilities instead. The move enabled both companies to cut their property costs by more than 50 per cent, while making employees happier and more productive. The biggest factor influencing their happiness was the fact that they spent less time commuting and had more flexibility to choose where they wanted to work. Auckland’s sprawling city limits mean many Aucklanders commute much further than they’d like to. “I think Auckland’s geography sometimes stands in the way of the right people getting the right jobs,” Regus’ Country Manager Pierre Ferrandon says. “Sometimes it is just not feasible to take a job on the other side of the city. "But imagine being told you could have that job without having to travel across town every day. “Rather than having one big CBD office, companies are now starting to see the
JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. JLL has over 50 years of experience in Asia Pacific, with 34,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016. www.ap.jll.com or contact Catherine Reiss catherine.reiss@ap.jll.com
Flexibility, global connectivity driving new office leasing solutions As the sharing economy continues to transform every aspect of life, Kiwi businesses are seeking alternatives to one of the last bastions of business tradition: the fixed office environment
PROPERTY
benefits in having satellite locations in the north, south, east or west of the city. Not just to be close to their customers, but to be close to where their employees live too. One way that they can do this is by having their central HQ and then using shared office facilities in the city’s fringes. That way they only pay for the extra space as and when they need it – there are no fixed costs or long-term commitments,” Ferrandon says. In the 2015 New Zealand Attitudes and Values Study by the University of Auckland, the average time Aucklanders estimated they spent commuting was five hours a week. Fifty per cent of those spent more than five hours a week, and 25 per cent said they spent more than eight hours a week commuting. Private transport still accounts for 75 per cent of all journeys to work in Auckland. The numbers of people using public transport has risen, but the number of drivers on the road has not really changed. It’s the number of people travelling as a passenger in a private vehicle that has decreased, suggesting that some Aucklanders have ditched carpooling in favour of public transport. Ferrandon says life gets easier for everyone when employers let go of the idea that we all need to be in an office between 8am and 5pm. “Of course there are benefits in gathering together to have face-toface meetings and work on projects together. But that doesn’t mean that all of your employees need to be in the same place every day. Some will find they’re much more productive if they have a day or two working from home on tasks that require a lot of focus, and then collaborating with colleagues in an office on the other days of the week. “If an employer can be flexible about what time the employees travel to the office, it reduces traffic stress. It also allows the people who are naturally early birds to start early and others to start later and work later. “For people who need to drop off or collect their children each day, flexible start and finish times can be the difference between longterm loyalty to a company and a desperate need to find a new job.” Regus has facilities in Auckland and Wellington CBDs, with many more in the planning stages for Christchurch and Dunedin next year. “Our goal is to have a network of locations across New Zealand, in the main urban areas, so that wherever you live, there will be a Regus facility within 15 minutes of your home. “I believe that by offering people an office location that’s close to their home and has world-class facilities, employers will ultimately be able to attract better talent and have a happier workforce,” Ferrandon says. “There are huge environmental benefits too. If we change the way we think about work and stop making people drive back and forth to the city each day, we reduce the amount of pollution we produce.” In Singapore the offer of free public transport early in the morning has helped to reduce the crush on peak-hour trains. The idea has been posed in Toronto too, a city known for its traffic problems. “For these schemes to really be successful, it relies on employers to make flexible working hours common practice,” Ferrandon says. Tech hubs like GridAKL in Auckland’s Wynyard Quarter are prime examples of the benefits of a flexible co-working environment. Tenants tend to be start-up tech companies, all of whom are working towards similar goals and can learn from each other. Chance conversations that start in the shared kitchen lead to problems solved and new collaborations. Commercial property company JLL released a white paper on tech hubs in 2016. It points out that property companies need to be innovative in their thinking, in order to adapt to the way the companies of the future want to work. “The traditional set-and-forget lease arrangements do not apply,” JLL Associate Director – Office Leasing James Thorburn says. “Flexible solutions, shared space and serviced offices are all part of the puzzle. Commercial property companies can learn a lot from the way tech hubs operate. This is the way the younger generations want to work,” he says.
CREATURE COMFORTS: an executive office at Regus ANZ Tower, Auckland
To meet growing demand for more flexible working arrangements, Regus, the world’s largest flexible workspace provider, is opening its seventh New Zealand location — its third in Wellington, located on level 6, 1 Willis Street. The new prime CBD workspace features private offices, shared spaces and carefully designed drop-in areas available for an hour, a week, a month or longer. It’s all about maximizing productivity and comfort, and minimizing the limitations that fixed space can present. “Businesses need faster and more flexible options for all sorts of reasons: short-term projects, new branch offices, expanding into new markets, better use of working capital, growing teams and more,” explains Regus New Zealand Country Manager, Pierre Ferrandon. “Many now choose to work this way on a permanent basis because it makes sense and is more efficient for their business PROPERTYANDBUILD.COM YEARBOOK 2017
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PROPERTY
LEFT: Spaces Richmond in Melbourne BELOW: Views from Wellington Regus Plimmer Tower
and people. In the on-demand, shared economy, there really isn’t any reason to have money, energy and time tied up in assets that are often in use for shorter and shorter periods of time.” Past solutions for many have included makeshift meeting spaces and spare rooms. “Coffee shops and home offices are no longer enough. The next wave is about having anywhere, anytime flexibility, with the security, discretion, professionalism and comfort of a permanent base. It’s not just about mobility any more, it’s about quality mobility,” says Ferrandon. The new Wellington Regus
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A fully-furnished and equipped workspace – simply turn up, plug in and get straight down to business workspace will provide fresh, purpose-built premises for local, out-of-town and overseas business travelers. It also offers crucial global connections for its Wellington-based tenants, with access to new networks and more than 3,000 Regus offices around the world. “The global aspect is especially important to New Zealand businesses, given the distance from
YEARBOOK 2017 PROPERTYANDBUILD.COM
many key markets. They need to have their networks well formed already if they are going offshore, and be ready to hit the ground running. With 3,000 locations in 107 countries, Regus can help provide the bridge for that.” Regus’ customers range from sole-practitioner consultants, professionals and knowledge workers through to medium-sized organizations looking to test a new market,
and multinational corporations building a New Zealand presence. “The variety of nationalities, people, business types and sizes you’ll find in a Regus office is very much part of the appeal for many of our customers,” says Ferrandon. “While Regus clients will often come from diverse backgrounds, sectors and parts of the world, the space and network provides common ground for those who want to work in quality space, surrounded by other successful businesses.” Regus’ commitment to helping New Zealand businesses thrive and grow in new ways extends to its sponsorship of the New Zealand Innovation Council – a homegrown membership organization with the goal of developing and growing great companies. As part of its commitment to support Kiwi innovation, Regus has developed a dedicated offer for the finalists in the council’s Innovation Awards at the newly opened Wellington workspace. * Some terms and conditions apply, see the Regus website www.regus.co.nz for further information.
Strong foundations The best start to any infrastructure project is expert legal advice. Our specialist environmental and resource management, and construction and major projects lawyers work with you to deliver successful outcomes throughout the life cycle of your project. Visit www.chapmantripp.com/construction
Artificial intelligence offers a helping hand
CONSTRUCTION
The potential efficiencies of new technology could lead to further growth for New Zealand’s booming construction sector
Last year, a 57-storey building in China took only 19 days to complete, thanks to Artificial Intelligence (AI) – computer systems that perform tasks traditionally performed by people. The impact of AI is likely to be pervasive and span sectors and industries. Chapman Tripp and the Institute of Directors recently released a white paper calling on government to take the lead in addressing opportunities, risks and challenges presented by AI. In fact, experts surveyed for the study, Future Progress in Artificial Intelligence, said there is a 50 per cent chance AI will exceed the general intelligence of a human in the next 24 years, rising to a 90 per cent chance within 60 years. While we are still in the early stages, innovation is garnering speed and we are already seeing significant technological advancement in New Zealand. AI is likely to drive highly disruptive change not just to our sector, but to our economy, society and institutions. But what do AI systems mean for the construction industry specifically?
Increased efficiency These technologies have the ability to hugely increase the efficiency of significant construction and infrastructure projects – and they already are. Drones are being used to conduct inspections, required on construction sites, traditionally carried out by people. They are being used to make 3D maps and blueprints, and can do this with far greater efficiency than their human counterparts. Processes that once took weeks can now be completed in only a matter of days. More and more projects are becoming paperless, with construction workers, architects and other parties working from – and sharing plans and blueprints on – devices. Developers are drawing on 10
autonomous technologies in order to develop the most efficient air-conditioning systems. “Smart buildings” boast intelligent systems capable of recognising occupants’ temperature and lighting patterns to optimise energy consumption. Autonomous robots are also being developed to further increase efficiency in the sector and they are becoming increasingly common on construction sites. Repetitive jobs are most at risk of being displaced by technology, and we can expect to start to see AI used more and more for jobs such as demolition, welding, concreting and bricklaying. The ATMA (Autonomous TMA Truck) is a vehicle capable of following a lead vehicle completely unmanned. In the context of road construction, the autonomous vehicle is used to protect construction workers navigating through temporary road works. In New Zealand, the Ministry of Transport and NZ Transport Agency have started reviewing legislation to examine liability risks associated with autonomous vehicles – so it’s not far-fetched to expect to soon see autonomous vehicles on large construction or infrastructure projects.
“AI could be hugely beneficial in preparing for and mitigating against possible earthquake damage” In the near future We can expect the construction process will undergo significant change in the immediate future, attributable to – in part – autonomous technologies.
YEARBOOK 2017 PROPERTYANDBUILD.COM
Overall, we can expect to see safer construction sites and more efficient workflows leading to fewer errors and faster completion times. Of particular relevance to New Zealand, AI could be hugely beneficial in preparing for and mitigating against possible earthquake damage. With AI and remote sensing data it is possible to detect the level of building collapse following an earthquake, which means damage can quickly be assessed and aid deployed. The key thing driving strong AI will be data – so large construction companies generating and recording significant amounts of data may end up having a competitive advantage over smaller companies.
Addressing legal and policy issues From a legal perspective, AI presents questions around causation and agency. For instance, who is liable for the actions of an autonomous technology such as a driverless vehicle? The programmer, manufacturer, contractor or owner? Employment and health and safety legislation will also need
to be increasingly clearer about the responsibilities and liabilities of directors and organisations with the introduction of AI to the workplace. Nevertheless, it’s an exciting time across all sectors – not just construction – and the public and private sectors need to work together in looking at how we can make use of opportunities the technology presents, and mitigate against risks.
Determining the future The rapid development of AI technologies has far-reaching implications for New Zealand says Bruce McClintock, and we should start preparing for them now. Amazon.com CEO Jeff Bezos recently observed that we’re at the earliest days of artificial intelligence and the influence it will have: “It’s hard to overstate how big of an impact it’s going to have on society over the next 20 years”. As a small country shaped by its
to engage, as everyone becomes aware of both the risks and opportunities AI brings for them. The Chapman Tripp and Institute of Directors’ white paper, Determining our future: Artificial Intelligence, released early this year, is a call for action to public and private sector leaders to work together to promote the greater development of AI technologies and to ensure there is a co-ordinated approach to prepare for the effects AI will have on the New Zealand economy, work, education and welfare.
Sector specifics
distance from others, New Zealand has more to gain than most from the opportunities artificial intelligence brings. Combined with advances in genetic technology (agribusiness), the Internet of things (networked sensor-driven devices), 3D manufacturing (the built environment) and nanotechnology (methods, systems and fabrication), AI will lessen and in time remove the economic and resource constraints of distance and size. Artificial intelligence holds the potential to be a major driver of economic growth and social progress, if we work together to support its development while managing its risks.
Two tracks In its current state of development, AI is proceeding down two paths. Narrow AI addresses specific domains such as for search engines (think ‘Hey Siri’ or ‘OK Google’) self-driving cars (Uber’s self-driving cars or Google’s Waymo) or strategic games (high frequency trading,
AlphaGo or military tactics). Andrew Ng at the Harvard Business Review website suggests the following simple rule of thumb, “If a typical person can do a mental task with less than one second of thought, we can probably automate it using AI either now or in the near future.” Narrow AI shows us the near path to opportunity and disruption for business and livelihoods. The far path of AI development is General AI. This seeks an AI system that displays intelligence at least as advanced as a person across the full range of cognitive tasks in any domain. The debate is not about if but rather when – and when could be as soon as 20 years from now. And, given the nature of technology progress, once AI systems are as smart as we are they will inevitably be smarter, and exponentially so, virtually a few moments later. The current leaders in AI research are the global technology giants: Google, Microsoft, Amazon and Facebook. They are all-in to develop both Narrow and General AI, bringing enormous resources and research focus to bear. Alongside them, leaders and innovators in every sector are starting
Each sector has a role to play. For industry, the risks and opportunities will speak with increasing volume, requiring businesses to invest so that they stay with if not ahead of current and emerging competitors. Enterprises must consider a range of factors when applying AI. To take one example, AI must be introduced responsibly to ensure that it is in compliance with current regulation. This will require some consideration of regulatory requirements of general application, such as for health and safety, as well as those specific to the industry (such as for transportation). Beyond this, our view is that industry will inevitably be drawn into
areas that have traditionally been of less immediate concern. AI and associated technologies will very likely lead to larger scale redeployment of personnel. It will also require deeper engagement with other sectors that traditionally may not have been part of an industry’s supply chain, for example with technology companies. A future in which society looks to industry explicitly to have greater responsibility for societal impacts of technological development is not hard to foresee. Government has an important role to set the agenda for public conversations about AI. It is the New Zealand way in recent times for regulation to be well-targeted and light-handed. Even so, there will be a role for government to monitor the safety and fairness of AI applications, and to adapt our regulatory framework to support innovation and protect the public. Beyond this, government can help in the development of a skilled workforce and help avoid adverse economic consequences. The potential economic and social opportunities from AI technologies are immense. The public and private sectors should move promptly and together to ensure that we are as well prepared as we can be to take advantage of them.
Brian Clayton and Bruce McClintock are partners at Chapman Tripp, New Zealand’s leading full-service law firm with 53 partners and a legal team of more than 200 staff in Auckland, Wellington and Christchurch PROPERTYANDBUILD.COM YEARBOOK 2017
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CONSTRUCTION
Artificial intelligence holds the potential to be a major driver of economic growth and social progress, if we work together to support its development while managing its risks
With that comes change to the makeup of councils and elected leadership, including new membership for Local Government New Zealand’s National Council. It’s a time when Local Government New Zealand (LGNZ) reviews its strategic policy priorities to ensure the right issues are prioritised so the challenges ahead can be met. This process has begun and will continue in the first part of this year, culminating in LGNZ’s 2017-19 Business Plan and refreshed Policy Strategy. Looking back, key milestones include:
Several key highlights in a very busy year The local elections that were a major feature of the year mark the start of a new triennium
Governance and performance excellence
LOCAL GOVERNMENT
The past year was a landmark for the sector with the launch of the Local Government Excellence Programme. The Local Government Excellence Programme is a system designed to demonstrate and improve the value and services of councils by measuring indicators across leadership, finance, service delivery and community engagement. Participating councils are assessed by independent experts every three years, given an overall rating from triple AAA to C, and the results publicised. Councils will discuss results with communities and use the assessments to plan improvements. Some 21 councils signed up as Foundation Councils to be to be assessed in the inaugural year, with the first four completed in late 2016.
Infrastructure and other resilience badly needed Recent earthquakes in the upper South Island and lower North Island once again highlight the issue of infrastructure resilience, Leigh Auton insists While accepting we live in a dynamic physical environment of earthquakes, tsunamis and volcanic activity, a question needs to be asked as to our level of infrastructure resilience in terms of such likely impacts. Ultimately, resilience is a question of how much society is prepared to invest in ensuring relatively positive outcomes in the face of potential adverse events. The likely answer ultimately lies with how we collectively determine our investment and regulatory priorities, as determined through political and governance processes. We only need to look north to Japan, with similar geological challenges to New Zealand, to a country that has been prepared to proportionally invest more heavily in infrastructure resilience. This, of course, has been driven by events with impacts on Japanese society far greater than we have evidenced. To a significant extent, our willingness to invest in resilience
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YEARBOOK 2017 PROPERTYANDBUILD.COM
is tempered by the impact, severity and frequency of major events. Our community response to the hazards associated with earthquake-prone buildings following the Christchurch earthquakes has arguably waned, outside of Christchurch, with the passage of time. From observation, the fate of many buildings throughout the towns and cities of New Zealand is yet to be resolved. Many buildings sit empty because owners, are in effect, currently incentivised to delay any investment decisions by this means. In other cases, building owners have demolished buildings, with little economic rationale for them to be rebuilt, or higher risk buildings continue to be occupied on the basis of an assessment that the likelihood of an adverse event is low in the short term. I am not necessarily critical of these responses, but there may be a cost to the social and
economic resilience and fabric of many towns and cities throughout the country based on the potential impact of these choices.
Urgent upgrade Resilience, in particular, may require taxation incentives for property owners to upgrade or rebuild their earthquake-prone buildings in the quickest time possible, so that our communities may be safer and more sustainable in the face of an adverse event. I am sure the smaller towns of New Zealand in particular would benefit from such incentives. The Kaikoura earthquakes, with their impacts on cities and towns such as Wellington and in northern Canterbury and Kaikoura, are a reminder of how far we have to travel to ensure effective resilience post the Christchurch earthquakes. One wonders how acceptable it is for our capital city to be so adversely affected by the recent earthquakes, given the nature of that city being built on significant
fault lines. Questions have been asked, rightly in my view, as to whether having such an overwhelming concentration of public service entities based in Wellington is the most resilient response to a potential major earthquake in the capital. Translating these potential adverse impacts to our largest city, Auckland, I do wonder about the resilience of some of its infrastructure. We know that tsunamis have previously affected the upper North Island coastal regions. NIWA research has highlighted the catastrophic impacts of a series of tsunamis on the Northland coast in the 1500s. We know that a tsunami originating from an earthquake off Tonga or the Kermadecs could have a devastating impact on coastal Auckland. Significant parts of Auckland on the Waitemata Harbour would be impacted by a tsunami originating from the north.
A shared national approach to addressing regional development and growth Strong economic performance in the regions benefits the whole country and leads to a stronger New Zealand. To provide local government with a guideline for best practice economic development, LGNZ has progressed the Stronger Economic Development research programme. The programme collected data on local economic development to highlight best practices and current information on how councils are using their resources to sustain and generate economic activity. A draft discussion paper outlining how, where
“The regulatory and legislative burden on local government which imposes unnecessary and undue costs on local communities needs to be reduced” and why economic development resources are used is planned for completion in early 2017.
Developing a sustainable funding model for local government LGNZ’s 2015 Funding Review has stimulated considerable debate and since its launch LGNZ has responded with several streams of continuing policy work. As a result, many policy matters around infrastructure are now being addressed, with or by central government. Early work and wins have included: • housing infrastructure – LGNZ has worked closely with partners to advocate for tools and resources to facilitate housing development where it is most needed; the government has responded with the $1 billion fund available to assist high-growth councils advance infrastructure projects • special economic zones – LGNZ has been working with central government to re-
Indeed, even a small tsunami surge travelling down the west coast of the North Island from that direction would have a significant impact on the Auckland International Airport and the Mangere Waste Water Plant on the Manukau Harbour. Such an event would have a catastrophic impact on the New Zealand economy. Likewise, we are aware that sea-level rise emanating from climate change will significantly impact storm water and transport networks in the City. A number of low-lying suburbs are already impacted through their storm water systems by high tides associated with lowpressure systems.
State Highway One, intersecting with the North Island Main Trunk railway at Takanini. Other utilities also confluence around these transport utilities. Motorists and listeners on morning radio and TV will daily testify to the current gridlock associated with the upgrade of the motorway system from Papakura to Manurewa, including the Takanini interchange.
Raising roads
I am totally supportive of this upgrade, but a significant question remains as to the resilience of the transport network. If a significant adverse event were to impact on the current or rebuilt Takanini interchange, which includes the North Island Main Trunk rail passing through it, then Auckland’s transport network link to the Waikato would be very seriously compromised. The simple answer, and one advanced over 60 years ago, is to build an alternative Weymouth to
The NZTA is currently taking action to raise the Te Atatu to Pt Chevalier causeway several metres to reflect the likelihood of sea-level rise. But significant further investment will be needed on the infrastructure of Auckland to develop ongoing resilience. In the south of Auckland, the corridor for almost all utility services from the rest of NZ, the current road network relies on one primary state highway,
“Political leadership and prioritisation will be required to develop this infrastructure”
search the cost, benefits and impacts to implement special zones, which would allow localised policy and regulatory tools such as Urban Development Authorities • road pricing – through ongoing advocacy the government has acknowledged a need for the use of road pricing to manage congestion and cover the balance of costs for long-term roading infrastructure • tourism/visitor levy – then Prime Minister John Key told a tourism industry summit the government would introduce a tourist tax with possibilities ranging from departure or bed taxes to tourist levies, but “doing nothing” was not an option • regional mid-sized tourist facilities fund – LGNZ has repeatedly called for support and the first $3 million tranche of the $12 million fund was allocated in November to help those communities that struggle to build tourism infrastructure – this is a start but much greater investment will be needed.
Leading effective infrastructure development and funding policies LGNZ is laying the foundations for improved risk management for councils, having proposed a central risk agency to assist councils in understanding their risk profiles and to work to a common methodology and set of standards. Getting better at preparing means communities and the nation can recover from disasters
Karaka connection to link State Highways 29 and 20 at Paerata and Puhinui respectively. Urban roads in Weymouth have already been constructed and/ or sufficient land is preserved for this eventuality, and greenfield land is currently available in Karaka prior to proposed urbanisation of that area to facilitate this connection. It is inevitable that this link will be built, it being part of the necessary ‘ladder’ of road networks throughout Auckland to provide the city with resilience. Political leadership and prioritisation will be required to develop this infrastructure. The proposed alternative Drury to East Tamaki arterial via Mill Road will provide some enhanced resilience, but nowhere as effectively as the option described. The Waikato expressway is another example of building a resilient roading network linking the growth regions of the North. Great progress is being made. Transmission Gully and the Kapiti Expressway also reflect the essential requirement to build resilience into the transport networks of the Wellington region. I could cite other examples. As a nation we are probably doing reasonably well but I fear still not
enough. Some utility providers are doing better than others. I cite Transpower as a good example of providing electricity transmission resilience to Auckland, in the face of much opposition. Having been involved in emergency management throughout my career, I believe we are getting better with our planning, response and recovery. All of this, nonetheless, would be much better supported by the willingness of New Zealanders to better resource our critical infrastructure to withstand adverse impacts such as earthquakes, likely tsunamis and no doubt volcanic activity somewhere sometime. This costs dollars which will be easily be prioritised elsewhere if we take our eye off the ball. We must make this investment in infrastructure (and other) resilience. Leigh Auton is a local government commissioner and a director of Auton & Associates with 35 years’ local government experience, a chairman/director/ trustee on several boards and provides consulting advice to public and private sector companies
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LOCAL GOVERNMENT
The programme is overseen by an Independent Assessment Board chaired by Toby Stevenson, Director of Sapere Research Group and an independent company director with 30 years’ experience in strategic risk management. He is joined on the board by Debbie Birch and Albert Brantley, both of whom have significant experience in public and private enterprise. Further assessments will continue in the early part of 2017, and LGNZ will soon call for expressions of interest from other councils to join the programme in its second year. EquiP, LGNZ’s Centre of Excellence, continues to assist councils with expertise, executive management professional development and elected member training.
more quickly, both economically and socially. This is essential because New Zealand has a high natural hazard environment, exposed to earthquakes, tsunami, landslides, and volcanic activity. Climate change will cause more severe and more frequent river and urban flooding, storms and high winds, storm surges and coastal erosion in coming years. An agency would establish guidelines and models by which local government understands and manages its risks and shares information. It would harmonise practices, improve skills in management and financing, provide quality assurance, and supply expert staff. An Establishment Board was formed to launch the proposal, and the business case has gone to central government for funding consideration, with a decision due in 2017.
LOCAL GOVERNMENT
Setting an agenda of regulatory reform and development of more effective policy setting The regulatory and legislative burden on local government which imposes unnecessary and undue costs on local communities needs to be reduced. A stronger relationship with central government policy setters is needed to ensure that new initiatives are appropriate and able to be implemented, minimising costs to communities. LGNZ continues to work closely with both its partners in the government as well as support and opposition parties, and will continue to keep the lines of communications with all parties open.
Sector-led policy on important environmental issues for effective management of natural capital New Zealand is facing a period of significant change, including adapting to climate change and managing scarce natural resources. After many years of ad-hoc tweaking the resource management system struggles to meet current needs. This year LGNZ launched Planning our future, an eight-point action programme designed to address a range of important issues with the system with the aim of furthering discussion about what would best suit the country’s needs in the coming decades. The document has an emphasis on early decision-making and placing greater value on natural eco-systems.
Strengthening local democracy and the value of local government LGNZ’s Vote 2016 campaign set out with the goal of raising voter turnout to 50 per cent for the first time since the 1980s. While this target is likely to require several election cycles to be achieved, it was encouraging to see turnout rest at 42 per cent, up from 2013 and effectively halting the long-term downward trend. The campaign used a partnership approach with LGNZ, councils, stakeholders and media all playing a part, and has set the foundation for future work. In the coming triennium, focus will remain on raising engagement, with greater online engagement, investment in civics education and consideration of online voting all to be investigated or promoted. Lawrence Yule is president of Local Government New Zealand, which represents the interests of 78 local authorities in New Zealand 14
YEARBOOK 2017 PROPERTYANDBUILD.COM
New local government national council confirmed Local Government New Zealand (LGNZ) has announced the formation of its new National Council, which has already met to discuss priorities for the coming triennium. Acting as the governing body of LGNZ that sets, guides and oversees its policy and advocacy work, the National Council is made up of elected members from New Zealand’s metropolitan, regional, provincial and rural councils and is formed following local elections. Dunedin May and Chair of LGNZ’s Metro Sector Dave Cull was appointed Vice President of the National Council, which LGNZ President Lawrence Yule says plays “an important role” for the sector and will be setting the direction of travel for the coming term. “There has been a refresh following the local elections and I am thrilled with the quality of the council,” Yule adds. “Mayor Cull has tremendous experience and will be an excellent Vice President.” He says the landscape for New Zealand has changed since the last National Council was established in 2013, and it is the role of the new council to set a refreshed strategic direction and continue to work alongside the new Prime Minister and LGNZ’s partners in central government. “This work has now begun and will define how the sector approaches major issues including climate change, infrastructure funding and regional development, among other issues,” he advises. “Those who sit on the council do so in addition to their other workloads and I thank them for their commitment to the wider local government family and their communities, and welcome all new members on board.” The LGNZ National Council consists of: • Lawrence Yule, President of LGNZ and Mayor, Hastings District Council • Dave Cull, Vice President of LGNZ and Mayor, Dunedin City Council • Hon Phil Goff, Mayor, Auckland Council • Justin Lester, Mayor, Wellington City Council • Doug Leeder, Chair, Bay of Plenty Regional Council • Rachel Reese, Mayor, Nelson City Council • Brian Hanna, Mayor, Waitomo District Council • Jan Barnes, Mayor, MatamataPiako District Council • Penny Hulse, Councillor, Auckland Council • Hon John Carter, Mayor, Far North District Council • Stuart Crosby, Councillor, Bay of Plenty Regional Council • Don Cameron, Mayor, Ruapehu District Council • Wayne Guppy, Mayor, Upper Hutt City Council • Richard Kempthorne, Mayor, Tasman District Council • Tracy Hicks, Mayor, Gore District Council.
The complete package Like all PFI’s tenants, Pharmapac makes modern life possible. Yet we pick up and put down their products without a second thought, totally unaware of how much human intelligence went into them. “What? That plastic bottle . . . how hard can that be?” Pharmapac is New Zealand’s leading manufacturer of the plastic bottles that pharmacies put drugs in to, that our honey is packaged in for overseas markets and that nutritional supplements, shampoos, conditioners and body wash are sold in. Depending on what’s inside — what the customer needs — the bottles may be child-resistant, tamper-evident, wide-mouthed, clear, coloured, plain, in different sizes, designed to stack, designed to attract the consumer. They are recyclable and traceable. They might be injectionmoulded, blow-moulded or stretchblow moulded. They are manufactured to FDA and EU standards, in a special ‘clean’ environment if required. And they are delivered daily to customers throughout New Zealand. Yes, that plastic bottle: Pharmapac have been expertly making them for more than 30 years. When business growth meant time for new premises, Pharmapac turned to another specialist, PFI. They needed a quality building big enough to accommodate their various production processes, with the right mix of office space, production space, and storage. They needed to be close to the motorway, for inward and outward goods, and they wanted to be on Auckland’s North Shore, because that’s where they had been, and so it suited their 45 staff, some of whom have been with them for 15 years.
PFI were able to meet these requirements with a property in Argus Place, off Sunnybrae Road. Having the right building in the right location is two parts of the industrial property puzzle but often – as in this case – it is putting a deal together that works for both parties that makes the difference. To streamline the relocation for Pharmapac, PFI were able to
negotiate an early exit by the outgoing tenant. As well, an agreement was reached over refurbishing the premises and fitting them out to meet Pharmapac’s particular requirements, including a major upgrade of the power supply. And then, there was dealing with the unexpected . . . During the refurbishment,
problems with the roof of the building were discovered. PFI was aware that maintenance was needed on the roof and this had been scheduled, but it became clear that work was needed sooner rather than later. Pharmapac’s quality control standards are such that they wouldn’t want dust - and certainly not rainwater - entering the build-
ing once manufacturing started. PFI didn’t hesitate. Board approval was immediately sought for the expenditure and a contractor engaged to completely re-roof the building in time for Pharmapac’s move. Today, Pharmapac are in business in their new location, looking after customers in their spacious, good-as-new premises. If you’re ever driving down Sunnybrae Road, look out for them. And next time you open a bottle of medicine, a jar of honey, or a shampoo, take a moment to appreciate how much goes into everything we take for granted.
RELOCATION
Having the right building in the right location is two parts of the industrial property puzzle but putting a deal together that works for both parties makes the difference
COMPLIANCE & LEGAL
Kaikoura quake to cost billions, international firm predicts
Catastrophe modeling firm AIR Worldwide estimates that industry-insured losses from the magnitude 7.8 earthquake that struck near Hanmer Springs on November 14 will be between NZ$1.15 billion and NZ$5.3 billion “More than 80,000 landslides and 2,600 aftershocks have been recorded following the massive earthquake that struck New Zealand’s South Island early this week,” says AIR Worldwide Assistant Vice President Dr Bingming Shen-tu. “The temblor was the largest experienced by the country since the 2009 M7.8 Dusky Sound earthquake and one of the four most powerful since 1855. “Recovery efforts in the region have been additionally hampered by gale-force winds, heavy rainfall, and flooded roads.” The epicentre of the M7.8 earthquake, Kaikoura was cut off by landslides and lost its power, water supply, and sewage system. More than 134 buildings have been inspected in Kaikoura, resulting in 13 red tags denoting unsafe for use as well as 39 yellow tags denoting restricted use. About 1,200 visitors and residents were evacuated and a local state of emergency declared. The seabed in the area has been raised by up to two metres in places, likely impacting the local fishing industry. Christchurch appears to have experienced far less damage than it did in the devastating earthquakes that struck the area in late 2010 and early 2011, but has not escaped unscathed. Damage in the Canterbury area may account for up 16
to 30 per cent of the total losses. Air says the fact that much of the impacted region is rural and sparsely populated helped limit the damage, but significant damage accounting for at least half of the losses was reported in Wellington on the southern tip of North Island. Throughout the impacted region, glass was broken in buildings, chimneys collapsed and some
YEARBOOK 2017 PROPERTYANDBUILD.COM
structural damage occurred. Building contents breakage occurred widely, and power outages, disruption of water and sewer services, and interruption of phone service was reported. Some highways and rail lines in the affected region were damaged, and many bridges and tunnels were closed after the initial quake pending inspection. Several multi-storey buildings in Wellington experienced broken windows and contents damage, and the capital initially appeared to have escaped serious loss. Moreover, inspections raised concerns about 60 or so buildings in the centre. While parts of the central business district were cordoned off because of damage to buildings, there was no “Red Zone” like the 859-day exclusion zone controversially established five years ago in Christchurch. However, the nine-storey building at 61 Molesworth St in central Wellington is being demolished amid concerns it may collapse following the discovery of substantial damage in parts of the structure after the quake. A demolition contractor has been hired to deconstruct the building using an 85-tonne excavator, while work to temporarily strengthen the multistorey Reading Cinema car park in Tory Street is expected to start shortly. According to AIR, much of the central business district and waterfront of New Zealand’s capital is underlain by soft
sediments, which amplify ground shaking and liquefaction damage has been reported there and on the Picton foreshore. Wellington’s port operations were suspended by CentrePort because of shake and liquefaction damage to buildings and facilities, which was more extensive than during the 2013 Seddon earthquakes. Container shipping operations were suspended with many buildings off limits, but most other services were up and running one week after the earthquake. Most residential damage will be covered by the government-owned insurer, the Earthquake Commission (EQC), which is backed by NZ$4.7 billion in reinsurance. AIR’s modeled insured loss estimates include: • insured physical damage to property (residential, commercial/ industrial), both structures and their contents from ground shaking • demand surge—the increase in costs of materials, services, and labor due to increased demand following a catastrophic event • direct business interruption losses AIR’s modeled insured loss estimates do not include: • losses to uninsured properties • losses to land • losses to automobiles • losses to infrastructure • indirect business interruption losses • loss adjustment expenses.
Government to spend billions restoring Kaikoura coastal route The government is to spend up to $2 billion to reinstate the coastal route to Kaikoura, Transport Minister Simon Bridges has announced. The existing State Highway 1 and rail corridor along the coastal route to the north and south of Kaikoura will be rebuilt, with additional improvements to increase safety and resilience. “Since the day of the earthquake, restoring access to Kaikoura has been our number one priority,” Bridges insists. “Agreeing to restore the coastal route demonstrates our ongoing commitment to getting this region back on its feet as quickly as possible. “To provide certainty, the crown will fund the work required. Exact costs are still being determined, but the current estimate is between $1.4 billion and $2 billion.” In addition, emergency legislation passed through Parliament will cut through red tape, and ensure repairs to the existing route can be accelerated.”
An Order in Council is currently being prepared that will accelerate the reinstatement of State Highway 1 north and south of Kaikōura. Bridges says that even with an accelerated process, there is a long way to go. “The precise work required to repair the route is still under investigation and it will be a very complex job. “However, the government is confident that limited access via the coastal route can be restored in about 12 months. “Rebuilding a stronger, more resilient coastal route will give Kaikoura residents the security of a second connection to the rest of the South Island.” The NZ Transport Agency will repair and maintain the road for vehicles travelling through the Springs Junction and Lewis Pass route over the weeks and months ahead. The Transport Agency will also work with local government to repair and maintain the Kaikoura emergency access route, and bring other roads back into service.
Engineers say some Wellington buildings need targeted checks in the interests of public safety. New Zealand Society for Earthquake Engineering (NZSEE) President Peter Smith says that after completing hundreds of rapid assessments, engineers have developed a profile of Wellington buildings that suffered the most damage in the Kaikoura earthquake or are susceptible to a similar future event. “The council is being proactive in requiring all buildings fitting this profile to have targeted evaluations. We fully support the measures that the council is taking. “The buildings that need targeted evaluation share key characteristics. These include being medium height and having concrete frames with precast floors. Other characteristics include being sited on soft soils or ridgelines, having significant damage to non-structural elements, demonstrating signs of stretch in carpet tiles or ceilings, or damage to façades. “This quake has generated severe shaking in buildings with these characteristics. Some of these buildings have been tested beyond their design loadings.” Structural Engineering Society (SESOC) President Paul Campbell says engineers now understand that damage from the Kaikoura
you would normally expect the inspection component to be completed in a day.” Institution of Professional Engineers New Zealand (IPOENZ) Chief Executive Susan FreeIPENZ CHIEF man-Greene says engineers EXECUTIVE SUSAN remain concerned about public FREEMAN-GREENE: safety in and around buildings “Earthquake-prone categorised as earthquake buildings are likely to prone, given the current heightperform poorly in an ened risk of aftershocks. earthquake centred “The energy of the Kaikoura closer to Wellington” earthquake wasn’t focused on shorter, stiffer buildings, some of which are categorised as earthquake in Wellington was highly selective. earthquake prone. “As well as carrying out hundreds of assess“It’s important to realise that earthments, engineers have been working hard to quake-prone buildings are likely to perform analyse emerging patterns of damage across poorly in an earthquake centred closer to Wellington buildings.” Wellington.” Campbell says the targeted damage evalFreeman-Greene says structural engineers uations mandated by the council will involve are being brought in from outside Wellington reviewing structural drawings and are likely to to help meet current demand. be invasive. This means potentially taking up “IPENZ appreciates the close collaboration some floor coverings, stripping off selected between the council and the engineering wall linings and inspecting ceiling spaces to profession.” look for specific patterns of damage. “How long it takes depends on the size of SESOC and NZSEE are IPENZ the building and availability of drawings but technical groups
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ENGINEERING
Engineers support council's precautionary approach to Wellington buildings
Building for future cities, what do we need?
CITIES
Looking at the current state of play for New Zealand cities there is much to contemplate First we need to start at the beginning by casting a sharp eye on a 25-year-old, heavily amended Resource Management Act (RMA). Introduced in 1991, the RMA greatly reformed the Town and Country Planning Act which was hugely prescriptive. Instead, the RMA placed the focus firmly on use and management of the natural environment. The difficulty with focusing too squarely on the natural environment is that the RMA hasn’t sufficiently provided for the needs of growing New
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Zealand cities. Nor has it adequately protected the natural environment, as envisaged. Evidence to support this argument was released recently via an Environmental Defence Society (EDS) report, which was jointly commissioned by the EMA, the New Zealand Council for Infrastructure Development and Property Council New Zealand. The groundbreaking EDS report found that the RMA has not met the environmental outcomes expected of it and that management of the nation’s resources has been suboptimal.
YEARBOOK 2017 PROPERTYANDBUILD.COM
The research, conducted by EDS Senior Policy Analyst Dr Marie Brown, shows that 81 per cent of respondents believed the environment had declined since 1991. The business side of the argument was well developed. Businesses have strongly advocated that the current system was a handbrake on development and productivity. However, what has been missing from the conversation is an empirical element relating to the environmental impact.
Key question What does this mean for the
future of our cities and what can be done? I can tell you now it will not be governed by an RMA or district plans under the RMA. The issue we have is no clear national direction as to what our cities should look like and how to balance the needs of both development and the environment. It is only in the last year, in the face of a serious housing crisis, that central government decided we needed a national policy statement on the built environment. The nature of what the national
Liaison lacking Developers understand this and spend much time considering
“Legislation, planning and funding must be geared towards supporting and implementing infrastructure to encourage worldclass, property development”
factors like proximity to public transport and the surrounding infrastructure to determine if a project is worth doing. Often we find, however, a lack of collaboration between developers and town planners when it comes to looking at the infrastructure requirements needed to support both current and future population growth. The best result for cities is to take a long-term view and for governments and councils to work with developers in building communities and cities that are well supported by infrastructure. The main challenge will always be that infrastructure is expensive and very timeconsuming. Rail, roads, water supply and sewage infrastructure all come with a large amount of cost and disruption, however they are all inherently important factors when facilitating future growth. Therefore legislation, planning and funding must be geared
towards supporting and implementing infrastructure to encourage world-class, property development. Lessons from the past, the Auckland housing crisis and the current government Housing Accords and Special Housing Areas Act (HASHA) strongly indicates for this to happen we must integrate legislation better. The answer may even be a reframe of the situation and investigation into the fundamental question, do we need proper city legislation to deal with the development of cities? Either way, for our cities to grow and prosper we must start to take a holistic, integrated view towards future growth and development. Connal Townsend is chief executive of the Property Council NZ, which represents the interests of the commercial property investment industry – including commercial, industrial, retail and property funds
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CITIES
policy statement will contain hinges on the capacity for growth, and on utilising some hard metrics to calculate how fast a population is going to grow and the drivers of that population growth. A key factor in the capacity for growth is the amount of land zoned for the development of housing and for ancillary parts of a city, such as offices and cafés. One lesson that we have learnt in the commercial property world, especially in regards to the Christchurch Replacement District Plan and the Auckland Unitary Plan, is that in many instances town planning seems to occur in isolation. There is often the belief that if the land is zoned as residential, development will magically happen overnight. In fact, for this ‘magic’ to happen you need a willing buyer and a willing seller.
The dream doesn’t become reality by resolution
CITIES
The Paris Agreement commits signatories to holding the increase in the global average temperature to well below two degrees above pre-industrial levels, and to pursue efforts to limit the temperature increase to 1.5 degrees The Deadline 2020 report presents a detailed pathway of what the C40 cities and their acolytes, including Auckland, need to do to play their part in converting the Paris Agreement from aspiration into reality. Research and analysis for the report identified each of the C40 cities share of the remaining global carbon budgets to 2100, for 1.5 and two-degree temperature rise scenarios. Target emissions trajectories have been established for 84 individual member cities that enable these budgets to be met. The work outlines some of the city-specific action pathways necessary to meet the target, laying out clearly the pace, scale and prioritisation of action needed
between now and the end of the century.
that actions can take many years to mature and reach full scale.
Four years to get on track
Contraction and convergence
The overriding and deeply significant finding of the work is that the next four years will determine whether or not the world’s megacities can deliver their part of the Paris Agreement – without action by the cities the agreement cannot realistically be delivered. The business-as-usual path of C40 cities emissions needs to ‘bend’ from an increase of 35 per cent by 2020, to peak at only five per cent higher than current emissions. This bending of the curve is required now to ensure that in the coming decades the necessary reductions remain feasible, given
To remain within a 1.5 degree temperature rise, average per capita emissions across C40 cities need to drop from over five tCO2e per capita today to around 2.9 tCO2e per capita by 2030. tCO2e is “tonnes of carbon dioxide equivalent” – a measure that allows comparison of the emissions of other greenhouse gases relative to one unit of CO2. It is calculated by multiplying the greenhouse gas’ emissions by its 100-year global warming potential. For wealthier, high-emitting cities that means an immediate and steep decline. Many fast developing cities can maintain their
PARIS COP2I
DO WE DELIVER IT?
NATIONS AGREE TO LIMIT
O
5.I TCO2 / PERSON TODAY, 2.9 TCO2 / PERSON BY 2030 CIT
HEADLINE FINDING I 86 CITIES
A statement released by C40 chair and mayor of Rio de Janeiro Eduardo Paes and chair-elect Paris mayor Anne Hidalgo says that C40 mayors, representing 25 per cent of global GDP and more than 650 million citizens, are committed to urgent and impactful action on climate change. Mayors understand that cities are where the impacts of climate
A PIES HAV LA E N
Deadline 2020 presents the first significant pathway for relating the ambition of the Paris Agreement to action on the ground. This would allow C40 cities, representing 650 million people and 25% of the world’s GDP, to deliver individual emissions trajectories consistent with limiting global temperature rise to 1.5 degrees.
TCO2e/ YEAR
HIGHEST EMITTERS MUST0 DO MOST BY 202 HEADLINE FINDING 6
HEADLINE FINDING 5
Mayors can deliver or influence just over half of the savings needed to put C40 cities on a 1.5 degree trajectory.
Wealthier, high carbon cities must deliver the largest savings between 2017-2020.
$375 N
PER PERSON
BILLIO
HEADLINE FINDING 2
HEADLINE FINDING 3
To remain within a 1.5 degree temperature rise, average per capita emissions across C40 cities would need to drop from over 5 tCO2e per capita today to around 2.9 tCO2e per capita by 2030.
As C40 cities age and grow they will need to invest in renewing and expanding infrastructure, and working to enhance the quality of life of citizens.
Doing so would keep cities on a trajectory consistent with either 1.5 or 2 degrees of warming, it is only after 2030 that these trajectories diverge.
GLOBAL WARMING TO I.5 C
That includes a total of 525 GtCO 2e by 2100, either through direct action or via collaboration with partners such as the private sector.
Half the emission savings from C40
C40 BY 2050
DEADLINE 2020: HEADLINE FINDINGS BUT HOW
current levels for up to a decade, and in a small number of cases there is some scope for emissions per person to rise slightly before they eventually fall to zero. But every city needs to diverge considerably from its current business-as-usual pathway.
WE HAVE
From 2016 to 2050, over $1 trillion investment is required across all C40 cities to meet the ambition of the Paris Agreement through new climate action. $375 billion of this investment is needed over the next four years alone.
WE HAVE FOUR YEARS TO CHANGE THE WORLD
4 YEARS
TO ACT
As of 2017, cities with GDP over $15,000 per capita must begin to reduce their per capita emissions immediately. Of the 14,000 new actions that are required from 2016-2020, 71% should be taken by cities that need to immediately decrease per capita emissions.
I4,000 MORE
2020
CLIMATE ACTIONS
HEADLINE FINDING 4 DEADLINE 2020: ACTION TAKEN IN THE NEXT FOUR YEARS WILL DETERMINE IF IT IS POSSIBLE FOR CITIES TO GET ON THE TRAJECTORY REQUIRED TO MEET THE AMBITION OF THE PARIS AGREEMENT. If sufficient action is not taken over this period, limiting temperature increases to below 1.5 degrees will be impossible. C40 cities collectively delivered nearly 11,000 climate actions between 2005 and 2016. In the four years to 2020, an additional 14,000 actions are required. This represents an additional 125% in less than half the time.
70%
ACTIONS
SCALE
C40 MAYORS
CAN AND WILL ACT
OT/CAPITA
UP
HEADLINE FINDING 7
HEADLINE FINDING 8
HEADLINE FINDING 9
If action involving city governments can deliver just over half of the GHG savings needed, then action to deliver structural changes from outside cities (i.e. electrical grid de-carbonisation), must start to have a significant impact from 2023 at the latest. This will take over as the dominant driver of urban GHG reductions after 2030.
Even with all required actions taken as per city trajectories, substantial carbon sequestration will also be required by national governments if cities are to stay on a 1.5 degree trajectory post 2050.
Action by C40 cities can have huge magnification: If all cities with a population greater than 100,000 adopted the ambition for C40 cities set out in this report, they could save 863 GtCO 2e globally by 2050.
0 0 8
20
NEGATIVE EMISSIONS
YEARBOOK 2017 PROPERTYANDBUILD.COM
BY 2100, THEY COULD HAVE SAVED UP TO THE EQUIVALENT OF 40% OF THE REDUCTIONS NECESSARY FOR A I.5 DEGREE SCENARIO.
CITIES CAN DELIVER UP TO 40% OF SAVINGS NEEDED FOR I.5 DEGREE WORLD
EQUA CAPACITYRESPONSIBILITY LITY
DEADLINE 2020: PROCESS TO PATHWAYS I GLOBAL BUDGET 1870-2100 Emissions today: C40 Cities: 2.4 GtCO2e Global: 47 GtCO2e Remaining global emissions budget to 2100: 387 GtCO2e for 1.5 degrees How much of this remaining budget should be allocated to C40 cities?
387 47
2 ESTIMATING THE C40 CITY SHARE OF THE BUDGET
2.4 GtCO e
Our chosen method for developing a "fair share" budget for the C40 cities. This takes into account the issues of:
GtCO2e
Equality
Responsibility
Capacity
Convergence value: Half of global average C40 per capita emissions
High emitting city
CONVERGENCE AND CONTRACTION
2
GtCO2e
CO2e per capita
C40 average by 2030 Low emitting city
This budget is calculated by assuming cities' per capita emissions (and those of the rest of the world) converge linearly to a common value, then everyone declines to zero at a common rate depending on the remaining budget.
remaining share to budget
Today
Common decline rate
2030
Future
HOW DO
C40 CITIES
COLLABORATE?
Late Peak
Low Emissions
4 TARGET TRJECTORY
34 25 8
The 2CAP model is used to investigate the actions required by cities, and the external factors (such as electrical grid decarbonisation)necessary to achieve each city's target trajectory. What actions give a Target Trajectory?
22 GtCO e
Now, how do C40 cities collaborate to ensure this collective budget is not exceeded?
2
Example city carbon trajectories per capita (tCO 2e)
34,000 ZERO I4,000 ACTIONS CARBON ACTIONS
We need negative emissions: 57 GtCO2e cumulative emissions by 2050 mean we must remove 35 GtCO2e from the air and store it by 2100.
IN PLACE BY 2030 ENERGY BY 2050 INITIATED BY 2020
2050
-35GtCO2e
2100
NEGATIVE EMISSIONS REQUIRED BETWEEN 2050 AND 2I00
Flex to achieve 2100 carbon budgets
See Appendix A for more detail, and associated Technical Report for full detailed methodology
0 1 0
change will hit hardest, but also that climate action can drive economic growth and prosperity, they said. Over half the emissions savings identified in the Deadline 2020 route map can be delivered directly or through collaboration by C40 city governments. If the action pathway outlined in the document is pioneered by C40 cities, and then adopted by cities globally, action within urban
This method gives us a budget of 22 GtCO 2e, 6% of the global budget to 2100.
Budget by 2100
I7
5 CLIMATE ACTIONS TO DELIVER TRAJECTORY C40 – ARUP PARTNERSHIP CLIMATE ACTION PATHWAYS MODEL (2CAP)
3 C40 BUDGET
C40 Share =6% of Global
Each city is assigned one of four per capita emissions reduction trajectory typologies based on their current emissions per capita and GDP per capita. The characteristics of these four trajectories are flexed to share the burden between cities and achieve rapid emissions reductions across cities.
CITIES
Early Peak
High Emissions
NUMBER OF CITIES
Steady Decline
LOW GDP
Steep Decline
HIGH GDP
Assign to C40 Cities
areas would deliver around 40 per cent of the savings needed to achieve the ambition of the Paris Agreement.
Commercial and governmental collaboration The Deadline 2020, report is a collaborative partnership between C40 and Arup, the global consultancy firm. The partnership is founded on Arup’s independent and evidence-based approach,
alongside C40’s longstanding belief in “measurement for management”. The partnership supports a strong analytical research agenda while helping cities to identify opportunities, collaborate and develop practical solutions to accelerate and expand action on climate change. “Once again, it is cities that have demonstrated their agility and the speed by which they can act,
committing to the most ambitious element of the Paris Agreement, and setting out the exact means by which they will get there,” says Arup Chairman Gregory Hodkinson. “I have said before that we have onl y one generation to save our cities, but actually, as our Deadline 2020 research shows us, the timeline for necessary action is far shorter than this. “The decisions we all make now, and the plans we set in motion
Emissions savings against BAU from energy programmes
Deadline 2020 is an evolving blueprint, not a static or perfect prescription, to which all partners are invited to contribute. Deadline 2020 is based on the best currently available evidence, however more and better data will continue to become available, allowing refinement of the goals and approaches. This plan is the first stage in an ongoing process of measurement and prioritisation that C40 will lead over the coming decade to refine its action
pathway. Arup has published all the evidence, methods, assumptions and analysis, and welcome suggestions for improvement. C40, Arup and our partners have a number of work streams underway that aim to close some of these key knowledge gaps in the coming years. This work is in part delivered as a call for evidence that seeks to gather further data and insight on the elements that make up Deadline 2020 thinking.
4.50
Emissions Savings (GtCO2e/year)
Not a static blueprint but the start of a collective journey
4.00 3.50 3.00
2.50 2.00 1.50 1.00 0.50
0.00 2020
2030
2040
2050
Clean energy procurement by the city City-owned utility switching fuels Industrial efficiency
Fuel switching programme (building or district scale) District-scale clean energy deployment (heating/cooling/power) Building-scale clean energy deployment
PROPERTYANDBUILD.COM YEARBOOK 2017
21
within the next four years will determine the futures of our children and grandchildren. “This report shows us exactly what this kind of ambition looks like at a city-scale, and sets the tone for the years to come,” says Hodkinson. “The pace and scale of climate action must more than triple, such that by mid-century, C40 cities are
carbon-neutral, and on the pathway to negative net emissions. “This will require a wholesale reconfiguration of how we produce, store and use energy, interact with our urban environments, and use our infrastructure,” he says. To read the full report: http:// publications.arup.com/publications/d/deadline_2020
CURRENT C40 CITY MEMBERS Megacities
CITIES
Population: City population of three million or more, and/or metropolitan area population of 10 million or more, either currently or projected for 2025. Or GDP: One of the top 25 global cities, ranked by current GDP output, at purchasingpower parity (PPP), either currently or projected for 2025. Africa: Ghana - Accra, Ethiopia - Addis Ababa, Egypt - Cairo, South Africa - Johannesburg, Nigeria - Lagos East Asia: China - Guangzhou, Shenzhen, Nanjing, Wuhan, Hong Kong - Hong Kong, South Korea - Seoul, Japan - Tokyo, Japan - Yokohama Europe: Greece - Athens, Germany - Berlin, Turkey Istanbul, UK - London, Spain - Madrid, Italy - Milan, Russia - Moscow, France - Paris, Italy Rome, Poland - Warsaw Latin America: Colombia Bogotá, Argentina - Buenos Aires, Venezuela - Caracas, Peru - Lima, Mexico - Mexico City, Brazil - Rio de Janeiro, Salvador, Sao Paulo North America: United States - Boston, Chicago, Houston, Los Angeles, New York City, Philadelphia, Washington, DC, Canada - Toronto South and West Asia: Jordan - Amman, India - Bengaluru, New Delhi, Bangladesh - Dhaka, United Arab Emirates - Dubai, India - Jaipur, Kolkata, Mumbai, Pakistan - Karachi Southeast Asia & Oceania: Thailand - Bangkok, Vietnam - Hanoi, Ho Chi Minh City, Indonesia - Jakarta, Philippines - Quezon City, Australia Melbourne, Sydney
Innovator cities: Cities that do not qualify as Megacities, but have shown clear leadership in environmental and climate
22
change work. An Innovator City must be internationally recognised for barrier-breaking climate work, a leader in the field of environmental sustainability, and a regionally recognized "anchor city" for the relevant metropolitan area. Africa: South Africa - Durban, Tshwane East Asia: South Korea Changwon Europe: Netherlands Amsterdam, Spain - Barcelona, Switzerland - Basel, Denmark - Copenhagen, Germany Heidelberg, Norway - Oslo, Netherlands - Rotterdam, Sweden - Stockholm, Italy Venice Latin America: Brazil - Curitiba, Ecuador - Quito, Chile - Santiago North America: United States - Austin, New Orleans, Portland, San Francisco, Seattle, Canada - Vancouver Southeast Asia & Oceania: New Zealand - Auckland
Observer cities: A short-term category for new cities applying to join the C40 for the first time; all cities applying for Megacity or Innovator membership will initially be admitted as Observers until they meet C40's one-year participation requirements. A longer-term category for cities meeting Megacity or Innovator City guidelines and participation requirements, but for local regulatory or procedural reasons, are unable to approve participation as a Megacity or Innovator City expeditiously. Africa: South Africa - Cape Town, Tanzania - Dar es Salaam, Kenya - Nairobi East Asia: China - Beijing, Shanghai Southeast Asia & Oceania: Singapore - Singapore
YEARBOOK 2017 PROPERTYANDBUILD.COM
Their floors were often puddles of booze and broken glass, their air a heady mix of teenage sweat and cigarettes, and the volume always went up to “max”. But for rock and pop fans of a certain age, New Zealand’s live music venues were the perfect slice of heaven The crowds that squeezed into venues such as Mainstreet Cabaret, the Gluepot, The Mon, the Gladstone Hotel and The Cook, to name but a few, witnessed many of New Zealand’s biggest and most influential bands in action - including Split Enz, the Dance Exponents, Hello Sailor, DD Smash, Herbs, The Mockers, Th’ Dudes and When The Cat’s Away. And if live music fans weren’t thrashing their heads to local bands, they were rocking out to such international acts as New Order and Siouxsie and the Banshees. “While the history of rock and roll was written inside pubs across the city, most of the legendary venues of the ‘70s, ‘80s and ‘90s have now have largely disappeared – either swept aside by the wrecking ball or converted into commercial or residential premises,” says John Church, Bayleys’ national director commercial. With one of the country’s last legendary live music venues, the King’s Arms in Auckland, recently selling and the landholding most likely facing a new future, here are some of the New Zealand’s most famous music spots and the great moments in rock and pop history that defined both them and a generation of music fans… The Gluepot, at the corner of Ponsonby and Jervois roads, Auckland, was where Mick Jagger once played a 30-minute set for free and Midnight Oil’s Peter Garrett smashed his foot through the stage. From the late 1970s onwards, the Gluepot was Auckland’s premier live music destination, attracting both big Kiwi bands and international acts. It closed on Labour Weekend in 1994 when owners, Dominion Breweries, put it on the market for sale. It is now a mix of apartments and retail space. Mainstreet Cabaret helped countless Kiwi bands such as Split Enz, the Dance Exponents and Hello Sailor find their feet before they made it big, and was the New Zealand launching pad for revolutionary sounds from overseas, including New Order and Siouxsie and the Banshees. It is now a five-storey office block dominating the top of Queen Street with 2,600m² of office space that was previously occupied by Ames IT Academy.
TOP: The Gluepot in its heyday – it's now a mix of apartments, retail outlets and offices PHOTO AUCKLAND MUSEUM BOTTOM & INSET: The Windsor Castle now and a flyer for bands playing there in April 1980 PHOTO AUDIO CULTURE PROPERTYANDBUILD.COM YEARBOOK 2017
23
PROPERTY
Whatever happened to New Zealand’s great rock venues?
PROPERTY
The Mon Desir in Takapuna, Auckland, was bulldozed and turned into a six-storey waterfront apartment complex in the mid1990s. The pub was where David Bowie had his infamous “four days of debauchery” with a group of Kiwi fans who managed to slip past security. During the 1980s, the pub was reported to have the biggest on-the-spot beer consumption in Auckland and rock fans got boisterous around the swimming pool as they listened to bands on the pub’s notorious Thursday nights. Midge Marsden, the Al Grant Band, the Rockafellas, Dave Dobbyn and The Exponents played a tearful farewell concert to “The Mon” in 1994 after it was announced it would be demolished. Windsor Castle, at 144 Parnell Road, Auckland, once shook to the sounds of Toy Love, Street Talk and Dave Dobbyn. Since its music heyday it has been a restaurant headed by Simon Gault and a sushi bar before reverting back to a local pub. The 890m2 site, which has 268m2 of professional offices on level one, was sold earlier this year for $6.62 million. The White Horse Inn o n Ti Rakau Drive in the Auckland suburb of Pakuranga was the home of New Zealand glam rock during the 1970s. The pub closed some six years ago and is soon to be replaced with a new three-storey mixed-use development featuring a dozen or so food and beverage outlets in 2,100m2 of space at street level, and 30 apartments above. The Adelaide, on the corner of Wellington’s Adelaide Road and Drummond Street, had a colourful history even before it became a classic rock bar. The two-storey 440m2 pub and hotel built in 1899 was home to former Prime
24
ABOVE: Kiwi glam rock band Noazark play the White Horse in 1972 PHOTO / COURTESY OF BRUCE SERGENT
Minister Norman Kirk in 1972 after he was expelled from the Labour Party. The pub hosted gigs by the Skeptics, Headless Chickens and Straitjacket Fits during the late 1980s. It was closed after struggling financially and Wellington Council deemed it was earthquake prone. The pub was sold in 2015 and is set to be redeveloped into residential accommodation. Named after a British Prime Minister, The Gladstone Hotel, in Christchurch, shook off its rather stuffy beginnings in the 1970s when it became, in the words of
During the 1980s the pub was reputed to have the biggest on-the-spot beer consumption in Auckland
YEARBOOK 2017 PROPERTYANDBUILD.COM
BELOW LEFT: The now derelict Adelaide Hotel in The Press newspaper, Wellington that is to be converted into residential “a meeting place for accommodation PHOTO DAVID HAMILTON all the young people BELOW RIGHT: The refurbished Captain Cook who like to listen to Hotel in Dunedin PHOTO SCOTT CLARKE up-tempo music and dance to their hearts”. The pub, on the south-east corner of Durham and University of Otago cracked down Peterborough streets, nurtured on out-of-control student drinking. local bands such as the Gordons, It reopened again earlier this year the Clean and the Verlaines, and as an upmarket gastro pub. hosted international performers such as Nick Cave and The Saints. The Empire Hotel was the main The pub was bulldozed to make home of the “Dunedin Sound”. way for an office building, and The revolutionary early grunge the site is now occupied by a guitar-driven sounds played by legal firm. the likes of The Verlaines, The Clean, The Chills, Sneaky Feelings The Captain Cook Tavern, and The Bats could be heard in known to generations of Dunedin the first-floor bar for much of the students as The Cook, is one of decade, until the pub changed New Zealand’s most famous pubs. hands and the new owner signalled In the 1970s and early 1980s, he wasn’t interested in that sort The Cook’s low stage hosted of music. Last drinks were poured The Enemy (before it became Toy in 2009 and the pub has stood Love), Rockylox, The Clean and empty since. Look Blue Go Purple to name but a few. In 2014 it was closed as the Bayleys Realty Group
YEARBOOK 2017 • VOLUME 7 NO 1
INFRASTRUCTURE NEW ZEALAND'S WISHLIST
Benefits and implications
ROUGH RIDE AHEAD FOR PETROL POWER Vehicle revolution changing fuel mix
INFRASTRUCTUREBUILD.COM
AI IN CONSTRUCTION
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2017
Road to nowhere or nirvana?
TRANSPORT
Autonomous electric vehicles are no longer a science fiction and cities such as Auckland have two choices, according to Praveen Thakur
Two divergent futures await within 10-15 years when autonomous electric vehicles become the primary form of city transport: • a scenario with privately owned autonomous vehicles would significantly exacerbate congestion in our cities • in contrast, the introduction of autonomous ride-sourcing has the potential to ease the burden of congestion. KPMG utilised its proprietary Land Use and Transport Interaction (LUTI) model and applied it to Melbourne as a case study of the urban form/spatial impacts of self-driving autonomous vehicles. The analysis considered multiple scenarios related to autonomous vehicles on a weekday morning peak period in 2046 and compared them to a business-as-usual scenario. A scenario with private autonomous vehicles showed an increase in urban sprawl, while a scenario with mass take-up of autonomous ride sourcing showed an increase in population density in inner and middle-ring areas. 26
Scenario one: A recipe for gridlock The introduction of autonomous vehicles with a continuation of the current norm of private car ownership is expected to significantly worsen congestion. KPMG analysis of this scenario estimated a 29 per cent increase in average trip time and 23 per cent increase in person kilometres travelled in car. This will lead to a significant increase in demand for road infrastructure and significantly worsen the level of congestion. The reason for this is simple: autonomous electric vehicles will make car travel cheaper, easier and more convenient, which will lead to more and longer car trips, and more car travel.
More car trips Today, only adults with a valid driver license and access to a car can operate vehicles. Others must rely on lifts from family and friends, public transport, walking and cycling. With autonomous electric vehicles, this barrier to driving will no longer exist. Anyone will be able
YEARBOOK 2017 INFRASTRUCTUREBUILD.COM
to use cars. This will lead to an increase in the number of trips taken.
Longer car trips Today, long driving trips are associated with fatigue, boredom and frustration. With autonomous vehicles, people will be able to sleep, read, work, watch movies or television or relax as they travel. As a result, people will accept longer travel times, particularly on freeways where the ride will be smooth and comfortable. Lower vehicle operating costs will further encourage longdistance travel. Electric vehicles are far cheaper to run and maintain than petrol vehicles. Even today, running an electric vehicle in Australia is estimated to be 56 per cent cheaper than a petrol vehicle.
In the future, with rooftop solar and battery storage the cost of running electric vehicles will reduce even further.
More car travel in inner areas Today, the cost and hassle of parking is a significant disincentive to driving to inner city locations in our major cities. With autonomous vehicles, this disincentive no longer exists. This will mean more road congestion in inner areas at the expense of public transport and active modes. An autonomous vehicle will drop you exactly at your destination, saving time to find a parking spot and walk to the destination. The vehicle will drive to a cheaper parking area, or even better, service fare-paying passengers, earning money for the vehicle owner.
“Autonomous ride sourcing will contribute to a seven per cent reduction in average trip time and nine per cent reduction in person kilometres travelled by car”
The introduction of autonomous electric vehicles provides an alternative to car ownership. In this scenario, people would rely on autonomous ride-sourcing services for daily travel. These services will be like today’s Uber and taxi services, but with no driver, and a much lower price tag. Using Melbourne as a case study, KPMG analysis shows that autonomous ride sourcing will contribute to a seven per cent reduction in average trip time and nine per cent reduction in person kilometres travelled by car. This would lower the demand for road infrastructure, ease the burden of congestion in our cities and make our transport systems more efficient and productive.
Inner city densification The autonomous era will also encourage inner and middle-ring city densification. Ride-sourcing services (such as Uber and taxis) and car-sharing services (such as GoGet and Flexicar) have enjoyed rapid growth in our cities. Despite this, most people only
use these services for select trips, relying on the private car for most daily travel. Private car ownership involves high fixed costs such as financing, registration and insurance, for an asset which is idle 96 per cent of the time, rapidly depreciates in value and takes up valuable land for parking. With car sharing and ride sourcing, these fixed costs are distributed among a large pool of users. Currently, these advantages are offset by the cost of a driver (ride sourcing), or the inconvenience of finding, booking and walking to a vehicle (car sharing). In the autonomous era, these disadvantages will no longer exist. Analysis undertaken by KPMG suggests that an autonomous ride-sourcing service would cost $8-10 per half hour of travel. This implies that a typical Melburnian’s annual cost of vehicle travel would reduce from $11,000 to $6,000-$7,000, an option that will appeal to many. If large numbers of residents use autonomous ride-sourcing services, the fleet would be large
enough to ensure the wait times are minimal, particularly in the inner city. For residents who choose to forego car ownership in the autonomous era, many will choose to live in the inner suburbs to optimise autonomous ride-sourcing fares. These residents will use a mix of high-quality public transport, walking, cycling and autonomous ride-sourcing services.
A smaller, more productive fleet Car ownership involves high upfront costs such as financing, registration, maintenance and insurance. With autonomous ride sourcing, these costs will be shared among a large pool of users. As a result, the vehicle fleet would be much smaller and in use for most of its economic life. In contrast, privately owned cars are idle 96 per cent of their life on average These efficiencies will reduce the cost of daily transport for consumers. KPMG estimated that an autonomous riding service would cost $8-10 per half hour of travel
Autonomous advantages Autonomous vehicles offer several major benefits as they: • communicate with each other and/or the road infrastructure itself, maximising vehicle speed and flow • markedly increase the capacity and speed of long-distance freeway travel, catalysing a shift in how and where people live and how they move • make long-distance travel easier, freeing drivers from having to concentrate on the road for long periods and encouraging some to accept longer travel times • are also much cheaper to operate and maintain than petrol and diesel vehicles, increasing the affordability of long-distance travel.
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Autonomous Vehicles ASIA 2017 M ain Conference: 21 - 22 February 2017
P re-Conference Workshop: 20 February 2017
Post-Conference Workshop & Site Tour: 23 February 2017
V enue: Amara Sanctuary Resort Sentosa, Singapore
STRATEGIES AND REGULATORY ROADMAP FOR IMPLEMENTING AUTONOMOUS VEHICLES IN ASIA EXPERT SPEAKERS Peter Damen Chair of Executive Steering Committee Australian Driverless Vehicle Initiative
Dr. Bernhard Morys Head of Driver Assistance & Chassis System Daimler Greater China Ltd. Changgi Lee Senior Deputy Director Ministry of Land, Infrastructure and Transport, Republic of Korea
James Williams Manager Policy – Compliance & Technology National Transport Commission, Australia
Seo-ho Choi General Manager, Human Factors & Devices Research Team Hyundai Motor Company Niels de Boer Programme Director, Centre of Excellence for Testing and Research of Autonomous Vehicles - NTU (Cetran)
KEY TOPICS DISCUSSED
1
Legislation and Regulatory Roadmap for Asia Autonomous Vehicles (AVs)
4
Latest Case Studies on the Commercialization of AVs
2
Evaluating Infrastructure Readiness to Enable AV Implementation on Public Roads
5
Enhancing Public Acceptance of AVs
3
Ensuring Risk Management, Safety and Reliability for AVs
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TRANSPORT
Scenario two: A better way to move
TRANSPORT
More efficient use of road space When people make the decision to purchase a car, they commit to the high upfront costs that come with car ownership. Once those costs are incurred, the additional perceived cost of each trip is low, estimated by KPMG at $2.10 per half hour of city travel. Autonomous ride sourcing has no upfront costs, saving the user thousands of dollars per year. However, the cost per trip is higher than if the car was privately owned, estimated at $8-$10. Because each individual trip costs more, people have greater incentive to walk, cycle or use public transport. This will lead to a decrease in road congestion. It will also increase demand for modes that use space more efficiently than cars and promote public health, including public transport, walking and cycling.
How should we respond? Governments must begin taking action now to safeguard the liveability and productivity of our cities in the autonomous era. KPMG recommends the following actions: • review existing planning schemes and controls to ensure they support urban consolidation that is appropriate from a societal perspective
• provide affordable housing in the inner and middle suburbs to encourage densification and take-up of ride-sourcing services • assess development plans to ensure new developments are consistent with the implications of the autonomous era • invest in decision-making tools for understanding the impact of autonomous and electric
Average trip time by car, weekday morning peak, 2046 15
Average time per trip (mins)
compared to $34 for an equivalent service with a driver. At this price, the annual cost of car travel for a typical Melbourne household would reduce from $11,000 to $6,000-$7,000.
+29%
10
-7%
5
vehicles on land use – this can be achieved with land use transport interaction (LUTI) models • consider autonomous electric vehicles in our infrastructure planning and investment decision-making processes – this includes the take-up of autonomous ride-sourcing services and the implications for travel behaviour and land use • implement road pricing reform as a matter of priority to manage demand for car travel, and as a policy lever to encourage ride sharing • encourage an eventual transition from private ownership to ride sourcing and car sharing for daily travel, including promoting business models that provide these services – governments must also ensure high-quality alternatives to car travel are available, including public transport, walking and cycling • address regulatory hurdles to the mass adoption of autonomous vehicles.
Source: KPMG analysis
0 Business as usual
Private autonomous vehicles
Autonomous ride sourcing
Praveen Thakur is a director at KPMG
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Gearing up for changing transport trends Electric vehicles (EVs) may become popular much faster than previously anticipated and will constitute over 33 per cent of the country’s passenger and light commercial vehicle fleet by 2030, according to Z Energy. The company’s latest research report, Electric vehicles Making a positive contribution to New Zealand, believes it’s “inevitable” that local roads will see a lot more EVs – particularly Plug-in-Hybrid Vehicles (PHEVs) that have both an electrically driven powertrain and an ICE or internal combustion engine (ICE); although Hybrid Electric Vehicles (HEVs) that aren’t powered by an external electricity source will also be a disruptive influence given their relative energy efficiency improvement over ICE vehicles. Developed using Business NZ Energy Council scenarios, Z’s report sees two scenarios for EV uptake: • in a Kayak future, markets drive supply chain decisions and innovation, with consumers making informed decisions based on price and quality • in a Waka future, heightened environmental awareness drives business, consumers and government to make decisions in the national interest. The research indicates the Waka scenario offers the most disruptive potential impact to existing energy businesses. The number of vehicles in the light duty fleet increases materially over the period to 2050 (12.1 per cent CAGR), driven by wide availability at economic prices
ENERGY
How fast are electric vehicles approaching national acceptance and what does it mean for New Zealand fuel companies? One major fuel distributor has been looking at the road ahead…
FAST GAME: an EV fast charger can fully charge a car in 10-25 minutes, making them ideally suited for areas such as airports and supermarkets where people park for a lengthy period
on the back of global technology developments. Combined with New Zealand’s commitment to a lower carbon emission economy and high renewable electricity base, this promotes exponential uptake. Actual electric powertrain vehicle fleet numbers for 2015 are tracking below the Waka scenario; however, Z views this as “insignificant” given that potential exponential uptake commences from 2020. In addition, the government’s EV incentive scheme targets a doubling of the combined EV and PHEV
The government see EVs as one of the main pathways to a lower carbon future and to meeting New Zealand's international COP21 commitments
fleet each year to 64,000 vehicles in 2021 – equivalent to the Waka scenario for EV and PHEV uptake at 2021. The 2021 target may appear ambitious, but the company believes there are potentially other incentives in the pipeline such as fringe benefit tax (FBT), road tolling and ACC levy exemptions. In addition, the government sees EVs as one of the main pathways to a lower carbon future and to meeting New Zealand’s international COP21 commitments (the Conference of Parties that ratified the UN Framework Convention on
NZ passenger and light vehicle commercial fleet numbers (Waka scenario) TYPE
2015 (A)
2015
2020
2025
2030
2035
2040
2045
2050
14,980
15,000
100,000
485,000
815,000
985,000
985,000
865,000
770,000
PHEV
474
25,000
25,000
95,000
270,000
540,000
820,000
995,000
875,000
EV
450
10,000
15,000
90,000
205,000
320,000
500,000
775,000
1,110,000
15,904
50,000
140,000
670,000
1,290,000
1,845,000
2,305,000
2,635,000
2,755,000
0%
2%
4%
18%
34%
47%
57%
64%
66%
HEV
TOTAL % FLEET
INFRASTRUCTUREBUILD.COM YEARBOOK 2017
29
ENERGY
Climate Change in 1992 at the Earth Summit in Rio de Janeiro). The increasing uptake of electric powertrain vehicles in the light vehicle fleet will, however, materially reduce demand for existing petroleum-based fuel – particularly petrol. EVs are substantially more energy efficient than ICE vehicles – an equivalent journey requires less joules of energy input. Both the Kayak and Waka scenarios show efficiency improvements in the heavy vehicle fleet are less dramatic, with electricity not assumed to have a significant penetration other than for trains and buses. Petrol consumption for transport use over the period will be driven primarily by transformation in the light vehicle fleet and reduction in personal car usage and/or ownership, ranging from 0.7 CAGR under Kayak to 2.5 per cent under the Waka scenario. Diesel consumption for transport use will be driven by the transformation in the light vehicle fleet and the reduction in personal car use and/or ownership, offset by an increasing need for heavy vehicle transport due to economic growth. Both hydrogen and biofuels become viable for heavy vehicle transport from 2040, significantly reducing demand later in the period and impacting diesel consumption from (0.8) per cent CAGR under Kayak to (2.0) per cent CAGR under the Waka scenario. Several input assumptions underpin the EV uptake numbers, representing signposts to monitor in determining what scenario could eventuate. The price of carbon has risen from under $10 to around $18 per T CO2, following the government’s May 2016 budget announcement on changes to the Emissions Trading Scheme (ETS) that will see the phasing out of the one-for-two subsidy by January 2019. However, the $25 price cap remains in place, meaning the impact of the ETS on the price of petrol is approximately 6.6cpl, and 7.7cpl for diesel – levels that on their own are unlikely to drive mass adoption of alternative powertrains for transportation. Regulation is a critical uncertainty as to the future price of carbon and the uptake of EVs; will successive governments err towards a more light-handed or a more interventionist regime for promoting uptake? Both scenarios support a continuing trend of rapidly reducing battery costs, with actual cost 30
NZ transport energy demand scenarios – petrol (mlpa) 2015 (A)
2015
2020
2025
2030
2035
2040
2045
2050
Kayak
3,050
3,185
3,230
3,135
2,980
2,820
2,685
2,585
2,500
Waka
3,050
2,870
2,845
2,450
1,975
1,530
1,200
1,190
1,180
rK (cum)
-
135
180
85
(70)
(230)
(365)
(465)
(550)
rW (cum)
-
(180)
(205)
(600)
(1,075)
(1,520)
(1,850)
(1,860)
(1,870)
rMP (cum)
-
(20)
(10)
(260)
(570)
(875)
(1,105)
(1,160)
(1,210)
NZ transport energy demand scenarios – diesel (mlpa) 2015 (A)
2015
2020
2025
2030
2035
2040
2045
2050
Kayak
2,290
2,245
2,240
2,285
2,360
2,425
2,405
2,205
1,695
Waka
2,290
2,205
2,150
2,125
2,115
2,080
1,950
1,655
1,085
rK (cum)
-
(45)
(50)
(5)
70
135
115
(85)
(595)
rW (cum)
-
(85)
(140)
(165)
(175)
(210)
(340)
(635)
(1,205)
rMP (cum)
-
(65)
(95)
(85)
(53)
(38)
(113)
(360)
(900)
Carbon price ($ per T CO2) 2015
2020
2025
2030
2035
2040
2045
2050
Price carbon – Waka
21
37
48
60
75
90
102
115
Price carbon – Kayak
7
9
12
18
26
37
49
60
Battery cost curve (NZ$/kWh) 2015
2020
2025
2030
2035
2040
2045
2050
Battery cost curve – Waka
365
310
270
240
215
195
175
160
Battery cost curve – Kayak
330
270
235
210
195
180
170
160
in 2015 estimated to be around $400 per kWh. It’s not possible to determine a completely reliable projection of future battery cost – though some manufacturers such as General Motors and Tesla have more ambi-
Both hydrogen and biofuels become viable for heavy vehicle transport from 2040, significantly reducing demand later in the period
YEARBOOK 2017 INFRASTRUCTUREBUILD.COM
tious cost estimates of $160 per kWh in the 2020s. The difference in price between a conventional ICE and an EV is primarily due to the cost of batteries – as lithium-ion battery technology advances and battery cost comes down the price premium barrier to consumers in purchasing EVs will also likely reduce. Correlated with reducing battery cost trends is an increase in battery energy density (kWh/ kg), which in turn improves EV range capability – a key consumer concern with EVs. Several other uncertainties could stretch the boundaries of any future scenario, including autonomous vehicles, heavy fleet technology, EV availability and the electricity and charging infrastructure.
Autonomous vehicles Adoption of autonomous vehicles could reduce transportation energy demand through lower light duty vehicle ownership and reduced vehicle kilometres travelled. The intersection of EV uptake with future acceptance of self-driving technology could unlock an evolution of transportation-as-a-service through car sharing. EV technology is available today, but the development and acceptance of autonomous vehicles could have a greater long-term horizon impact. Car manufacturers such as Ford and Tesla have announced plans for a future car-sharing service built around their selfdriving vehicles.
Electric vehicle scenarios
PHEV scenarios
1,300,000 Z Energy House View: Electric vehicles 1,200,000 1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
11
1,300,000 1,200,000 1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
No’s
Charts for petroleum demand impact 2010
2015
2020
2025
2030
2035
2040
2045
2050
2010
2015
2020
2025
Source: BEC NZ 2050 Scenarios and MOT data
2040
2045
EV – Actual
EV – Waka
PHEV – Actual
PHEV – Waka
EV – Kayak
EV – Range
PHEV – Kayak
PHEV – Range
2050
Transport fuel consumption scenarios – diesel
HEV3,500 Scenarios
3,500
3,000 1,300,000 1,200,000 2,500 1,100,000 1,000,000 2,000 900,000 1,500 800,000
3,000
mlpa
2,500 2,000 EVERYDAY OCCURRENCE: charging an electric vehicle will soon be as familiar as filing1,500 up at a petrol pump for a third of Kiwi drivers if Z Energy’s projections pan out
2015
2020
2025
2030
2035
2040
2045
2050
Source: BEC NZ2020 2050 Scenarios MOT data 2010 2015 2025 and 2030 2035
2040
2045
2050
Year
0
Petrol Consumption Actual
Year
Petrol – Waka (ml)
Source: BEC NZ(ml) 2050 Scenarios andPetrol MOT data Petrol – Kayak Consumption Range
20 1 20 4 15 20 16 20 1 20 7 18 20 1 20 9 20 20 21 20 2 20 2 2 20 3 2 20 4 2 20 5 2 20 6 27 20 2 20 8 29 20 30
mlpa
HEV – Actual HEV – Waka The opportunity isn’t limited to new and used vehicles imported HEV –with Kayak into New Zealand traditional car manufacturers, in 2015. HEV – Transport fuel consumption scenarios –Range petrol giants such as Google, Apple and Japan is a member of the Uber all3,400 prominent in this developElectric Vehicles Initiatives (EVI), ment space. a multi-government policy forum 3,200 representing the majority of global Heavy3,000 vehicle fleet EV car stock, which has a goal technology of achieving 20 million EV cars 2,800 The uncertainty is over what alterby 2020. nate technology to fossil fuels will Japan currently has 16 per cent 2,600 prevail, and to what extent, in the of the global car stock of EVs at heavy vehicle 0.13 million, with a committed tar2,400 sector – trucking. The impact of this uncertainty get to get to one million by 2020. 2,200 will occur over a longer-term horiThe Japanese government zon than for plausible EV uptake in provides financial incentives for 2,000 the light vehicle fleet. EV cars, including purchase price subsidies and tax exemptions. 1,800 Can new and used France, Germany, Italy, Nether13 demand? imports meet lands, Norway, Portugal, Spain, 0 2 Asia (primarily Japan) and Europe Sweden and the UK are also Year accounted for 77 per cent and 20 members of EVI, with most having per cent of the record 285,000 announced aspirational commitSource: BEC NZ 2050 Scenarios and MBIE data
1,000 ments to the goal of 20 million EV with its recent public announcecars by 2020. ment that “the future is electric” 500vehicle importers conMotor – a new strategy to roll out more sistently report that they could electric cars and add self-driving 0 respond quickly to increased features faster than their rivals. 2015 2020 2025 2030 2035 it 2040 2045 2050 demand if2010 New Zealand sales of Z believe is “reasonable” to asYear EVs take off. sume that growth in EV adoption in Under theSource: WakaBEC scenario key vehicle supply NZ 2050 Scenarios andNew MOT Zealand’s data ~500,000 additional HEV, PHEV markets of Japan and Europe will or EV vehicles enter the light duty be sufficient to support exponenDiesel – Waka (ml) Diesel Consumption Actual vehicle fleet over the five-year tial demand growth. Diesel – Kayak (ml) Diesel Consumption Range period from 2020 to 2025. However, the current rate of On average ~100,000 or 35 per turnover of the New Zealand light cent of new or used imports per duty vehicle fleet makes a more annum would have electric powaggressive EV demand growth ertrains – a significant rise from a scenario than seem implauTransport fuel consumption scenarios – Waka diesel total of ~3,000 vehicles in 2015. sible the company believes. Manufacturers’ research and deThe volume and number of EV 3,400 velopment focus is now predommodels coming to market will 3,200 inantly electric powertrains, with increase significantly, making some manufacturers intending to them cheaper and thus more 3,000 stop any further internal combusattractive to consumers by tion2,800 engine R&D by 2025. increasing the number of vehicle Leading Japanese manufactursegments and brands. 2,600 ers Toyota, Nissan, Honda, Suzuki, Can the electricity sector Mazda and Mitsubishi all have 2,400 meet the demand? expansive targets and plans to 2,200 production capacity of EV New Zealand is one of the most increase EV-ready countries in the world, car models. 2,000 with a high base of renewable Similarly, the main European electricity and the necessary manufacturers that supply 1,800 network infrastructure to support the New Zealand car market 13 BMW, MercedesPHEV uptake – if only because of (Volkswagen, 0 2 all the suburban garages with an Benz, Audi and Renault) have Year ordinary three-pin socket. consistent plans. Although there is some uncerThe most prominent is BMW, 20 1 20 4 15 20 16 20 1 20 7 18 20 1 20 9 20 20 21 20 2 20 2 2 20 3 2 20 4 2 20 5 2 20 6 27 20 2 20 8 29 20 30
700,000 1,000 600,000 500,000 500 400,000 300,000 0 200,000 100,0002010
mlpa
mlpa
2035
Source: BEC NZ 2050 Scenarios and MOT data
Transport fuel consumption scenarios – petrol
No’s
2030
Year
Year
ENERGY
No’s
Appendix B
Source: BEC NZ 2050 Scenarios and MBIE data
INFRASTRUCTUREBUILD.COM YEARBOOK 2017
31
COMMON SIGHT: there are currently more than 100 EV fastcharging stations strategically located throughout the country, mainly in the main centres where traffic density is highest
tainty over how smart charging could manage electricity distribution flexibility, New Zealand is uniquely placed in having planning consent for enough wind farms, hydro and geothermal power stations to cover about a 25 per cent increase in demand for electricity.
ENERGY
Will EV charging infrastructure support EV uptake? International trends show charging infrastructure availability is positively correlated to growth in EVs. The Electricity Networks Association [ENA] working group of lines companies along with Contact Energy, Mercury and Drive Electric are looking at a coordinated approach to putting in place a ‘renewables highway’ that provides public access to charging. The renewables highway would potentially see a network of charging locations at key stopping points and tourism locations along State Highway 1, expanding to regional routes over time.
This backbone could then encourage further charging infrastructure by other businesses, including airports, retailers, supermarkets, tourist destinations and other places where people park their vehicles. Auckland-based private company, Charge.Net.NZ is also rolling out a national network of fastcharging stations, with over 100 sites already in place. A fast charger can fully charge a car in 10-25 minutes, but while many public AC chargers are free a fast DC charger can cost up to $40,000 to install. Z concludes that charging infrastructure development is “relatively low cost” and underway to support future EV uptake, thereby alleviating consumer anxiety over short range and long charging times. Whatever the scenario, whether Waka or Kayak, the electric vehicle looks destined to become a common sight on New Zealand roads – and within a very, very short period of time.
Thrifty backs a winner in road safety An online interactive driver training programme, Fleetcoach, picked up the Thrifty Car Rental sponsored Fleet Safety Product Award at the recent 2016 Brake Australasian Fleet Safety Awards. The training programme coaches drivers through multimedia modules in skills such as hazard perception and situation awareness. Fleetcoach was created by Dr Robert Isler, who also won the Outstanding Commitment Award for his 25 years service at the forefront of road safety research. General Manager of Thrifty Rental Emma Gardiner joined Brake’s New Zealand Director Caroline Perry in congratulating the winning awards and highly commended entries in a range of areas Dr Isler’s research, and his knowledge of other research worldwide, was used to develop the programs and ensure they use the latest behavioural interventions. He pioneered work on a head-mounted eye-tracker, which showed that eye movements control to a large degree how drivers move their steering wheels. It also showed that effective eye-scanning behaviour and hazard perception skills can be trained in both laboratory and real driving situations. The research findings lead to the development of several interactive multimedia training programs. He founded e-Drive in 2010, an online driver training program that focuses on visual search, situation awareness, hazard perception and risk management driving skills for all drivers. Fleetcoach was created through the need for a similar driving programme for at work drivers. There is also a risk assessment element, so that managers can identify whether their drivers are low-risk or high-risk and require specific training modules on various topics such as speed and distractions. “We’re proud to sponsor the Fleet Safety Product Award,” Thrifty’s Emma Gardiner says. 32
YEARBOOK 2017 INFRASTRUCTUREBUILD.COM
Backing Safety! We value your safety when you’re behind the wheel, that’s why we’re proud charity partners of Brake.
Welcome to a low-carbon world a price on carbon. The vast majority of the majors’ upstream operations are not yet directly impacted, with most policies primarily focused on the power and industrial sectors. Up to 50 per cent of majors’ production could be hit with carbon costs over the next decade – but only if the countries and regions that currently price carbon extend their policies to the extractives
“As costs for renewables and energy storage continue to fall, ‘subscription’-type services could open up new low-carbon growth markets. For example, electric car sharing.” According to the study the global major oil companies are under pressure to de-risk their existing business models and diversify into low-carbon energies. However, diversification into
Global demand shifting to lower-carbon 5.0%
Average % YoY Growth
Natural gas and zero-carbon fuels will satisfy at least 60 per cent of the rise in global energy demand to 2035, and under some scenarios renewable energy could grow nearly 500 per cent in the next 20 years. Coal and oil demand could peak well before 2035. As demand for oil slows and energy growth shifts to lower carbon fuels, renewables will grow rapidly across all regions. The three main risks for global oil majors identified in Wood Mackenzie’s study: Fossil fuels to low-carbon: The Majors’ energy transition are: • the growth in renewable energy • intensifying carbon policy • and increasing lowcarbon competition. The study investigates how the major oil companies are responding to growing pressure to move to a low carbon-energy environment. Paul McConnell, research director of global trends for Wood Mackenzie, says: “As carbon policy intensifies, the oil and gas majors will face more regulatory burden and are likely to face increasing costs. “Green financing could also mean higher cost of capital for more carbon-intensive oil assets such as oil sands, as investors shift to alternative fuels and lower-carbon technologies.” Wood Mackenzie’s study shows that only 13 per cent of global emissions are currently covered by
Forecast Historic data (1995-2015) Wood Mac base case* WM carbon-constrained scenario IEA 450 scenario**
2.5%
0.0%
-2.5%
Coal
Oil
sectors. These are commonly outside the scope of emissions-limiting schemes. “While all the major oil companies put a price on carbon in their longterm planning, the big question is how much risk each has taken into account,” says McConnell. Assumptions vary greatly by geography, timeline and on price from between US$6 to US$80 a tonne.
Gas
Zero-carbon fuels
renewables will be challenging. It will be difficult to both justify allocating already scarce capital to low-returning projects and transform existing business models. “The timing of a transition to low-carbon energy will be critical,” says McConnell. “Diversifying to renewable energy will be a balancing act. “Moving too quickly could leave
ENERGY
The next global energy transition is already under way, posing risks for some of the world’s largest energy companies says global natural resources analyst company Wood MacKenzie money on the table from the majors’ fossil fuels business. But too slowly, and they could miss their window of opportunity. “The biggest risk for oil and gas companies is to do nothing, and be left exposed to investors making their own minds up. “There is notably an emergence of three different strategies by the major oil companies – decarbonise, capitalise or grow. “The majors are testing different strategies to decarbonise and mitigate risks, to capitalise by using existing capabilities to explore opportunities in renewables and to grow a profitable and substantial renewables business. “Regardless of the diverging strategies, the majors are all increasing their share in gas while also aiming to push down the cost curve,” says McConnell. “Global carbon risks could depress oil prices for the long term with slowing demand and an increase in costs, making it crucial for the majors to push breakevens down further. “To facilitate the move to low-carbon energy policies, new skills will be needed through joint ventures or acquisitions.” While there is strong rhetoric on diversification into renewables, a much greater proportion of capital will be needed to deliver a material shift Woods MacKenzie maintains.
INFRASTRUCTUREBUILD.COM YEARBOOK 2017
33
The art of procurement prophecy: promises and pitfalls
MANAGEMENT
There’s plenty of good news in procurement in 2017 and it’s only going to get better
Several main factors are combining to shape and change the procurement environment for both clients and suppliers, according to the 15-strong Plan A team that works with suppliers to write, review, manage and edit bid responses in just about every sector Their expert views are supported by their experienced colleagues within Clever Buying – the organisation that trains and mentors hundreds of procurement professionals and qualifies tender evaluators.
Pipeline forecasts will drive better procurement planning on both sides The forecasting tools for both clients and suppliers to the infrastructure sector have come a long way in the past couple of years; and there’s every indication 34
that they’ll continue to improve, providing more certainty and enabling us to minimise investment in wasted efforts on both sides of procurement. In 2015 and 2016, we’ve seen publication of far more accurate and detailed infrastructure project pipelines from organisations such as the National Infrastructure Unit, Infrastructure New Zealand and the NZ Transport Agency. They’ve served two purposes. First, they have enabled clever clients to put serious time, expertise and planning into their tender documents. The best tender documents make it clear in objective terms what they are looking for. They incorporate ‘gates’ which effectively make it impossible for an unsuitable supplier to get past base one; then they zero in to the factors that will make a tangible difference to the success of the
YEARBOOK 2017 INFRASTRUCTUREBUILD.COM
project and the long-term sustainability of the assets created. Standard sets of questions that are used as a template for every tender are now openly acknowledged to fall short of best practice. The risks and opportunities to add value are different for every project. So the tender documentation, if designed carefully to target risks and opportunities that will determine project success, provides the tools that lead directly to the right decisions. That’s good for all of us, especially when it’s our money invested in public assets that’s at stake. Secondly, and equally importantly, detailed pipelines of upcoming projects coming to market have given suppliers an incredibly useful forecasting tool to plan their tendering activity. Armed with that intelligence,
they can plan and put in place the partnerships, the resources, the staff and the plant they’ll need to deliver those projects efficiently and competitively. No longer blind-sided by massive tenders that spring on us on the 23rd of December to be completed by the 10th of January, supply-side tenderers can put real time and careful thought into developing clever methodologies that will deliver sustainable benefits over the life of the asset. This is a huge advance over the cheap and short-term, seat-ofthe-pants bids that won the job but delivered a low quality flimsy asset that didn’t last the distance.
Winning on quality will demand more effort A consequence of this, however, is that suppliers need to put significant effort into the
NZQA Procurement qualification to prove its worth The new NZQA Procurement qualification came online this year – strengthened, updated and extended to all of infrastructure. Its assessment tools were approved in November; and the first few candidates are working through it. As an alternative to the UK-developed procurement qualification suite available from CIPS (the Chartered Institute of Purchasing and Supply), the NZQA Certificate in Infrastructure Procurement is relevant and focused, providing a practical qualification for procurement professionals who are engaged in tendering. Assessment and learning is via workplace activity rather than exams and reading textbooks, so the knowledge and skills are immediately applicable to professionals who are working in procurement in New Zealand. What’s more, the qualification is the only one to build in a working knowledge of the New Zealand Government Rules of Sourcing, which have been mandatory, expected or encouraged as best practice for New Zealand government organisations since 2013.
“The NZQA Certificate in Infrastructure Procurement is relevant and focused, providing a practical qualification for procurement professionals who are engaged in tendering”
Progress on achieving compliance with those sensible rules has been agonisingly slow over the past three and a half years; but this qualification has the potential to create step change in compliance within those directly responsible for government procurement activity, from ministries and departments, right down to councils and even, for example, school boards. What this means for clients is that the proven NZTA tender evaluator qualification is now even
better than before. Since the early 1990s that qualification has been the mainstay of councils and road controlling authorities throughout New Zealand as the benchmark in competence in best practice procurement via tendering. Traditionally, it relied heavily on evidence of experience to provide the basis of achievement of the qualification. That proved a risky tactic in some cases, since best practice in procurement was not well defined and acceptance of a variety of legacy practices was sufficient to gain the qualification. It was difficult for assessors of the old qualification to be confident that an individual had the skills and competence to prepare RFx documents or evaluate tenders to the standard required, since the evidence was largely shown via documents that were jointly prepared by teams of evaluators. The new version of the qualification requires assessment via observation and interviewing to assure the assessor of that individual competence. Rolling out standard templates prepared originally by others – with minor tweaks or edits from the individual being assessed – will no longer
WHO WON THAT TENDER? Was Plan A the wind beneath their wings?
In 2016, the 15 – strong Plan A team wrote over 300 tenders across all sorts of sectors, including infrastructure, facilities management, technology, professional services and more. We helped clients respond to tenders for contracts in NZ, Australia, the Pacific, North America, the Middle East and Africa. We wrote, developed strategy, reviewed, edited, designed and produced tenders that won billions of dollars’ worth of work for our clients. It’s our Day Job (and sometimes our Night Job too!). We know what it takes to win, and how best to support you to grow your business. Find out more: www.planawriters.com
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preparation of their tenders. Winning on quality is everyone’s goal, but it doesn’t happen without effort and time invested. Based on experience, those suppliers who start planning strategy and preparing their bids early, engage professional help when needed, and are open to independent input into their review are those who most often score highest. Last-minute, rushed tender preparation is never anyone’s ideal, but sometimes a massive effort is needed in a short space of time. That’s why the Plan A team now incorporates northern hemisphere bid writers, who leverage time zone differences to enable round-the-clock activity on tenders when needed. Suppliers who plan their tenders effectively and are willing to invest in winning work will always be at an advantage; so using those forward work plans to plan your bid programme through 2017 is prudent. Full marks to those government organisations who are most active in communicating their forward work plans to tenderers and using them to plan their tendering activity.
MANAGEMENT
be acceptable. They’ll need to demonstrate their personal understanding and involvement in decision-making to conform with well-defined best practice standards. This is excellent news for anyone involved in tendering. Suppliers will see that with additional discipline in procurement planning and tailoring the RFx documents to drivers for best value for money, there are more opportunities to win work based on the quality and sustainability of the solution offered. The price war mentality – which cut costs to the quick and resulted in so many cases with false economies – is reducing, with the support of the requirements of this new version of the Infrastructure Procurement Qualification.
‘Balanced, healthy market’ debates will continue There has been much debate among major procurers about the merits of aggregating or bundling contracts to streamline the number of suppliers that clients interact with and reduce administration and tendering costs. While on the surface this sounds sensible, there are fish hooks in this approach which
should not be overlooked. Clients argue that although this tips the market in favour of larger companies and potentially reduces the number of opportunities for smaller companies, it is possible to maintain a healthy market through requiring those head contractors to engage a minimum quota or percentage of subcontractors for major projects. This is a simplistic approach which unfortunately does not solve some worrying issues. When smaller companies are presented with a glass ceiling that prevents them from contracting direct, they have few or no opportunities to develop their own management systems and expertise. While they are under direction from the head contractor, who is not bound to follow the principles of fair procurement that applied to their own engagement with a major government client, subcontractors are often squeezed on price to the point where business growth for them is difficult to achieve. Let’s not forget that the giants that dominate our infrastructure landscape today grew from small enterprising companies several decades ago, who had real oppor-
A key point of debate prompted by Infrastructure New Zealand earlier this year was the proposal to provide a centre of excellence in procurement specifically targeted to assist with largescale projects
tunities to grow and seized them, with characteristic Kiwi and Aussie ingenuity. As we face a promising and healthy pipeline of infrastructure projects over the next five, 10 and 20 years, prudent client organisations will provide a balance of large and small projects to go to market to encourage the best in every tier of infrastructure providers to grow and prosper. That’s insurance for generations to come that our infrastructure market will continue to attract a range of competitive, high quality suppliers.
Stronger and deeper alignment between procurement agencies A key point of debate prompted by Infrastructure New Zealand earlier this year was the proposal to establish a central agency that would provide a centre of excellence in procurement specifically targeted to assist with procurement of large projects. This was widely supported, but – not surprisingly – the question of who and how are head-scratchers. Clever Buying has been picking the best from various procurement models including NZTA and MBIE (among other international examples) over the past five years, and blending these into a best practice training programme for procurement professionals. That’s been challenging at times, with misaligned practices and no common language still evident in the methods taught by those entities. Both those agencies provide good models and practices, however it is quite difficult to blend them into a seamless model. The past year has seen growing signs of increased cooperation between these two agencies, which is welcomed. The NZTA
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There are several reasons why 2017 could be a landmark year for infrastructure procurement: • we have a healthy and visible pipeline of work in New Zealand and (to a lesser extent) in Australia, which is increasingly detailed and accurate – suppliers and clients now have the tools to plan their respective business development and procurement activities far more effectively than previously • both clients and suppliers will put more effort into procurement planning, and this investment will pay off with better decision-making tools, more effective use of public money, and more sustainable infrastructure solutions • the new version of the NZQA Procurement Qualification can provide a powerful tool for infrastructure agencies to demand effective procurement practices that directly lead to compliance with government rules and conformance with best practices in procurement
manual is being revised to create stronger alignment with the Government Rules of Sourcing. Workshops between the two entities have begun to explore their strategic alignment, although there is still work to be done to combine the actual
• The balance between providing efficient category management to streamline procurement activity and reduce tendering costs and providing a healthy and balanced market so suppliers of all sizes have opportunities to grow will continue – clients need to be mindful of both the benefits and potential pitfalls, and take care not to make decisions that could affect the viability of significant sectors of our infrastructure supplier markets in the future • we’ll welcome further progress on convergence of best practice tools and models in procurement as alignment at a strategic level is useful but often falls short of making real differences that drive better outcomes – hopefully the initial signs of cooperation between the two most influential agencies in New Zealand procurement will filter through to achieve alignment in the areas that actually deliver infrastructure projects.
practices that are evident in tendering from each of these agencies into a unified model for all New Zealand procurement professionals to follow. I am hopeful that the work done so far will continue in this direction, so it will actually make a
difference to procurement tools used to make decisions on asset investments. With a working knowledge of having prepared thousands of responses to tender documents prepared all over the world over the past 19 years, I can confidently say that the practices
Caroline Boot is the Managing Partner of Clever Buying, an organisation dedicated to providing practical procurement training including Government Rules of Sourcing, NZQA assessment and expert procurement support for tender evaluators. For more information, see www.cleverbuying.com If you have a perspective on these issues, or more to add or debate, please contact Caroline Boot at caroline.boot@plana.co.nz or caroline.boot@cleverbuying.com or phone 021 722 005.
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MANAGEMENT
A landmark year…?
routinely used by the NZTA are head and shoulders above most others in their effectiveness, transparency and fairness. While it’s always good to be aware of emerging best practices, we have excellence in our own back yard and in my opinion we don’t need to invest too much time and effort into offshore investigation to adopt procurement practices that are the envy of the civilised world. We have that centre of excellence already – all we need to do is extend its influence over infrastructure beyond transport.
Big solution for small town
WATER
The site for the 200 resident Porangahau township water supply contained five concrete tanks that were starting to show their age with a number of cracks – and the site itself showing signs of ground movement
Central Hawke’s Bay District Council’s Water Network Engineer Harry Robinson set out to find a way to stabilise the site and increase the holding capacity to be able to supply the township for longer in the event of the supply main failing. He also wanted to increase the volume of water available for firefighting purposes. “I needed a more robust site with increased tank storage and greater capacity to monitor the site as well as increased security of the compound in both ground stability and public access,” says Robinson. There were limitations on increasing the site due to the topography of the surrounding hill side and council road infrastructure. The reservoir site is located on a ridge above Porangahau beside a sealed road. “The reservoir supply system had to remain in operation throughout the redevelopment of the site and it was decided very early that a staged upgrade of the site would be required,” he says. Porangahau consists of a local pub, primary school, dairy, church, town hall, play centre, rugby club and local marae. It has a permanent population of less than 200, but this can double during the summer months. A bore site located at Te Paerahi Beach to the east supplies the tanks and the beach settlement itself, which is fed directly via a variable speed drive pump. The 38
township water is pumped 4.5km to the reservoir site before gravity feeding into the township network Water is first treated via membrane ultra filtration with disinfection carried out by chlorination prior to distribution. Council carried out a cost estimate on three different types of tank storage systems. This not only covered the tank costs but included site preparation, provision of a new inlet and outlet pipe network within the compound, and valves to enable a shutdown of individual tanks for maintenance purposes while still having an operational reservoir site. The telemetery system needed an upgrade including a more robust
solar power supply and installation of a security fence around the compound. Three tank options were considered – six 30,000 litre Rota moulded PE tanks, three 55,000 litre steel tanks on a concrete ring foundation, and Kliptanks' three 60,000 litre tanks. All three options came within 1.5 per cent lowest to highest overall cost once all site and associated works were added to the tank costs. The council needed a system that would provide a reasonable construction time frame, provide the most compact internal pipe network with easy operation in maintenance periods, a
compact compound to house the reservoir and easy repositioning of the tanks should it be required. The Kliptank option ticked all of council’s requirements. The council consulted all six contractors involved with the project to produce a construction timeline to ensure critical points in the sequence of the works were maintained throughout the project. They required flexibility should it be needed to ensure the redevelopment was completed within the 14-week schedule. One factor in the assessment was to be sure that if a tank was to be moved for any reason, it could be dismantled or moved without the need for heavy
“The increase in capacity has also meant a longer time between stopping and starting of the supply pump, which we believe will wear on the pump itself...”
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TOP LEFT: Modular construction did away with the need to have heavy machinery on the site TOP RIGHT: Kliptank’s three 60,000 litre tanks increased the reservoir capacity by more than 60 per cent meaning less wear and tear on the supply pump OPPOSITE PAGE: The reservoir supply system had to remain in operation throughout the redevelopment of the site LEFT: Water Network Engineer Harry Robinson (left) and Civil Engineer Shane Kingston found an economical and flexible solution to small town water supply changes
WATER
lifting equipment. Kliptank provided this assurance through its modular construction system which requires only onsite personnel. The sand base system for sitting the tank, in combination with the tank’s construction, provided an Importance Level One (IL1) constructed water tank. If the tank was to be constructed outside to council’s Network Utility Operators classification an Importance Level Three would have been required as part of the Water Network framework within the Building Code. Council engineers deemed this would add unnecessary costs and time to the project and that an IL1
would provide the required level of service to maintain an operational reservoir site for the township. This was put to the test when the township experienced a 5.8 magnitude earthquake centred some 50km south without any issues on the reservoir site. The old site held about 110 cubic metres of water, while the new site now has the potential to hold 180 cubic metres. “The increase in capacity has also meant a longer time between stopping and starting of the supply pump which we believe will lessen wear on the pump itself, increasing its lifespan,” says Council Civil Engineer Shane Kingston
“Like many small towns Porangahau is situated some distance from major centres where there are resources to carry out this sort of redevelopment,” he says. “Kliptank’s modular system does away with the need to have heavy machinery on site which reduces costs further.” Robinson and Kingston took a look with Kliptank’s Sales Engineer Ian Jamieson at a dairy effluent holding tank outside of Dannevirke to assess the construction method employed by Kliptank and how the tank had performed to date, says Kingston. “After the construction of
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the first tank on site a few minor issues showed up around the access hatch, platform and mounting of the monitoring equipment – a teleconference call with Kliptank quickly provided quick solutions that enabled the time frame to be unaltered.” Council is now considering the use of Kliptank on another water bore site – a single holding tank of greater capacity used as a secondary supply site for the Waipawa. Kliptank: Ian Jamieson 07 579 5200, www.kliptank.com Harry Robinson, Shane Kingston 06 857 8060 www.chbdc.govt.nz
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39
Kaikoura quake a wake-up call for greater pipeline resilience
WATER
The 7.8 earthquake in Kaikoura provided another sharp reminder to improve water network resilience in light of the Christchurch quakes, says Water New Zealand Chief Executive John Pfahlert It’s early days yet but there has clearly been substantial damage done to the 3 Waters infrastructure. The sewage system wasn't working and residents were using 900 chemical toilets. The main town water supply tank was broken and one assumes there will be significant damage to pipeline assets. It will be well beyond the financial resources of a small community like this to pay for the repairs. In support of the association's wider programme of work to improve resilience of pipeline assets we have started a collaborative venture with the University of Canterbury Quake Centre and the IPWEA with the objective of developing guidance documents and tools to assist New Zealand’s water organisations to make nationally consistent, evidenced-based decisions relating to the management and renewal of their 3 Water Pipe Networks. The programme covers inspection, maintenance and renewal
strategies for pipework in potable water, wastewater and stormwater systems. The tools and guidance documents developed through these initiatives will form a framework that can be used in conjunction with the International Infrastructure Management Manual to implement advanced asset management processes to produce investment strategies that optimise cost, risk and level of service. They will enable organisations to assess the implications of adopting alternative investment strategies and select the strategy that best suits the needs of their community. Benefits of this programme include: • Better performing assets and higher returns on investment • Potentially large cost savings in renewal budgets • A better understanding of risks and contingent liabilities • Improved transparency in the decision-making process.
An outline of our programme material is contained in a report the consortium have just produced, called Evidence based investment decision making for 3 waters networks. This document presents 46 project initiatives that comprise the overall programme and one integrating decision support theme. This year has also seen a significant water-borne disease outbreak in Havelock North. The Government Inquiry and its associated terms of reference has been widely communicated and starts in Hastings on 30 January, postponed due to court action between a couple of the parties to the Inquiry. There is a role here for organisations such as ours to ensure that we learn from the mistakes that were made and communicate these to the wider sector. One of the possible outcomes from the inquiry is a focus on the adequacy of the existing training and qualification regime for
DAMAGE CONTROL: Kaikoura Mayor Winston Gray surveys the damage to local infrastructure
water operators. The two existing qualifications are at the certificate and diploma level and have not been updated for some years. There is no formal requirement for council managers to hold more
Earthquake damage highlights need for better ways to invest in water services The devastating effect of the 2011 Canterbury earthquake has led to a major project which could save ratepayers billions of dollars on the cost of replacing vital water pipes. Major earthquakes take a huge toll on vital infrastructure such as water and highlight the need for improved decision-making on pipeline replacement. This has sparked a joint venture between Water New Zealand, the Institute of Public Works Engineering Australasia (IPWEA) and the Quake Centre based at Canterbury University, aimed at providing tools to enable better and more nationally consistent decisions on where and how to renew and replace water piping. This programme could hold the key for unlocking huge savings for ratepayers – if
40
YEARBOOK 2017 INFRASTRUCTUREBUILD.COM
decision-making could be improved by five per cent on a $50 billion asset it would provide $2.5-billion of potential savings. The first stage of the programme aims to bring together guidance documents and tools to enable council staff to make evidence-based decisions relating to the management and renewal of their drinking, storm and wastewater pipe networks. The programme covers inspection, maintenance and renewal strategies. All around the country, drinking water, wastewater and storm water pipes are nearing the end of their useful lives and will need replacing. This is vital underground infrastructure worth $50 billion, yet it’s a burden that many local authorities have an “out of sight out of mind” attitude to.
Libraries, swimming pools and parks make a much more attractive and visible investment, and this has led to a consistent pattern by councils of delaying spending on assets that can’t be seen. Quake Centre Manager Greg Preston says a key component to improving sector performance is knowledge-sharing. The programme will also help councils use national data effectively to help them decide where they are best to spend their funds – what pipe replacements need to be done urgently and what can wait. “This is a long and detailed project but has the potential to save billions of dollars, allow communities to understand what resilience means for them and to make the best local decision based on real information.”
advanced water treatment qualifications (they don’t exist), and there is no system of continuing professional development (CPD). While Water New Zealand, the Water Industry Operators Group and contractors representatives are developing a CPD scheme, there are likely to be questions around the general adequacy of the training regime. As an industry we need to stand prepared to address these concerns. Over the past year there has also been a great deal of work undertaken to develop metadata standards for water infrastructure. This project is well advanced with draft standards available and officials working on funding and governance options for the project. The project is expected to commence July 2017 with pilot trials being run with a selection of councils around New Zealand. It’s likely to take some years to be implemented, but will be of huge significance in that for the first time councils will be reporting consistent data for 3 Waters assets. This will enable improvements in asset management. The other issue that remains unresolved in the local government sector is that of water governance. Our association has decided to stand aside from
championing local government reform and the overt promotion of corporate models of water governance in favour of a more collaborative approach with regional and district councils. We will also be focusing on technical guidance to water managers and being a strong advocate for the sector. Local Government New Zealand, after considerable sector engagement during 2013-16, has developed a model based on co-regulation of the sector – much along the lines of the gas industry. Government has yet to respond to that proposal. Anyone close to the sector realises that the disaggregated nature of small councils in New Zealand makes it hard for them to provide First World water services with limited technical and financial means. That issue isn’t going to become any easier going forward as they are increasingly faced with asset renewals. The Havelock North Drinking Water inquiry is specifically excluded from considering the structural arrangements of local government, but parties to the Inquiry may well raise governance issues. It will be interesting to see if the inquiry makes any observations in this regard.
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WATER
Bayer is continuing its investment in producing high-quality animal health medicines in New Zealand with the commissioning of a new $3 million water treatment station at its Manukau production site. The new plant takes ordinary tap water and through a system of filtering, deionizing and softening converts it into Pure Water (PW). It is then further refined and distilled to create Water For Injection (WFI). Both types of water are used in manufacturing a wide range of animal medicines and products ranging from metabolics for dairy cows to drenches and supplements for farm livestock and horses. Bayer New Zealand Managing Director Derek Bartlett says the new water treatment plant is a major leap for the production site. “Previously it would take about six hours to produce 2000 litres of WFI –
D_1794
U.S. Navy Imagery
Bayer opens new water plant
now we can produce 2000 litres in one hour,” he explains. “We can now get high quality water whenever we want without any restrictions, which will impact positively on our production times.” Another important feature of the water treatment plant is its ability to self-monitor. “Basically, it self-checks itself to ensure the water being produced does not get contaminated or go out of spec.” As well as treating water, the new plant also distributes it throughout the Manukau production site 24/7 and has two large storage tanks. Following the commissioning of the plant, there will be a two-month testing and validation process before full manufacturing begins in January. The new water treatment plant is part of a series of multi-million upgrades to the Manukau plant. Other improvements will be made to its Liquids and Pastes production facility starting next year. “Bayer firmly believes in supporting our local farming industry here in New Zealand,” says Bartlett. “To do that, it is crucial that we invest in our manufacturing plant, which not only produces animal medicines for local use, but also exports to more than 70 countries around the world.”
COMMENT
The calm before the storm – or the new norm? This year was an unusual one for infrastructure – on the surface there’s been significant steps forward, but dig a little deeper and a year of much less progress emerges The big question is which infrastructure profile we see continued into 2017? There were a number of significant milestones hit in 2016, particularly in transport. After years of hard grind, outgoing Auckland Mayor Len Brown finally got to cut the ribbon on the City Rail Link. This will be New Zealand’s biggest ever infrastructure project and will unlock capacity in Auckland’s metropolitan rail network. Some of the shine was taken off, however, when it was revealed that the project could cost up to $3.5 billion as opposed to the $2.4 billion originally estimated. It is important to note that the majority of these costs are the result of inflation rather than other 42
factors, but the risk of a project of this scale and complexity calling on more public funds is high. New Zealand’s second transport public private partnership got underway. The Spanish construction firm Acciona led the successful consortium to win the Puhoi-Warkworth motorway contract and this vital link to Northland should be operational around 2022. It was not the only Road of National Significance to begin construction in 2016. Wellington’s Peka-Peka to Otaki expressway, Christchurch’s northern motorway and Waikato’s Longswamp section are the last major respective links in the RoNS programme for our second, third and fourth biggest cities. But these were all projects long
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in gestation – each ultimately born in the election manifesto of the 2008 National Party. They represent the last wave of the RoNS programme and, in the context of recent experience, seem like symbols of a bygone age.
Starting struggles The East-West Link in Auckland, for example, is struggling to make it to the start line. Wherever you are right now, take out your phone and check the traffic on your maps app. Unless you’re using this article for bedtime reading, I can virtually guarantee that you’ll see a thick red line where Neilson St and the Onehunga off-ramp should be. The entire area is in gridlock all day every week day and has been
for half a decade, and still we can’t get an agreed solution off the mark. The reason for this is clear. The New Zealand Transport Agency is battling a near insurmountable consenting challenge created by the Resource Management Act’s effects-based approach combined with the precedent created by the Basin Reserve’s failed flyover consent application. If the agency’s application for the East West Link is cancelled, Auckland, like Wellington, will be staring down the barrel of 18 months of replanning with no end in sight. East-West and the Basin Reserve solution are not the only projects to have stalled over 2016. Auckland’s second-biggest
public transport project, AMETI, as well as the emerging priority light rail proposal, have both hit a quiet patch this year. There have been some good reasons for these deferrals. The Auckland Transport Alignment Project (ATAP) has sought to align central and local government transport priorities before further major investments proceed. Nevertheless, this seems to sum up transport in 2016 – a holding pattern before something (hopefully) happens.
Water woes And it’s not just transport. Irrigation has moved in stops and starts as well. The Ruataniwha project has moved along at a frustrating “one step forward, two steps back” pace, even while, more positively, investigations into irrigation schemes in Northland and Hurunui have been initiated. Earlier this year, it appeared as though urban water services may see some much-needed change with the prospect of a combined CCO for the Hamilton, Waipa and Waikato district councils. Promising half a billion dollars of efficiency benefits to just these three councils over the next three
and will provide not only capacity but competition in the supply of data to New Zealanders. In addition, Crown Fibre Holdings has progressed the expansion of fibre-to-the-home from 75 per cent of New Zealand to 80 per cent. Rural broadband speeds have accelerated with the roll-out of new towers, and the three mobile operators have extended their 4G networks around the country. The message to infrastructure decision-makers, investors and operators in 2017 is very clear: be more like telco. That means getting on and delivering services which meet the need of residents and customers. It means fewer questions and hand-wringing about how hard it is to meet expectations and more focus on the how. It was only a few years ago that New Zealanders were told that they could never expect to have the kind of mobile and broadband services other developed countries have. Our geography and dispersed population apparently made it impossible.
“Central government should establish its own agency to sense-check regional infrastructure plans and procurement activities” What a crock! We’re now easily in the top half of the OECD in measures of speed and cost across telco services, and moving to the very top in key measures such as high-speed broadband performance and penetration.
Telecoms tops
Commitment question
Perhaps the only infrastructure sector which has steadily progressed this year is telecommunications. Spark and Vodafone are well into their delivery of a new cable between New Zealand and Australia. The Tasman Global Access cable will improve redundancy and digital connectivity with our major trading partner. More notably, an entirely new international fibre scheme got off the ground this year. The Hawaiki cable, which will provide a brandnew link to the US, was announced and construction began in 2016. The group developing the Hawaiki project is not connected to the existing Southern Cross cable
The outstanding question is whether we have the vision and commitment to apply the telco aspiration more widely, or whether we’re going to muddle through on key issues like 2016. Will we avoid tough questions on congestion, raw sewerage discharge into the natural environment, declining water quality, poor public transport, slow housing response, high infrastructure costs, weak procurement, misaligned planning and inefficient regulation with one-off projects and new inquiries or will we tackle these issues head on? Leaders must have the fortitude to confront the Resource Management Act, local governance
capability and funding and the Auckland growth crisis. We simply cannot afford to kick the can down the road for another two, three or four years. The RMA has got to go. It needs to be replaced with dedicated environmental protection legislation and dedicated planning legislation. It is unacceptable that governing bodies cannot plan, fund and deliver infrastructure and communities because responsibilities are spread over multiple agencies and statutes. Extra funding for local government must be put on the table as the quid pro quo for governance arrangements which enable local councils to deliver on community needs. Billions of dollars are needed in Auckland every year. Add up what it takes to make Hamilton work – every road, every pipe, every cable, every house, every job, everything – that’s needed every four years in Auckland. It is a massive amount of investment and current funding commitments don’t even come close. The latest signals from the government for a trebling of infrastructure investment are on the right track, but one-off and short-term commitments from central government are creating all sorts of false incentives in Auckland. The Auckland Council needs the tools to raise hundreds of millions of dollars more per annum – road pricing, land value uplift and/or a share of the economic benefit from growth (sales, income or corporate tax transfers). Until it gets these tools, it is going to lobby on a short-term, project-by-project basis and the region will suffer. Central government should establish its own agency to sensecheck regional infrastructure plans and procurement activities. Local councils, even big ones like Auckland, need help buying big assets. Many central agencies are no better. Improved central guidance can help promote national and local objectives. So will we see leaders in the build-up to the 2017 election acknowledge these challenges and take bold steps to avoid them, or will we see a patchwork of incremental steps to fight fires when they arise? It must be the former if we want New Zealand’s golden growth run to continue. Stephen Selwood is chief executive officer of Infrastructure New Zealand
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COMMENT
decades, a CCO looks on paper to be a “no-brainer”. However, that too was delayed as local body elections led to political vacillation. The stalling trend flowed through into energy. The Electricity Authority’s deliberations on a new transmission pricing methodology continued for another year and major investment in generation remained low in light of spare capacity and uncertainty over the future of Tiwai Pt. Social infrastructure saw a third schools public-private partnership (PPP) process get underway and the announcement of a new prison PPP. But where the corrections and education sectors seem capable of identifying and bringing projects to market, the health and housing sectors have been much less successful. The new Canterbury Hospital is underway, but little clarity surrounds decision-making in regard to Dunedin’s new facility. It is expected to get started in 2017, but suppliers still do not know what sort of project they may be bidding for. The Tamaki housing initiative took some promising steps forward this year, but the overall picture in the social housing space is uneven. The government continues to send mixed messages regarding its objectives in housing, wanting better social outcomes from new investment on one hand, but also wanting to maximise the price received from asset transfers. Before the Tamaki jewel in the housing regeneration crown is firmly put out to tender, some decisions will have to be made on the wider strategic purpose of housing transfers.
Managing local government risk in a changing environment
SECURITY
The Kaikoura earthquake has thrown into stark relief the vexing question of managing risk in the local government environment Local government in New Zealand owns and manages $120 billion of fixed assets, the bulk of New Zealand’s drinking water, wastewater and storm water infrastructure and 88 per cent of roads. While insurance remains one of the tools for protecting assets, it is the ambulance at the bottom of the cliff rather than the fence at the top. Managing risks to prevent or mitigate damage is vital, and to help city, provincial, rural and regional councils do a better job of reducing risks to assets from hazards a Local Government Risk Agency is being developed. The agency follows an LGNZ-initiated review of the insurance market in 2013 which was undertaken by Local Government Funding Agency Chairman Craig Stobo. This review put forward the case for an agency to help councils improve risk management practices and negotiate insurance, with a focus on resourcing risk profiling, risk management, and risk mitigation activities to improve self-reliance and resilience. Following this advice LGNZ moved to come up with ways of improving risk management and insurance of publicly-owned critical infrastructure, a process made all the more necessary by the Canterbury earthquakes.
Context critical Following the Canterbury earthquakes and faced with a changing climate, local authorities are looking at how they manage the risk posed by natural hazards. The costs of disasters are rising due to a range of factors, including increased development, a growing population, historic settlements in higher risk areas such as the coast, flood plains and riverbanks, and construction costs increasing faster than the rate of inflation. This last effect could be caused by shortages occasioned by the disaster itself. Additionally, a 2015 survey conducted by LGNZ showed resourcing risk management was 44
“Risk management is a high-level priority and we are looking at understanding it in a very different way”
not a priority for local government. The survey showed 25 per cent of local authorities and about half of the rural councils do not have a formal risk register. Nearly a third of existing risk registers are reviewed annually, but risk management frameworks are reviewed less frequently. And 65 per cent of local authorities have a business continuity plan. GNS Science General Manager of strategic relationships in the hazards division, Kelvin Berryman, told a risk management masterclass at the LGNZ annual conference in July 2016 that New Zealand should be preparing for a Canterbury-like event in the next 50 years. “How we manage that risk is the most important thing to think about,” he advised.
Risk management LGNZ Vice-President Brendan Duffy says the local government
YEARBOOK 2017 INFRASTRUCTUREBUILD.COM
sector has indicated it wants to approach asset protection, risk management and insurance in new ways. “Gone are the days of getting a third-tier manager to fill out forms for an insurance claim. That won’t cut it any more. “As LGNZ we have placed ourselves front and centre of this massive opportunity for strategic thinking,” Duffy says. “Risk management is a high-level priority and we are looking at understanding it in a very different way.”
Local Government Risk Agency LGNZ has proposed a central Local Government Risk Agency that pools and coordinates local government resources and expertise to lower and manage risk and the cost of disaster. Getting better at preparing
means communities and the nation can recover from disasters more quickly, both economically and socially. This is needed because New Zealand has a high-risk natural hazard environment, exposed to earthquakes, tsunami, landslides, storms and flooding, and volcanic and geothermal activity. Climate change will cause more severe and more frequent river and urban flooding, storms and high winds, storm surges and coastal erosion in coming years. An agency would establish guidelines and models by which local government manages risks and shares information. It would harmonise practices, improve skills in management and financing, provide quality assurance, and supply expert staff. The sector is keen to better understand how to manage risks in a changing environment and has asked for help to undertake risk assessment and risk mitigation. Councils value risk modelling and are mapping and defining the potential impact of natural hazards. There are also concerns about liability and insurance coverage. A risk agency will pool and coordinate local government resources to reduce risk to assets and the costs from disasters. It will give greater community resilience and welfare, and improved national and local visibility and cost certainty. It is estimated that between 2016 and 2035 work done by a risk agency would have a cumulative economic benefit of $65 million. The work of the agency would include: • communication and education – guidelines, practice notes, information, training, communities of interest, conferences, liaison with industry and central government; • quality assurance and incentives – accountability, incentives such as attractive insurance premiums and benchmarking; and • risk assessment and decision support services – data and
Risk financing in local government The LGNZ conference in July saw the release of Risk financing in local government, a guide designed to help councils better manage retained risk to vital infrastructure. The guide was prepared by former Earthquake Commission Chief Executive David Middleton, who says local authorities could save money by making better insurance decisions. “By becoming more sophisticated in their insurance purchasing, councils could reduce premium costs and negotiate policies that are best fit for purpose, helping to meet public expectations of recovery following disasters,” Middleton says. The guide helps councils and staff better understand their options when buying
insurance, from more accurate valuation of assets and wiser choice of the value insured, to using brokers and selecting the right deductible (excess). “It also outlines the primary task of identifying what risks should be insured and when an alternative risk management tool would be a better choice. “The most likely low-cost incidents should be handled through normal budget provision and the most destructive but extremely unlikely events need special techniques outside the scope of ordinary insurance,” Middleton says. LGNZ Vice-President Brendan Duffy says the guide came out of the work involved in preparing a business case for the risk agency. “While overall risk management is critical, the most acute challenge facing councils right now is insurance costs,” Duffy maintains. “Our investigations into a risk agency discovered insurance-related advice was needed by local authorities with some urgency.” Risk financing in local government is designed to help councils of any size better understand the financial aspects of risk management.
Big business The Office of the Auditor General (OAG) collected information about how 228 local government entities insure their assets in 2013 and found that they had assets recorded at about $112 billion. Local authorities own about 80 per cent of the carrying value of assets and have a unique arrangement with central government in terms of insurance. The 1991 Disaster Recovery Plan states that central government will pay up to 60 per cent of restoration costs for water and sewerage services after a catastrophe.
Value of local government assets in billions of dollars in 2013 0.2 1.3 3.0
3.8
8.4
2.7
Local authorities Council-controlled organisations 92.1
Airports Port companies Electricity lines business Licensing and community trusts Other local government entities
Sub Surface Detection had another great year helping clients identify and protect their underground assets Highlights from 2016 included: Advancing our GIS Consulting Department. Driven by Abhi and his master’s degree in GIS, we have been able to create some great mapping and 3D models, applying UAV/ Drone applications which are becoming very popular with clients because of the detail show in the deliverables. When combined with our survey of underground assets, this is a very valuable tool for clients for both project planning and asset recording. Check out 3D model link: https://www.youtube.com/watch?v=GBsirkZ4BUY
We now have in-house GPS for providing high quality mapping deliverables in which we completed for Bartley Consultants a GPR/EMI and GPS survey of a large stretch of East Cost Rd, North Shore, resulting in a high precision GPS survey of all utilities detected in an ”as-build” CAD drawing and map book of utilities overlaid on an aerial map of the site.
With 4 new staff in 2016 we continue to focus training to a very high standard of survey, working to the AS 54882013 of Subsurface Utility Information (SUI) with our technicians striving for quality Level B of this standard.
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SECURITY
information services, modelling advice and capabilities and supply of expertise. Local Government New Zealand has approved the risk agency model and the business case has been provided to the government for review. If crown funding is available an agency could be initiated in the first quarter of 2017.
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FPVC™ provides the only available method of installing a continuous. monolithic, seal ring–free PVC pipe, capable of use in numerous trenchless or conventional open-cut installation. Applications include pressure and non pressure pipelines for drinking water, wastewater, electrical, industrial and telecommunications industries. Fused and installed throughout the US, Canada, Central America, Hawaii, and NZ. Product detail: http://tinyurl.com/pduvfsg Case Study: http://youtu.be/VUR5v7raSH0
Poliplex PE100 PE100 polyethylene pressure pipe up to 2000 mm outside diameter and manufactured in accordance with AS/NZS4130. Suitable for a diverse range of infrastructure applications from water and waste-water to sewer rising mains, irrigation mainlines and above ground pipelines.
Flowtite GRP Pipe Glass reinforced polymer producing a high strength, corrosion resistant, light weight pipe system suitable for water, waste-water, chemical and industry applications. Available from PN1 to Pn32 in a range of diameters from 300mm to 3000mm, Flowtite is suitable for above ground applications and conventional trenched pipeline and is also available in jacking pipe and slip-lining pipe options for trenchless installation.
Also: BLUE BRUTE PVC-U Pressure Pipe CIOD Series 2. Standards: AS/NZ 1477 BLUE RHINO PVC-M Pressure Pipe CIOD Series 2. Standards: AS/NZ 4765 NOVAKEY PVC-U Pressure Pipe Metric Pipe Series 1. Standards: AS/NZS 1477
Apollo Biaxially oriented PVC pressure pipe for use in water and waste water pipelines. With exceptional toughness and impact resistance, Apollo PVC-O pipe can provide greater hydraulic capacity than PVC-U pipes of the same OD size and similar pressure class. Light weight and available in two dimensional Series (Series 1 & 2) Apollo PVC-O pipe is manufactured in New Zealand and available in the size range DN100 – DN300mm. Manufactured in accordance with AS/NZS4441. Product detail: http://tinyurl.com/pocxtfl Case Studies: http://tinyurl.com/pkr68v9
Telecommunications, electrical and gas http://tinyurl.com/nbljtup For technical services: Iain McNaught 027 243 3000, Frank O’Callaghan 027 495 4523, Todd Randell 027 211 4838
innovative 0800 800 262 www.iplex.co.nz There is more to Iplex than pipe manufactured and delivered to your project site. Talk to us about what you need. Iplex Pipelines, manufacturing and supplying PVC, PE and GRP pipeline solutions to the New Zealand market. 46
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