One city, one contract, one billion-dollar backlog
Sometime in the last year, Dunedin City Council went to market for something councils rarely advertise loudly: a 10-year network maintenance contract covering drinking water, wastewater, and stormwater across the entire city. The GETS tender notice, published in May 2025, described it as a long-term partnership with an experienced contractor. No contract value was published, but the scale of the work tells the story.
Dunedin’s three waters renewals backlog sits at $1.003 billion. Roughly 22% of assets have passed or are rapidly approaching end of life. The council’s 2025-34 nine-year plan committed $573 million for network renewals and a total three waters capital budget of $1.015 billion. Even that ambitious spending programme would reduce the backlog by only about 4% over the full decade.
In March 2025, Dunedin City Councillor Sophie Barker put it plainly: “We can’t afford to do it all at once, and right now.” At current rates, the backlog would take 30 years to clear.
The governance debate distracted from the commercial reality
New Zealand spent years arguing about Three Waters, then Local Water Done Well, then who controls the pipes. That debate obscured the simpler truth underneath: the pipes are old, someone has to fix them, and the money is now enormous.
KPMG’s 2025 analysis put the national figure at $38.6 billion in planned water infrastructure spending between 2024 and 2034, a 57% increase from the $24.6 billion planned for the previous decade. That is not a policy aspiration. It is a procurement pipeline that is already reshaping the contracting industry.
But KPMG also found a structural problem: historically, only 75% of long-term plan water budgets are actually spent. The gap between planned and delivered spending creates boom-bust cycles that discourage the very investment councils need from contractors. As KPMG’s Mair Brooks argued: “By providing clear, consistent visibility of upcoming work, the sector can give suppliers the confidence to invest, scale up, and meet demand.”
The Water New Zealand Pulse Survey from March 2025 found nearly half of respondents reporting deteriorating business conditions, over a quarter of contracts paused or cancelled, and 55% of organisations carrying active vacancies. The work exists. The capacity to deliver it does not.
A handful of firms are capturing most of the revenue
Watercare’s supplier spend report for the 12 months to January 2025 showed total contractor spending of $1.051 billion in Auckland alone. The top five recipients took the lion’s share: GHELLA ABERGELDIE JV at $305.3 million, Fulton Hogan at $88.6 million, Fletcher Construction at $59.6 million, McConnell Dowell at $57.6 million, and Downer at $51.4 million.
Watercare’s asset base is valued at $18.03 billion and it committed to a $13.8 billion infrastructure investment plan over 10 years. In FY25, it delivered $1 billion worth of infrastructure projects. The pattern is clear: a small number of large contractors have positioned themselves to capture the majority of water infrastructure revenue. Dunedin’s contract, whatever its final value, will almost certainly go to one of them.
This is not new. Back in 2020, the DCC negotiated directly with Fulton Hogan and Downer for up to $80 million of work over eight years, bypassing the standard tender process. Then-Councillor Lee Vandervis called it “jobs for the boys, and spin on top.” The Commerce Commission reviewed and cleared the arrangement, but the episode highlighted how few firms have the scale to compete for this work.
Ratepayers are funding the boom with no ceiling in sight
The commercial opportunity for contractors comes directly from ratepayer bills. In Wellington, households face water charges that could nearly triple within a decade as new entity Tiaki Wai inherits $9 billion in water assets and $1.7 billion in existing debt. Average household bills are projected to rise to approximately $2,400 in year one and potentially $6,800 by 2036.
Commerce Commission Chair John Small said in April 2026: “We will be looking at that model ourselves to make sure they are not overcharging.” Wellington Mayor Andrew Little described initial charges as “unreasonable and unnecessary.” Local Government Minister Simon Watts confirmed the government will not provide financial assistance to councils for water services delivery.
That is the uncomfortable equation. Billions must be spent. Councils cannot fund it from existing revenue. Ratepayers will pay more, potentially much more. And the contractors with the scale and relationships to win decade-long contracts are building annuity-style revenue streams that would make any SaaS company jealous. Whether those long-term arrangements deliver genuine value for money, or simply lock in a certainty premium that flows to the contractor, is the question nobody in the governance debate bothered to ask.
Sources
- ODT: $1 billion to clear Dunedin’s Three Waters backlog (2025-03-28)
- GETS: 3 Waters Network Maintenance tender (2025-05-13)
- KPMG: Turning the Tide – Local Water Done Well and the Case for Smarter Procurement (2025)
- Watercare Supplier Spend Report Feb 2024 to Jan 2025 (2025-01)
- Watercare Services Ltd Annual Report 2025 (2025-08-26)
- ODT: Focus on big firms called out (2020-08-19)
- ODT: DCC’s bypassing of tender process cleared (2020-08-25)
- Newswire: Wellington water bills set to triple (2026-04-12)