MINISTERIAL BRIEFING NOTE
Subject
State Highway Asset Condition and Maintenance
Date
30 November 2023
Briefing number
BRI-2887
ACT 1982
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Group General
s 9(2)(a)
s 9(2)(a)

Manager – Transport
Services
INFORMATION
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BRI-2887
30 November 2023

Hon Simeon Brown – Minister of Transport

STATE HIGHWAY ASSET CONDITION AND MAINTENANCE  1982
Purpose
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1.  This briefing provides you with an update on the State Highway network’s asset condition and
maintenance, including the summer maintenance programme for 2023-2024.
2.  There has been significant pressure on the National Land Transport Programme (NLTP) State
Highway Maintenance Activity Class over the last three years with contractor negotiations,
contractor capacity, price escalation and the frequency and severity of weather events impacting
on the delivery of the New Zealand Transport Agency (NZTA) maintenance programme,
particularly in 2022-23.
Background and context section
INFORMATION
3.  The state highway network consists of a range of different assets (such as roads, bridges and
culverts) which are owned by the Crown. NZTA controls and manages these assets on behalf of
the Crown.
4.  The state highway network is New Zealand’s largest-value social asset, with a current replacement
value of $90 bil ion.
OFFICIAL
5.  Approximately 90 percent of the state highway network continues to meet minimum asset condition
requirements and is performing as expected. The other ten percent is near or below the level of
what is considered acceptable. This impacts on the level of service to users through increased
THE
exposure to uneven road surfaces, potholes, and journey disruption. When lifeline routes are
affected, significant detour routes can be required and, in some cases, no alternate  route  is
available. See Appendix 1 for the proportion of the state highway network that meets acceptable
standards for skid resistance, rutting and roughness, one of the  Statement of Performance
Expectations (SPE) measures that NZTA reports on.
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6.  The NLTP State Highway Maintenance Activity Class is funded for the maintenance, renewal and
operation of the existing state highway network, to deliver an appropriate level of service. It
includes funding for urgent response to emergency event disruptions of the network and restoration
of the network.
7.  The State Highway Maintenance Activity Class has $3.1 bil ion committed for 2021-24. This was
increased from the original allocation of $2.8 bil ion to fund additional emergency works required
because of the abnormal scale of storm events.
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Factors affecting asset condition
8.  The state highway network carries 50 percent of New Zealand’s general vehicle traffic and 72
percent of road freight. The state highway network comprises approximately 11,000 km of road
(12 percent of all roads, which totals approximately 99,000 km).
9.  Total vehicle kilometres travelled (VKT) on state highways has increased in line with population
growth by 16 percent from approximately 19.3 bil ion in 2009 to 23 bil ion in 2021. The heavy  1982
vehicle VKT component of this figure grew by 28 percent over this period. The additional 3.7 bil ion
kilometres travelled has had a significant impact on the network,  as has the growth in  heavy
vehicles, resulting in degraded surfaces and pavements.
ACT
10.  Degraded road surfaces and increased rainfall makes it  more likely for water to enter the
pavements making them weaker and  more vulnerable to damage from heavy vehicles and
increasing the rate at which potholes form and greater decay occurs.
11.  The freight model from the Ministry of Transport shows that the upper North Island freight task has
grown substantial y since 2018 and is expected to keep growing to a 45% increase by 2033.
The increasing maintenance task
12.  The growing size and complexity of the maintenance task for the state highway network brings
INFORMATION
added chal enges and increased costs.
13.  In the past ten years, the state highway road length has expanded from 22,138 lane kilometres to
24,297 lane kilometres, an approximate ten  percent  increase1. There have been increases in
safety infrastructure such as roadside safety barriers to support the growing network, requiring
ongoing maintenance.
OFFICIAL
14.  The maintenance activity class was expanded in 2018 to include footpath maintenance and will be
expanded again in 2024 to include bridge renewals. Bridges add approximately $120 mil ion over
three years on top of the usual $75 million (five percent) per annum increase.
THE
15.  There are increasing regulatory requirements related to waste management, biodiversity and water
quality. These  change the cost and scope of activities to reduce environmental damage from
maintenance. Initial costs are approximately $30 mil ion over three years but wil  depend on the
stringency and rapidity of new requirements.
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16.  See Appendix 2 for details of the 2023-24 summer maintenance and renewal programme.
Increasing input costs of labour and materials
17.  Maintenance costs from one three-year period to the next typically require a 15 percent increase
in the three-year total expenditure to sustain service levels. This addresses input price change that
is typically three percent per annum and provides for additional maintenance activities required to
maintain the increasing scale and complexity of network infrastructure as the network services are
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improved and extended, and to meet the increasing rate of decay from increasing freight.

1 Lane kilometres is a measure of each lane of road rather than the overal  length of road. For example,
if a four-lane highway is extended by one kilometre, there wil  be four kilometres of road added.
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BRI-2887
18.  We planned  and adopted  the 2021-24  NLTP allocation of $2.8 bil ion for state highway
maintenance based on Treasury inflation forecasts as shown in the green line on the graph below.
Actual inflation has followed the red line due to significant increases in international oil and bitumen
prices, plus increases in costs of labour, plant and other construction materials. An allocation of
about $3.5 bil ion would now be required to implement the original planned programme. Because
that was not affordable, we have adapted the originally planned programme. Further changes have
also been required to respond to the scale of storm events.
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Input Price Movements
1600
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1400
$3,479M
1200
$2,805M
  1000
alue
x V
800
Price Inde
INFORMATION
Input  600
400
200
OFFICIAL
0
Jun'20 Sep'20 Dec'20 Mar'21 Jun'21 Sep'21 Dec'21 Mar'22 Jun'22 Sep'22 Dec'22 Mar'23 Jun'23 Sep'23 Dec'23 Mar'24 Jun'24
Solid lines are actuals, dashed are forecasts
THE
2021/24 SHAMP
Index: NOC + Bitumen
Index: NOC + Bitumen
SHAMP 2124 budget $M
SHAMP 2427 inflated equivalent $M
SHAMP 2427 with demand ,size, complexity $M
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19.  As a result of budgetary and storm related issues we expect the network condition to continue to
decline over 2021-24.  Had inflation and weather been as assumed when the programme was
proposed,  the decline in network condition would have been more gradual because it was
proposed to build the pavement rehabilitation towards the sustainable level. However, it is likely
that only half the targeted works quantities wil  now be delivered.
20.  Current predicted spend in both local roads and state highway maintenance activity classes is
sitting at,  or near,  the top of the funding  range  in the Government Policy Statement on land
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transport 2021, and emergency works are consuming more than all available headroom. There is
considerable uncertainty in future prices. Recent contract tenders and negotiations are showing
upward pressure on prices greater than forecast inflation.

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BRI-2887
Overview of maintenance and renewal activities
21.  Our maintenance and renewals activities are delivered in line with design standards and guidelines
that are updated regularly to reflect changes in demand, technologies, and external drivers such
as changing climate patterns. For this reason, they are not just about renewing assets ‘like for like’
– replacement bridges and culverts are built to withstand modern climate forecasts.
22.  We routinely collect asset condition data and model the expected deterioration of roads and the
impact of planned works across a range of scenarios. Annual state highway road surveys are  1982
undertaken that provide network condition reports for pavement and surfacing. Regular inspections
of other asset classes including structures, drainage and signage are undertaken by consultants
and contractors along with ongoing Geographic Information Systems (GIS) network hazard
ACT
mapping.
23.  We run continuous programmes of work to operate, maintain and renew roading assets, including
multimodal paths and busways. These programmes are primarily contracted through Network
Operating Contracts (NOCs). Councils manage their own procurement of maintenance and
renewal works (the exception being Marlborough where there is a joint venture between NZTA and
Marlborough District Council). These programmes are designed to ensure that roading assets
deliver essential levels of service for safety, access, and resilience.
24.  Our asset management model ing is calibrated against about 120 pavement deterioration
INFORMATION
calibration sites across the local and state highway network, and against the impact of past
maintenance programmes compared to forecasts. State highway and urban data and modelling is
more extensive than that for rural roads where there are smal er changes in demand year on year.
25.  We have put considerable resource and focus into improving emergency response over the past
five years. Under the current NLTP, $480 million has been budgeted for response and recovery
works on state highways and local roads. This  budget has been topped up by $250 mil ion
OFFICIAL
(response) and $842 mil ion (recovery) due to the severe weather events that affected the upper
North Island at the start of 2023.
Constraints on industry capability and c
THE  apacity
26.  A period of flat-line funding for road maintenance between 2010 and 2017, compounded by more
recent disruption caused by COVID-19, has led to supplier under-investment in plant (such as
bitumen sprayers) and the loss of skil ed crews. Consequently, there has been a loss of expertise
and capacity in the sector.
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27.  Improved health and safety expectations, particularly for traffic management requirements to
protect those working and travelling on roads, have reduced maintenance productivity due to the
time and resource required to safely manage traffic and workers. We are looking to improve both
health and safety outcomes and productivity through our new risk-based approach to temporary
traffic management.

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Impact of stretching the asset
28.  Ongoing under-investment in preventive measures is resulting in repeated cycles of damage and
repair. While we are managing the asset wel  overall  and  within funding constraints, a lack of
preventive investment on items such as subsoil drains or culverts means that infrastructure such
as pavements deteriorate faster and the cost of recovery from extreme weather events and other
disruptions is higher.
29.  Due to funding constraints, we are unable to fund sufficient preventive activities to reduce risk from
1982
future events or slow the decay on infrastructure under normal conditions.
30.  Fewer roads have been rehabilitated2  since 2009 than before 2009. We need to replace nine
ACT
percent of road surfaces each year and rehabilitate two percent of the pavements, on average, to
cost-effectively sustain access. We also need to undertake more  preventive works,  such as
drainage maintenance and bank stability. Partial fixes are sub-optimal and we are experiencing
repeat  failures over some  corridors, meaning lengthy,  recurrent  closures are becoming more
common.
31.  The NZTA State Highway Investment Proposal (SHIP) for the 2024-27 NLTP has been predicated
on a significant funding boost for renewal activity towards the sustainable level. An increasing
proportion of that  funding  is programmed to be  allocated to rehabilitation activity  to  move the
proportion of rehabilitation to two percent of road pavements (or 500 lane kilometres per annum
INFORMATION
instead of the 130 lane kilometres currently) over the next ten years. This wil  help return the state
highway network to an acceptable level of service  (comparable to that last achieved in 2014)
reducing the number of potholes experienced and contractor re-work required.
Investment is not keeping pace
32.  Investment is not keeping pace with the amount of work required to restore service levels and
OFFICIAL
restore asset condition to a satisfactory condition.
33.  While nominal investment increased 28 percent from 2018-21 into 2021-24, we saw a 20 percent
decline in purchasing power to that expected, because the $2.8 bil ion funding al ocation can now
THE
only buy 80 percent of the work in a programme that now costs $3.5 billion due to the higher-than-
budgeted inflation. We have lost the ability to deliver $700 million work over 2021-24.
34.  In real terms, this represents a decline in investment, as we are playing catch-up with work that
was unable to be delivered in previous periods and it cannot fund the increasing level of work
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required (at greater cost due to inflation and other drivers) in the current period.
35.  The real level of expenditure on state highway maintenance has not increased since a high point
in 2009/10. Once the impact of inflation, traffic growth and increases in network length and
complexity are accounted for, the level of expenditure on maintenance is relatively flat.
36.  Over the past ten years, annual renewal expenditure across the total asset stock has been
approximately  half  the annual depreciation expense. In general, spending less on renewals
compared
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2  Rehabilitation involves the removal of the existing road surface and underlying road structure
(pavement) and replacing it with new or recycled materials. Preventive works such as drain clearing
drain water away from pavements, so they last longer.
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level of risk to our long-term ability to maintain the condition of the state highway network. Over
the 2018-21 funding period there was a $1.08 bil ion gap between how much we  spent  on
depreciation compared to how much was invested in renewing the asset stock (excluding new
builds).
37.  Over the past ten years the length of state highway has grown by ten percent, increasing the assets
being maintained and traffic by 15 percent which has increased the load and rate of deterioration
of infrastructure.
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Future plans
38.  We have based our proposals for state highway maintenance over 2024-27 and out until 2034 on
ACT
the condition of the network and the level of service now expected at the commencement of the
period.
39.  We propose increasing preventive maintenance works such as roadside drainage maintenance to
improve durability of pavements and increasing pavement rehabilitation works to the level required
to sustain service levels and asset condition, to at least cover the lifecycle cost over the next ten
years ($240 million). We propose working with maintenance contractors over 2024-27 to restore
their capacity to the level required.
40.  The future equivalent cost of the planned 2021-24 $2.8 bil ion programme is forecast to be $3.8
INFORMATION
bil ion over 2024-27. We are proposed to do additional work through this activity class which takes
the cost of the proposed programme to $4.45 bil ion. That additional work includes:
a.  replacing 13 end-of-life  bridges through a new $120  million  budgetary provision in the
maintenance activity class, noting that in the past these works have been funded through
the improvements activity class
b.  increasing  the provision  for  bridges and geotechn
OFFICIAL  ical structures maintenance by $100
million to extend service lives (including partially repainting the Auckland Harbour Bridge3)
c.  increasing pavement rehabilitation by 300 lane kilometres  compared to the 2021-24
THE
proposal, a total of 1,035 lane kilometres or an average of 1.1 percent4 of the network per
annum, plus changes to the quantities of chipseal and asphaltic concrete within the
resurfacing programme at a net cost of $210 mil ion, and increase drainage works by $30
mil ion to improve the durability of pavements
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d.  increasing the al ocation for emergency works by $70 million
e.  meeting our new regulatory requirements $20 mil ion
f.  increasing the maintenance and renewal of safety infrastructure and traffic control devices
by $70 million to replace the end-of-life traffic control devices on Auckland’s motorways and
elsewhere, and replace old unobtainable light fittings with LEDs.
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3 Painting steel bridges stops the loss of strength as rust reduces the size of structural bridge elements
such as beams.
4 Note that this is 55 percent of the average sustainable level of two percent per annum.
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BRI-2887
Of the items above, $410 mil ion is for additional works, this is 60 percent of the planned work
for 2021-24 not affordable in that period.
Work underway to strengthen our approach to maintenance and renewal
41.  We are reviewing our current maintenance delivery model. It has been a decade since we
introduced the Network Outcomes Contracts (NOCs). These were introduced at a time when there
was pressure on our maintenance spend, with the objective of our contractors taking a stronger
asset management lead in optimising the level of renewal works on an as-needed basis within  1982
available funding.  While many NOCs have worked well others have not delivered as well as
expected, especially where increased freight and weather damage, and constrained budgets
limiting renewals work have required repairs at a quantity beyond the level provided for in the lump
ACT
sum repair elements of the NOC contracts. The objective of the current review is to better-balance
renewal and repair. To achieve this, the contract review is considering the commercial form of the
contract, how maintenance works are specified, how quality is managed, and the related roles of
the parties in planning work and managing risk.
42.  We are researching improved asset management practices, often at higher initial cost, to realise
long-term gains. For example, we have trial ed using epoxy modified road surfaces at twice the
conventional treatment cost for four times the service life and using structural pavements instead
of unbound gravel pavements for three to four times the cost but two to four times the service life,
and 25-35 percent less traffic disruption from roadworks.  INFORMATION
43.  We are collaborating with local government through Te Ringa Maimoa Transport Excel ence
Partnership, formerly known as the Road Efficiency Group. This collaboration works to lift asset
management capability and efficiency across the sector. We support Road Controlling Authorities
(RCAs) to understand the requirements of the Government Policy Statement (GPS)  on land
transport and to become ‘smarter buyers’ by creating tools and providing guidance to improve
performance.
OFFICIAL
44.  We are planning to trial and then implement the use of larger pavement rehabilitation work sites
with more comprehensive treatments targeting ten percent productivity gains. We are considering
THE
the potential for including drainage renewal works, local cost low risk improvements, and potential y
resilience works to strengthen steep slopes, and safety works where the need for these exists and
their priority warrants their implementation at the time of the rehabilitation works.
Strengthening the strategic approach to asset management
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45.  NZTA is currently developing the State Highway Plan which sets the overall direction for how we
manage the asset. It covers all activities involved with operating, maintaining and improving the
state highway network.  The strategy guides  all input into state highway improvement and
management decisions from policy advice, and asset lifecycle planning through to operating,
maintaining, and renewing the state highway.
46.  We are also reviewing our asset management plans to provide for greater agility as technology
and conditions change, to move beyond a reactive approach bound by funding cycles.
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47.  We are planning for a more climate-resilient land transport system. In partnership with councils,
communities, iwi/Māori, and government agencies, we are refining our approach to reducing risk
so that we are right sizing our resilience activities and investment in the future.
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48.  Tiro Rangi, the NZTA Climate Adaptation Plan, has now been published. This will help shape our
response to the changing climate and describes the role we wil  play in supporting adaptation
objectives for the land transport system.
Conclusion
49.  We have a mature asset management regime which continues to evolve to maintain effectiveness
and efficiency.
1982
50.  Up to 90 percent of New Zealand’s state highway network is considered to meet minimum asset
condition requirements and provides an acceptable level of service to users. The remaining ten
percent  requires  catch-up  works in addition to  the 90  percent  of the network that wil  require
ACT
resurfacing over 2024-34, and the 20 percent requiring rehabilitation over the ten year period to
bring it up to an acceptable level of service and sustain that.
51.  NZTA has developed a ten-year programme that wil  gradual y increase the level of rehabilitation
(alongside other renewal activity) to achieve an acceptable level of service across the entire state
highway network by 2033.  This programme is subject to the funding level provided for the State
Highway Maintenance Activity Class over the next three NLTPs.
52.  The current maintenance and renewal programme for 2023-24 is already targeting an increased
quantity of rehabilitation alongside additional maintenance and renewal activity required because
INFORMATION
of the under-delivery in 2022-23 due to Cyclone Gabriel e.
We are committed to maintaining and operating a safe and accessible state highway network.
Work underway to strengthen our approach to maintenance and renewals includes reviewing our
maintenance contract model,  researching improved asset management practices  and
collaborating with local government through Te Ringa Maimoa Transport Excellence Partnership.
It is recommended that you:
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53.  Note the contents of this briefing.

THE

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...........................................................................
Brett Gliddon
Group General Manager – Transport Services

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............................................................................
Hon Simeon Brown, Minister of Transport
Date:
2023

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BRI-2887
Appendix 1

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ACT
INFORMATION
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THE

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Appendix 2
2023-24 summer maintenance and renewal programme
1.  We are scheduled to deliver our largest-ever maintenance programme during the 2023-24
construction season (see table below).

2023/24
(programmed)
Paving & Surfacing Renewals
2021/22
2022/23
1982
Subject to affordability,
weather, resource
availability
Pavement resurfacing (lane km)
2,012
1,861
2,348
ACT
Pavement rehabilitation (lane km)
106
99
199
SCRIM – surface friction (lane km)
66
78
57
Total Programme (lane km)
2,184
2,038
2,604
Plus



Audio Tactile Profile - Rumble Strips
(lane km)
263
270
491
2.  The severe weather events of 2022-23 meant that we were unable to complete a significant
INFORMATION
amount of the renewal programme. While 98 percent of the programmed maintenance and
renewals were completed in the South Island, only 70 percent of the programme was
delivered in the North Island.

3.  The reduced delivery in 2022-23 has resulted in a much larger programme for 2023-24 and
this wil  be a stretch-target for us and our contractors. Risks to ful  delivery include severe
weather events, a constrained budget (year three of the NLTP), cost escalation and
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contractor capacity.

4.  The construction season for state highway renewal activity general y occurs between October
THE
and March each year. Warmer spring and summer months are the best time for resurfacing
as daylight hours are longer and the warm temperatures and dryer air help the new seal stick
to the road surface. In some parts of the country, renewal activity may start before October
and run later than April, depending on weather conditions.

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