It Doesn’t Add Up


The surprise at the $2.1m cost of average looking shelters for the Kingsland train station erected at the weekend  - surprise turning to outrage in non-published emails in my inbox- raises a wider question that’s been troubling me for some time.

Why are construction costs so high in New Zealand?

How do the authorities come to estimate such enormously high figures for projects such as the proposed Auckland CBD Rail Link of National Significance, or an Auckland Harbour bridge rail tunnel?

Do they just throw a dice and make up the figures or are consultants with fancy feasibility studies creaming squillions off the top before the project even starts? Is it all the resource consent, consultation with iwi etc etc process?

A NZTA commissioned report in March insisted a new Auckland Harbour bridge was cheaper than a tunnel system that would provide rail  -$3.9 billion for another harbour bridge versus $5.3 billion for tunnels – but had a higher BCR.

The CBD  Link has construction costs of $2.4b high enough to scare off wavering cynics.

In the wake of the KiwiRail Hillside layoffs, this may not be a good week to ponder whether overseas companies and workers can do it better but if means a Rail Link happens or a tunnel to the North Shore allowing for rail, should we not seriously consider it?

Locally, the numbers just don’t seem to always make sense.

China is busy showing off its new Jiaozhou Bay bridge, 42km long, 35m-wide and the longest of its kind. It links China’s eastern port city of Qingdao to the island of Huangdao.

It cost about $1.4 billion.

China's new bridge cost $1.4b

There are plenty of other examples.
The Millau Bridge in France - the highest road bridge in the world, opened in 2004, cost in today’s currency $659 million.

France's Millau bridge cost NZ$659m

So to ignorant commuters like me, who are angry that the CBD Link and Tunnel are unlkely for decades because of the cost, can someone explain why other countries can get projects done at a reasonable cost and everything here sounds over-inflated and still comes out at the end with aspects unfinished because costs had to be trimmed to prevent overruns or to give the impression we’re getting value for money?




  1. Andu says:

    VERY interesting questions there, I also shake my head at how high construction costs seem to be estimated. 5 billion for road and rail tunnels under the harbour sounds absolutely insane.
    I would totally send the contract overseas if somewhere else could do it (without compromising standards of course) and it could be done at a more reasonable cost.

  2. Simon says:

    Although still a bargain when you look at Edinburgh’s attempt at getting trams installed!

  3. geoff_184 says:

    I left a message on Mike Lee’s FB page a couple of days ago over this very topic. China is building a high speed rail line in Turkey that includes a whopping 55km worth of tunnels, and the project cost is coming in at around the same amount as the Auckland CBD link!

    But I’ve been shaking my head at these overinflated costs ever since we were told that a simple 6km railway from Wiri to the Airport, across flat undeveloped terrain, will cost nearly half a billion. In most parts of the world it would be 50 million at most.

    Red tape, legal bills and “sensitivities” for projects in NZ have reached such staggering proportions that actual construction costs are now a minority cost of any project. We have regulated ourselves to the point of not being able to get anything done.

  4. Matt L says:

    Mike Lee raised this very point last week at the CBT AGM and used both of these examples.

  5. KarlHansen says:

    We should also not forget that our critics of our projects constantly conflate costs - for example, do we know whether the Millau Viaduct project included property purchase costs?

    Also, as far as I know, the $2.4 billion for the rail tunnel included the costs for the new ROLLING STOCK for the extended network as well, because some critics said that leaving those out of the costs would be dishonest (cue Steven Joyce here, savaging the Auckland Council for trying to mislead the poor car driving citizens about the TRUE costs of building the tunnel!).

    So you get a constant pile-up of extra costs even before construction starts, because the opponents add costs, and the proponents are worried to take them off again, at the risk of being blamed for trying to hide costs.

  6. Giel says:

    I think it is well time that someone like the Office of the Auditor General investigated these construction costs for Public Road and Rail projects in NZ. Actually while Rail was in private hands such things were relatively well managed - they had to be there was little money around and what money there was had to go a long way and be well spent. Since the Government has been picking up the purse strings the Contractors and Consultants have been milking it in New Zealand - especially Auckland Rail upgrades and NZTA projects. We are not arguing about the need for the investment but the wastage and costs of things is an outrage. There is no way the private sector would have that low value for money and get away with it. This cost inefficiency was the case with NZTA and it seems this issue is now also in KiwiRail and Auckland Transport. lt is time this was investigated.

    Good on you for raising it again. I hope the general media pick this story up and some answers come out - we need to see why. People used to go on about private Rail owners asset stripping Rail at taxpayers expense. I think if you look into it now you would see way more of that going on by Contractors / Consultants to NZTA, KiwiRail and AT than there ever was under private ownership of the business. The sad thing is - no one seems to care or worse still understand the irony of it all.

  7. Jeremy says:

    Yes I’ve always wondered this like the 10 million on motorway traffic signals, why would it cost so much?

  8. Carl says:

    You guys need to check out Perth.

    roughly $4.5 billion for a pretty much a whole new system.

    thats aussie $$ yes and its strong at the moment, but for the money that is being spent, it gulfs what rubbish you pay for in NZ.

    The shelter things are a prime example of a proper ripoff.

    they are being built one by one, which pushes the cost up.

    someone should have made a plan for x amount of stations and a certain cost.

    because it clearly looks like its on a 1 quote 1 station idea.

    I’ll find the Perth link, its awesome reading and a great example of something that is already good that is just going to get even better.

    and most of the stuff is made in Australia.

  9. Anthony says:

    Well….I never realised how much we are paying compared to other projects around the world….

    I absolutely loved Perth’s System. Easy and Reliable. They have sleek Electric Bombardiers running from Clarkson to Mandurah with every station similar to Newmarket, sheltered, staffed lit and has security. And it costs only 4.5 billion????

    Im doubting we will ever get things right in my life time now.

  10. KarlHansen says:

    “and most of the stuff is made in Australia.”

    New Zealand’s government doesn’t even buy Kiwi when they own the company they could buy from.

    It’s like having an unemployed son who could fix your deck - and then telling him “Actually, son, I’m going to pay this guy from across town to do it - you won’t see any of that money! Tough luck for you, he’s a bit cheaper than you are. But at least, you can hang out on the deck every now and then, hey?”

  11. George D says:

    Honestly, no idea. Nobody can ever tell me why a single kilometre of rail line costs millions and millions, when identical rail line was built for a small fraction of the cost just a few decades ago.

    That shelter has to one of the worst examples I can think of. Insane price.

  12. Carl says:

    Guys I’m just trying to find the link, John I think its the one i sent you.

    I know its not Auckland, but Im sure people would interested.

    Guys the Bombardier trains are awesome. clean, and spacious and as far as Im aware, built in briso or Melbourne.

    Maybe Perth might sell us these when the are done with them, just like the last bunch we bought from them.

    the buses here too, most of them are less than 5-7 years old.

    They are really getting there arse into gear for a city that isn’t much bigger (smaller??) than Auckland.

    it cost them a big amount of cash to run the Line to Mandurah, but just as it goes in waynes world

    “build it and they will come” and its pretty much what has happened.

    any event or show that is on in the “city” transport is part of the concert ticket and the trains are quing to take people away from the events once they are done.

    during the UNsuper 15 season’s and Football seasons, all games have free PT 3 before and after the matches.

    replacement buses also travel direct to out lining hubs.

    whoever got in and sorted this out about 10 years ago is awesome.

    if John posts the link i gave him, its well worth a thread.

  13. Carl says:

    and while we are on the topic of money, what is the problem of brining in second hand trains and getting new zealand based trained and skilled workers to fix them up and do refurbs?

    keeps people working and may save a bit of coin in the process.

  14. Matt L says:

    Carl - Why would we want Perths old electric’s, we are getting our own brand new ones in a few years :-)

  15. Martin says:

    @ Carl

    Tranz Rail did that with engines from Queensland in the mid 90s. Even after rebuild they were so crap that a decent number from the fleet were dumped onto the Tasi network (Tranz Rail’s owners then owned Tasrail as well).

  16. NZIC says:

    I think only those very well paid transport planning/engineering consultants (not many here anyway and we should be able to get hold of them, at least the big ones) which the council, AT and NZTA/KiwiRail like to engage to do the studies/estimates for whatever projects and those contractors (again, those few ones which you can name them) would be able to answer these questions - why the hell the transport projects in NZ are so expensive compared with those in other countries???? However, whether they would tell you how do they come up with these figures/prices is another matter and it is ridiculous that the government agencies appear just willing to accept whatever the consultants told them without any questions…

  17. KarlHansen says:

    To be fair, the bigger projects are tendered, so either the price level is just high for other reasons, or there would be collusion between tenderers to drive up the prices. The latter is not impossible, but barring any indications to support it, unlikely.

    In comparing with projects in China, though, we should be wary - wages are cheap there, including for engineers and designers, and environmental mitigation is very low. Furthermore, there are economies of scale. In China, the construction companies build large tunnels and bridges by the hundreds each year. Here, we may go for years without a new project of that size. So of course the pool of capable contractors is smaller, and they have bigger fixed costs when starting a new job.

  18. Chris says:

    Wow - that bridge in China is beautiful


Leave a Comment


XHTML: You can use these tags:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>