Construction

Public procurement

Are public private partnerships (PPPs) common? Are they promoted or encouraged by the government?

Australia

Australia

The federal government defines a PPP as a procurement involving the use of private sector capital to wholly or partly fund an asset that would have otherwise been purchased directly by the public sector and which is used to deliver public sector outcomes. Australian Federal, State and Territory Governments will consider a PPP for any project with a capital cost in excess of A$50 million, in accordance with the National PPP Policy Framework.

PPP projects undertaken in the Australian market to date, the majority of which have been in New South Wales and Victoria, range from hospitals to courts to toll roads. In the case of toll roads, the government will usually hand over operation to the private sector participant for the period of the concession. In the case of social infrastructure such as hospitals and schools, the government will usually retain the obligation to provide the core services such as healthcare or education, although some projects have outsourced delivery of the core services to the private sector participant.

The Federal government (via Infrastructure Australia) has issued a set of National PPP Policy and Guidelines which now apply to all PPP projects released in the Australian market. . The various policies:

  • Require the preparation of a number of rigorous and detailed business cases and assessments at each stage of the delivery of a project
  • Require market testing at the procurement stage through a competitive tender process between the various private sector participants (usually structured as consortia in the form of a special purpose vehicle with interest by the financier, builder, designer, operator and maintenance contractor)
  • Impose some form of a value for money test
  • Are intended to be flexible enough to apply to different types of infrastructure while acknowledging that the market may be more receptive to certain kinds of PPP projects than others

The current trend is towards harmonization and an increasingly standardized approach to risk allocation by state governments, which is likely to lead to commoditization of PPP project documentation in the medium term.