The biggest opportunities to control infrastructure costs may occur long before we go to market

Why does infrastructure cost so much?

It is one of the most important questions facing governments and infrastructure delivery agencies across Australia, Canada and New Zealand where BRS works with its clients.

When major projects experience cost pressure, attention naturally turns toward the construction market.  Materials have become more expensive.  Labour costs have increased.  Contractors are charging too much.  There isn’t enough competition.  Productivity needs to improve.  Some of these explanations are valid.

But new research from the New Zealand Infrastructure Commission, Te Waihanga, suggests we may be looking in the wrong place—or at least looking too far downstream.

Its September 2026 research, Making Every Dollar Count: A Review of the Drivers of Infrastructure Costs in New Zealand, examines three broad drivers of infrastructure costs:

• Input costs such as labour and materials.
• Construction productivity.
• Project scope and design.

The distinction is important because infrastructure delivery agencies have very different levels of influence over each.  Global material prices are difficult for an individual project to control.  Labour costs are influenced heavily by the wider economy and global conditions.  Construction productivity can be improved, but sustained productivity improvements often take years.

Scope, design, standardisation, planning and sequencing, however, are areas where infrastructure delivery agencies can exert much greater influence.  That leads to an important conclusion which is that cost control starts long before the target outturn cost or contract price is agreed.  Not all cost increases are inevitable.

One of the most interesting findings from Te Waihanga is its challenge to the assumption that infrastructure inevitably becomes more expensive over time.  History tells a more complicated story.  Some infrastructure technologies have become dramatically cheaper.  Te Waihanga notes that solar panel prices fell by more than 90% between 1980 and 2012, while wind turbine costs fell by more than 30% between 2005 and 2017 after adjusting for inflation.

At the other end of the spectrum, the real cost of constructing motorways per lane kilometre has more than tripled over roughly the past two decades.  Why such a difference?  There is no single explanation.  Infrastructure projects are complex.  But one characteristic of technologies that become cheaper over time is particularly interesting:

Repeatability.  We learn.  We standardise.  We manufacture at scale.  We improve processes.  We apply lessons repeatedly.  We progressively remove inefficiency.  Major projects often operate very differently.  We customise.  We change requirements.  We develop bespoke solutions.  We establish new teams.  We create new governance structures.  We procure new delivery partners.  We introduce new specifications.  And then we wonder why we struggle to generate the same learning curves seen elsewhere mentioned above.

Scope is a commercial decision.  One of the most important implications from the Te Waihanga research is that scope discipline is commercial discipline.  Scope is sometimes treated as predominantly a technical issue.  What should we build?  What standard should it achieve?   What functionality is required?  But every scope decision has a commercial consequence.  Add another requirement and somebody has to design it.  Somebody has to estimate it.  Somebody has to procure it.  Somebody has to construct it.  Somebody has to integrate it.  Somebody has to test it.  And somebody will eventually have to operate and maintain it.  The cost is rarely limited to the item being added.

Additional scope creates interfaces, complexity, risk and management effort.  This becomes particularly dangerous on mega projects because seemingly reasonable individual decisions accumulate.  Every stakeholder has a legitimate requirement.  Every technical discipline has an argument for a higher standard.  Every operational group wants greater functionality.  Every risk can potentially be mitigated by adding something.

Individually, each decision can appear rational.  Collectively, they can create an unaffordable project.  That is why infrastructure delivery agencies need strong mechanisms for challenging scope.

Not:

“Would this be useful?”

But:

“Is this necessary to achieve the outcome, and is the additional value greater than its whole-of-life cost?”

Those are very different questions.  The cheapest change is the one you don’t have to make.  Timing matters enormously.  Changing a requirement during business-case development may require someone to change a few assumptions.  Changing it during concept design requires redesign.  Changing it during detailed design affects multiple disciplines.  Changing it during procurement affects pricing and risk allocation.  Changing it during construction can mean redesign, rework, delay, disruption, variations and claims.  The underlying decision may be exactly the same.  Its cost is not.

This is why decision quality and decision timing should be viewed as fundamental components of commercial acumen.  The cost of a delayed decision is rarely visible as a single line item.  Instead, it appears across the project.  Design teams keep working.  Advisors remain mobilised.  Contractors carry overhead.  People develop alternative solutions.  Interfaces remain unresolved.  Risk allowances remain in estimates.  Work is resequenced.  The project’s burn rate continues.  A $100 million-a-month project is consuming more than $3 million every day.  Against that backdrop, spending weeks avoiding a difficult decision is not necessarily prudent governance.  Sometimes it is extraordinarily expensive governance.

Standardisation deserves another look.  Standardisation can be an uncomfortable concept in major projects.  Every project is different.  Every site is unique.  Every community has different needs.  Every network has different constraints.  All true.  But uniqueness can become an excuse for unnecessary customisation.

The question should not be whether an entire project can be standardised. It should be:

What doesn’t need to be unique?

Stations.  Bridges.  Buildings.  Equipment rooms.  Specifications.  Digital systems.  Components.  Design details.  Construction methodologies.  Commercial processes.  Governance arrangements.  Reporting.  There can be enormous value in identifying repeatable elements within otherwise unique projects.  Standardisation does not necessarily mean accepting a poorer outcome.  It means avoiding the cost and subsequent burn rate of repeatedly solving problems that have already been solved.

Sequencing is a commercial strategy.  Te Waihanga also highlights planning and sequencing as opportunities to improve affordability.  This deserves more attention.  Poor sequencing creates costs everywhere.  Design is progressed before key requirements are resolved.  Land acquisition occurs too late.  Utilities are discovered after construction starts.  Approvals become critical-path activities.  Procurements overlap and compete for the same market capacity.  Early works commence without sufficient certainty about the final solution.  Delivery partners mobilise before infrastructure delivery agencies are ready to make decisions.  People wait.  Work is resequenced.  Temporary solutions are introduced.  The project pays.  Good sequencing therefore isn’t simply project management.  It is commercial strategy.

Infrastructure delivery agencies should deliberately ask:

• What needs to be known before we spend the next dollar?
• What decision unlocks the next stage?
• What work can genuinely proceed in parallel?
• What dependencies need to be resolved first?
• What happens to the project’s burn rate if this decision is delayed?

That is decision-led project development.

Procurement cannot fix an unaffordable project.  This leads to one of the most important lessons.  Infrastructure delivery agencies sometimes arrive at procurement with a project that is already struggling with affordability and expect the market to solve the problem.  Increase competitive tension.  Ask bidders for innovation.  Transfer more risk.  Push harder on price.  Negotiate the margin.  Challenge the estimate.  All of those actions may have a place.  But there is a limit to what procurement can achieve.

To highlight this, if the scope is excessive, procurement won’t make it disappear.  If standards are unnecessarily bespoke, competition won’t suddenly create standardisation.  If interfaces are poorly defined, suppliers will price the uncertainty.  If risks cannot be controlled by contractors, transferring them doesn’t eliminate them.  If decisions remain unresolved, bidders will price contingencies.  If sequencing is poor, someone will ultimately pay for the inefficiency.  You cannot procure your way out of poor upstream decisions.  In fact, attempting to do so can make the situation worse.  Risk doesn’t disappear because we transfer it.

This is particularly important when affordability pressure leads infrastructure delivery agencies toward aggressive risk transfer.  The logic is understandable.  If we transfer a risk contractually, we have achieved cost certainty.  But contractual allocation does not change physical reality.  If the contractor cannot genuinely control the risk, several things can happen:

• They price it.
• They qualify it.
• They insure it.
• They manage around it.
• They claim when it materialises.
• Or, in highly competitive environments, they underprice it and attempt to recover the impact later through variations and extensions of time.

None of these makes the underlying risk disappear.  Commercially intelligent infrastructure delivery agencies therefore distinguish between:

Who holds the risk contractually?

and

Who can actually influence the risk?

Those are not always the same party.

Collaboration should start upstream.  There is also an important lesson here for collaborative contracting.   We sometimes think collaboration begins when the alliance or delivery partner is appointed.  That is too late.  Some of the greatest opportunities for collaboration occur during project development.  Engage operations early.  Engage maintainers early.  Engage the market early. Engage constructors early where appropriate.  Bring commercial, technical and delivery thinking together before major decisions become embedded.  Test scope.  Challenge standards.  Explore constructability.  Understand market capacity.  Identify interfaces.  Understand risks.  Examine alternative solutions.

Collaborative contracting can then provide a powerful environment for continuing this optimisation during delivery.  But an alliance or delivery partners should not be expected to rescue a project from every poor decision made before the alliance existed.

The danger of focusing only on the target outturn cost.  In alliances and other target-cost models, enormous attention is rightly placed on developing the Target Outturn Cost or equivalent target price.  It is one of the most important commercial milestones in the project.  But there is a danger.  We can become so focused on whether the target represents value for money that we fail to ask whether the project being priced represents value for money.  Those are different questions.

A delivery partner can produce an excellent estimate for an unnecessarily expensive solution.  A highly competitive procurement can produce a good price for excessive scope.  A well-managed alliance can efficiently deliver something that should have been designed differently.  Commercial discipline therefore needs to operate at two levels:

Are we delivering the project efficiently?

and, before that:

Have we defined the right project to deliver?

The second question can create substantially greater value.

Productivity starts with the owner as well.  Construction productivity is often framed as an industry problem.  Contractors need to become more efficient.  Technology needs to improve.  Construction methods need to modernise.  The workforce needs better skills.  All true.  But productivity is also influenced by the environment infrastructure delivery agencies create.

How productive can a construction team be when design information arrives late?  When decisions take weeks?  When approvals are unclear?  When scope continually changes?  When every asset requires a bespoke solution?  When work is poorly sequenced?  When governance continually reopens decisions?  When contractual interfaces encourage organisations to protect themselves rather than solve problems collectively?  We should be careful about demanding greater productivity from the supply chain while simultaneously creating conditions that make productivity difficult.

Owner productivity enables industry productivity.  The mature and intelligent owner focuses upstream.  The emerging lesson is not that procurement and delivery don’t matter.  They matter enormously.  But sophisticated infrastructure delivery agencies recognise that their greatest leverage often exists before construction begins.  The mature and intelligent owner focuses on:

• The problem before the solution.
• Outcomes before scope.
• Scope before design.
• Standardisation before customisation.
• Decisions before activity.
• Sequencing before mobilisation.
• Risk management before risk transfer.
• Market engagement before procurement.
• Value before price.

By the time the project reaches the construction site, many of its most important commercial decisions have already been made.

Making every dollar count.  Australia, Canada and New Zealand face enormous infrastructure demands over coming decades.  There will never be unlimited funding.  That means affordability cannot simply be addressed by asking contractors to sharpen their pencils.  Nor can we assume increasing infrastructure costs are inevitable.  Te Waihanga’s research provides a valuable reminder that some cost drivers are largely outside the control of individual projects.  But others are not which include:

• Scope.
• Design.
• Standardisation.
• Planning.
• Sequencing.
• Decision-making.
• Risk.
• Procurement strategy.

These are choices.  And many of them are owner choices.  That changes the infrastructure affordability conversation.  Instead of asking only:

“How can industry build this project more cheaply?”

Perhaps we should start by asking:

“What decisions can we make differently so that this project costs less to deliver in the first place?”

Because the cheapest infrastructure dollar isn’t necessarily the one negotiated out of a contractor at the end of procurement.  It may be the dollar that never needed to be spent because a better decision(s) was made at the beginning.  Cost control starts upstream.