Do we need a Ministry of Green Works?

It’s a big idea: a ‘Ministry of Green Works’, a reboot of the old Ministry of Works (but with modern sensibilities), equipped to design and build the public housing, railways and green infrastructure this country needs now and into the future.

The idea is contained in a paper published yesterday, written by researchers Max Harris and Jacqueline Paul for FIRST union. And there’s a lot to like about it.

The paper is careful not to glamorise the old ministry, which – among other faults – was prone to compulsorily acquiring land in ways that “caused significant harm” to Māori communities. But the paper does point out what a storehouse of knowledge the ministry was. Its teams of engineers, architects and builders had vast experience in constructing public infrastructure, and left us with important buildings and other structures we still rely on. That knowledge was at best fragmented – and in the worst cases probably completely lost – when the ministry was split up and sold off in the privatisation frenzy of the 1980s and 1990s.

The report also rightly identifies major problems in the current construction of public infrastructure, which relies almost exclusively on contracting-out and delivery by private builders. The construction sector is short of workers, struggling to meet current demands, and often inefficient and prone to producing work of relatively poor quality. Elsewhere, the paper usefully points to traditions of design that can be drawn on, including Māori approaches to building kāinga and the like, and recommends that any rejuvenated ministry be accompanied by increased funding for Māori housing and infrastructure.

In my mind, the paper unequivocally establishes the need for – at the very least – a reconstruction of government’s storehouse of knowledge about infrastructure. Currently, each government department organises the procurement of its major infrastructure projects – be it in housing, roadbuilding or whatever – by itself. The public servants working on those projects will be relatively inexperienced, but have to negotiate with extremely experienced private sector construction partners. That means they are unlikely to negotiate a good deal; and because the private sector does the actual building work, most of the knowledge – the expertise, the lessons learnt from that project – stay with said private sector. Government struggles to learn lessons, work out how to run the next project better, or understand how to drive down costs.

What we need then, at the very least, is an upgraded Infrastructure Commission, with a dedicated team of architects, engineers and designers, who can set standards across public building projects, retain knowledge, drive a tougher bargain with the private sector, and ensure higher quality and better value. And there will be lots for them to work on – as the paper identifies, we need tens of thousands (if not hundreds of thousands) more state houses, a huge amount of green infrastructure to deal with climate change, and potentially a revitalised rail network.

Where the paper isn’t yet convincing is in the argument for government to actually do this building work itself – which of course would be a far larger, and more controversial, undertaking than simply creating the knowledge storehouse described above. It would, after all, involve creating an enormous public sector building workforce, including carpenters, painters, electricians and the builders themselves.

First, although there are certainly problems with the private construction sector, the paper seems to me overly reliant on one study (Hinton et al.) claiming inefficiencies and poor quality in private construction, when there must be a much vaster literature comparing public and private construction results across the globe. I’m a fan of more active government, but public agencies have all sorts of problems, just like private firms do; there are government failures as well as market ones. The profit motive is hardly a panacea, but it does often force firms to work more efficiently (though potentially at the expense of worker conditions), find different ways of using materials, etc., while the process of putting work out to tender encourages firms to compete with each other, come up with design innovations, and so on.

In the absence of these pressures, what is going to ensure that a Ministry of Green Works uses materials efficiently and can innovate? If the old Ministry of Works was indeed “nimble”, as the paper says, what made it so? What is going to stop its new incarnation from becoming a bureaucratic monolith, one that is slow to make decisions, inefficient in its operations, a kind of law unto itself? I’m not saying there are no answers here: the paper briefly mentions models like Paris’s re-nationalised water system, and one could point to similar systems in the Netherlands and elsewhere. This approach is often based on having diverse governance boards, with representatives of service users, technical experts, and so on, which provide scrutiny, oversight, and the ability to juggle multiple priorities facing a public body. There’s definitely a case that this model could create the right pressures for efficiency, innovation and quality in our infrastructure, but I would want to see much more detail before I was convinced.

Second, I’m not swayed by the argument that public construction would be more efficient than private simply because it would do away with the profit motive, saving – according to the paper – something like 7-12% on costs. Profit can be viewed as an unnecessary expense, or it can – as above – be what’s necessary to encourage efficiency and innovation. After all, if all private profit was pure inefficiency, the government should simply take over everything the private sector does, right down to providing its own stationery. (Think about how much we could save if we abolished the profits of stationery companies!)

There is (as I think the report authors know) a huge amount of research on when contracting-out does and doesn’t make sense. Crudely speaking, it often boils down to whether the service being provided is relatively simple and can be easily checked up on, or not. Private prisons don’t work very well (apart from their other problems) because it’s very hard for the public sector to supervise what the private provider is doing; as a result, private prison operators tend to cut costs and reduce wages, rather than actually doing anything innovative. Conversely, to return to the above example, stationery is relatively simple and it is easy to observe whether a private provider has done a good job (do these staples work?), so contracting-out makes sense. Obviously, there’s a strong case that public infrastructure falls into the first category – but that argument isn’t really developed in the paper.

It also doesn’t establish its case empirically. If we are going to be convinced that a new ministry would do a better job of building infrastructure than the private contractors do, surely it would be useful to know what the current contractors’ costs are (on a per square metre basis, or something like that), and compare that with the old Ministry of Works’s costs. Quality could be estimated by some proxy, like maintenance costs or experts’ evaluations. It also doesn’t look like the researchers engaged widely with private contractors, which is a shame – because even if one views them as part of the problem, they would still have come up with important counterarguments the report would have had to address.

I appreciate that the researchers probably didn’t have the time and resources to address all the points raised above. And I think their work is exciting nonetheless, because policy-making in this country has for too long been overly cautious and constrained by a set of pro-market “certainties” that are in fact anything but. It’s good to see the space for innovative policy-making opening up. I just think there are some big questions still to be answered if this kind of argument is to prove convincing in the years to come.