Cost-benefit analyses should lead infrastructure spending - report

New Zealand needs to require infrastructure plans to be strategically prioritised and include a mandatory cost-benefit analysis (CBA) to ensure billions of dollars of taxpayer-funded projects deliver what is promised, a new report says.

Research by engineering firm WSP and the Helen Clark Foundation indicated a need for a more consistent, disciplined, evidence-led approach to infrastructure investment, with billions of taxpayer dollars being spent every year.

The report said New Zealand faced significant and compounding pressures, including an ageing population, climate change, fiscal constraint, and an estimated $193 billion in unfunded infrastructure in the national pipeline.

Inconsistent planning

A CBA is not required when it comes to assessing the social, environmental, and economic impacts of investment options, with fewer than a quarter of bids submitted to the Infrastructure Commission including a CBA over the past five years.

Report author Kali Mercier said CBA was used inconsistently across much of central and local government.

"Of the six infrastructure-intensive central government agencies we contacted, only NZTA and Kāinga Ora consistently use cost-benefit analysis to inform infrastructure investment decisions," she said.

For example, Health NZ did not have a framework in place for measuring health benefits, and neither did Corrections.

"This makes it harder to compare options, harder to prioritise what to build and when, and harder to ensure long-term value for money," Mercier said.

No strategic pipeline

She said it was also concerning that major funding decisions were often made without a clear steer on their strategic priority.

"Our infrastructure pipeline, which lists all the major projects - hundreds of projects we're planning to do - is not organised by value for money or strategic priorities. It's just a big pile of projects," she said.

"I'd like to see a strategic pipeline of major projects, where we know what we're building and why, and when."

She said the lack of long-term planning was problematic.

"So if you don't have a long-term plan matched up with funding to go with it, then you're going to end up having to make a lot of decisions reactively or under urgency and have to do them quickly. And that means that if you don't have a mandatory cost-benefit analysis requirement to go with that, then it might often get dropped off, or it comes too late to actually help inform decision-making."

Inconsistent follow-up

Mercier said New Zealand also rarely evaluated whether completed infrastructure projects delivered what they promised, limiting the country's ability to learn from past decisions.

"We don't routinely check whether projects achieved the outcomes they were funded to deliver.

"Without post-implementation evaluation, we can't ensure public money has been used effectively, and we also miss opportunities to improve future decisions.

"This, combined with the lack of transparency within the system, makes it extremely difficult to hold decision-makers accountable."

Mercier said the opportunity for improvement was significant, considering the monitoring and management tools already existed.

Key report recommendations included:

• mandatory use of CBA for all major central government infrastructure investments, supported by enhanced training, clear guidance, and sector-specific tools
• an independent infrastructure assurance framework, with the Infrastructure Commission playing a strengthened independent assurance role, and requiring publication of business cases and CBA
• routine post-implementation evaluation of major projects to assess whether expected benefits were achieved
• more strategic, cross-portfolio use of CBA, supporting more consistent comparison of similar investments across sectors such as health, housing, justice, and transport

• closer alignment between the budget process and long-term investment planning, including exploring multi-year capital budgeting.

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  Why it matters
  WSP technical director Quanita Ali said CBA was most effective when it was applied early in the planning process and supported by high-quality data.
  "It helps decision-makers understand trade-offs, test assumptions behind projects, and compare very different types of investments using a consistent evidence-based framework," Ali said.
  "At a time when governments and councils face increasing debt and affordability pressures, it can also help focus investment on projects that deliver the greatest long-term value.
  "With more consistent use, CBA can support a more strategic, long-term approach to infrastructure planning, one that aligns investment with the outcomes New Zealanders value."
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