Recent New Zealand infrastructure announcements create opportunities for infrastructure sector participants

New Zealand’s Minister for Infrastructure, The Honourable Chris Bishop, has recently announced a raft of measures to support infrastructure projects in New Zealand. The announcements reflect an exciting change in policy focus and direction since the election of The Honourable Christopher Luxon’s National Party-led government last year.

The key measures announced recently are:

• The New Zealand Infrastructure Funding & Financing Framework; 
• new PPP Framework; and
• new Guidelines for Market-led Proposals.

The New Zealand Infrastructure Funding & Financing Framework

The new Infrastructure Funding & Financing Framework (the Framework), announced by the Minister for Infrastructure on Monday, will form part of the Governments work programme to improve infrastructure funding and financing.

This new framework has two key objectives:

1. to broaden the funding base for investments and utilise private capital, where efficient; and
2. to apply commercial disciplines to the Crown’s approach to the provision of public capital.^[1]

In addition to these key objectives, four principles underpin the framework:

1. Crown funding and/or financing should only be sought when all other sources have been exhausted;
2. Crown capital should be deployed in an optimal form;
3. Crown capital should be provided on the basis it is ‘recycled’ as soon as practical; and
4. The Crown should actively manage the financial risks associated with its investments.^[2]

The practical implication of this Framework is that internal and external stakeholders will need to consider how models such as ‘user or beneficiary pays’ can contribute towards funding requirements. Only once the alternative options for funding have been exhausted will the Government consider whether it will provide funding for the proposal.^[3]

The Government anticipates that this approach will enable it to provide greater support for investments where alternative funding options are not available, or where it is appropriate for the Government to be the primary funder, such as for health and education projects.

All new projects will be considered against this Framework.

New PPP Framework

The Government has also released a refreshed PPP Framework which sets out the new Governments approach to PPP transactions.^[4] The PPP Framework focuses on the following key elements:

1. better allocation of risk;
2. stronger collaboration in the tendering phase;
3. lowering the time and cost burden involved in bidding;
4. being more realistic about ‘affordability thresholds’ compared to the business cases; and
5. improving dispute management processes.^[5]

The Minister for Infrastructure emphasised the importance of utilising private sector expertise and capital but also noted that the Government will only use PPPs where they deliver better outcomes than the next best procurement model for the same, or less cost.  

Market-led Proposals

In addition to the new Infrastructure Funding & Financing Framework and the refreshed PPP Framework, the Minister for Infrastructure also announced the Governments new guidelines for market-led proposals.

A market-led proposal is where a proponent submits their proposal directly to the Government, without being requested to do so as part of a competitive tendering process.^[6]

The new guidelines outline the principles and processes that will guide the Government’s consideration of unsolicited proposals made by private sector proponents and draw on equivalent policies which have been adopted by States and Territories in Australia.

The guidelines aim to encourage world-class, innovative ideas and investment from the private sector. Under the new guidelines, each proposal will be considered in light of three core assessment criteria:

1. Public Interest: The Government will consider whether the proposal is in the best interest of the public and consistent with Government objectives.
2. Exclusivity: All unsolicited proposals will be required to justify why it should be allowed to bypass the competitive tendering process and enter into exclusive negotiations with the Government. This means that the proposal must have characteristics that can only be achieved by the relevant proponent, such as exclusive property rights or the ownership of software or technology that offers a unique benefit.
3. Value for Money: Proposals will be required to demonstrate that they deliver value for money to New Zealand taxpayers. Said value will be assessed quantitatively through benefit cost ratios, budget requirements and expected return on investment, and qualitatively through an assessment of scope, risk allocation and time to complete.

Proposals will be assessed in stages and against the below assessment criteria:

Stage of assessment	Assessment criteria
Stage 0 (Mandatory pre-submission review)	Indicative – public interest, exclusivity, value for money
Stage 1a, and onwards (Initial submission and preliminary assessment)	Public interest
	Exclusivity
Stage 1b, and onwards (Strategic assessment of initial assessment)	Value for money
	Scope and budget
	Risk allocation
	Capacity and capability
Stage 2, and onwards (Detailed proposal)	Value for money
	Economic assessment and benefit-cost ratio
	Affordability
	Return on investment

Table source: The Treasury, ‘Market-led proposals: Guidelines for submission and assessment’ November 2024, page 8.

The newly established national infrastructure agency, National Infrastructure Funding and Financing Co, will take the lead role in the consideration of market-led proposals.

Upcoming projects

There are a raft of potential projects in relation to which these policies may be tested. In particular, infrastructure sector participants are gearing up in relation to:

1. the Northland Corridor Programme
2. the Christchurch Men’s Prison; and
3. the Linton Army Base.

Further information

Please reach out if you would like further information. Herbert Smith Freehills has acted on a range of New Zealand PPPs over the years, including Transmission Gully, the Puhoi to Warkworth Motorway, Waikeria Prison, Wiri Prison and various tranches of the schools PPP programme.

 

Written by Andrew Griffiths (Partner), Nick Carney (Partner) and Erin Wakelin (Partner).