Canterbury Procurement Forum The forward pipeline – fifth edition – November 2013

Content National Pipeline – initial results Auckland Pipeline – making the two regional reports look similar Canterbury Pipeline – next iteration of the data and commentary on how this data compares with the National Pipeline See previous versions of the Canterbury pipeline for a description of the method and major assumptions for the data presented here.

National Pipeline

Two pronged approach in analysis: Bottom up – Pacifecon “known” projects based on leads detected from a national network of analysts (and corroborated with Auckland and Christchurch pipeline data sets) Top down BRANZ “economic forecast” based on modelling of historic building consents and economic data for residential construction and their approach to modelling gross fixed capital formation High level results: Forecasting an unprecedented level of building and construction activity Peaking in 2016 nationally – 2016 in Canterbury Forecast rate of growth in construction also very high in comparison with historic rates – haven’t seen rate of growth for as long in past 40 years. Auckland the largest and fastest growing region – 150% increase in residential building over the forecast period

Forecasting unprecedented construction demand 23%

Rate of growth in construction sector – historically maxed at 10% pa for 2 years – forecasting 4 years at 10%+

Regional forecasts

Regional rates of change in all building and construction

Auckland Pipeline

Connections between the two procurement fora Auckland pipeline report Intention to make both reports more comparable, where useful and possible Canterbury Pipeline Updated this report for easy to make changes to align with the Auckland pipeline report Note – key differences between the three pipelines. Auckland and national pipeline are most directly comparable with Stats NZ ‘fixed capital formation’ – this is about 2x higher than the Canterbury pipeline which is most comparable with the ‘building work put in place’ series. Key difference is fixed capital formation accounts for non-building construction – and construction related costs such as legal fees, planning and consent costs etc.

Canterbury Pipeline

Contributing organisation and sector distribution Vertical or HorizontalSectorOrganisation VerticalCentral Government Ministry of Justice CERA Hospitals Canterbury District Health Board Ministry of Health Education Ministry of Education University of Canterbury Residential Housing New Zealand PMOs Vertical and HorizontalTransport Lyttleton Port Company Christchurch International Airport Ltd Urban redevelopment CERA Christchurch City Council Horizontal Horizontal – including roads, water, waste water, electricity SCIRT Selwyn District Council Waimakariri District Council Roading (including bridges)NZTA Christchurch City Council Selwyn District Council Waimakariri District Council

Construction Intentions

Pipeline of work by major type of project

Main differences with previous iteration

Comment on major sources of difference between this and the August report Education peak about 2 years later than previous version, and longer and lower (by $15m) per quarter (taken $195m out of peak between mid 2014 and end of 2015) CERA – project values lower and a later peak (6 months) SCIRT – data correction regarding start of financial year. This has reduced total value of what captured by about $200m CCC – reduced number of projects (1) and SCIRT impact – Peak shifted out by a year, and a little lower.

Organisations overall expenditures for next three financial years (Comparable with Table 4 of Auckland pipeline) OrganisationSpend ($ million)total 2013/142014/152015/16 PMOs estimated SCIRT HNZC Canterbury District Health Board CERA Christchurch City Council Waimakariri District Council Christchurch International Airport Ltd University of Canterbury Lyttelton Port Company Ministry of Justice Selwyn District Council NZTA Ministry of Education0011 Total Industry Spend

Predicted changes in value of projects (Table 2 of Auckland pipeline) Total Portfolio$ million difference% of total March to June$ 5,053-$65-1.3% June to August$6,241$10.0% August to December$5,324-$ % March to December$3,369-$ % This compares the estimated value of the total programme where a project appeared (with the same name) in the two iterations indicated by the date. Most of the changes appear to be driven by changes in scope of projects / structure of the programmes.

Projection versus actual – your actual data – construction

Confidence in construction projections (with no PMO residential)

Comparison between this pipeline and the national pipeline forecast for Canterbury Note different scales – fixed capital formation – so will be higher (by at least 2x) Also this is annual data so need to multiply this pipeline scales by x4.

Pacifecon / BRANZ – forecast value of residential and non-residential

Canterbury forecast in quarters

Pacifecon / BRANZ – forecast and “known” value of non-residential construction

Comparison of pipeline with building work put in place Significant step up in building work put in place for Q Have yet to understand any cost increases on the measured level of activity. On average the pipeline is explaining about 80% of residential construction observed and about 1/3 rd of non-residential building being done. See previous pipelines for commentary on method for the following two slides.

Projection / Actual with Stats NZ data (doesn’t include infrastructure)

Implications of this for total pipeline

Understanding the implications of S curve analysis Previously noted that S curve analysis would affect the shape of the pipeline. S curve would tend to generate a lower costs at beginning and end of projects and a higher peak in the middle period of a project Following graph has ‘s curved’ every project – in reality programmes of small projects – eg SCIRT / Residential repairs by PMOs / council programmes of <$10 million may be better represented with straight line analysis An area for further work

S curve on impact on peak expenditure

Straight line version of same data – on same scale

Structure of the programme based on value of projects The following graphs are comparable with the Auckland pipeline They are designed to demonstrate what value of work falls within low / medium and high price bands

% Share of value of work, by price bands (inc PMO residential)

% Share of value of work and price bands (no PMO residential)

Gantt chart analysis These slides represent how project start dates / durations have changed across the programme. The first slide sorts the projects by start date for construction and shows whether / how the start date has changed (and associated value in the project has changed) Red = previous construction phase Blue = new construction phase Purple = construction phases overlap / no change Interpretation More red to the left - the more the projects have been delayed (if matched by blue – construction deferred – if not construction time contracted The more purple – the more the project specifications haven’t changed More blue to the left – projects start have been brought forward. Left had column - Darker blue = more increase in estimated cost of project Darker red = more decrease in estimated cost of project

How the Gantt Chart has changed

Gantt for projects >$50 million

Gantt changes >$50 mil (read same way as first Gantt chart)

Gantt for projects >$50 million, <$10 million (in decre

Gantt for projects <$10 million

Design Intentions

Design by type of project

Design projection versus actual – your data

Comparison of Design Projections

Comment on differences in design pipeline ‘Design peak’ remains about the same in terms of value and timing Design peak continues to be at about the same time as reporting the data Design has a higher value and longer “tail” than previous versions Over all value of design work declined – consistent with the reduction in construction work. Some of reduction in the design pipeline due to reduction in scope / total value of projects (as seen in the construction pipeline) reduction in design intention data provided by some clients But actual indicates that even this revised pipeline looks optimistic – although more consistent than the first version of this data

Tender / Procurement Intentions

Tendering by type of project

Comparison of Tender Projections

Comments on tender / procurement pipeline This pipeline will always be lumpy because concentrates value of projects into shorter timeframes Peak in mid June 2014 in part driven by a small number of very high value projects Been some redistribution of procurement activity from late 2013 to early 2015 over the year of data – consistent with the delays in completing design work