Some public private partnership projects may generate sufficient third party revenues (for example, from user charges) to provide a fair return on investment for the private sector party. In the majority of cases, government will be required to directly pay for the cost (in full or in part) of the underlying infrastructure through service payments. If so, the public private partnership project can only represent better value for money if it satisfies the output specification at lower cost to government than the cost of traditional delivery.
Value for money is a relative concept. In the context of public private partnership arrangements, it means, in its simplest terms, the lowest risk-adjusted cost to government of satisfying the specified output specification. However, non-quantitative factors may also require consideration within the context of the output specification and the specified evaluation criteria.
It is important that government measures the true financial cost (net of any revenues) of delivery under both traditional delivery and the best public private partnership alternative. To this end, this framework requires that adjustments are made to the
partnership model to reflect the fact that certain costs faced by private sector parties are remitted to the government as revenues (for example, stamp duties and land taxes) and therefore reduce the true cost to government of the private sector alternatives.
Where government owned corporations or other significant business activities are the delivery vehicle under the reference project, the principles of competitive neutrality apply, consistent with the National Competition Policy. Queensland has already met its obligations under the National Competition Policy, where all such entities comply with competitive neutrality principles. Comparable tax regimes are in place and they are fully subject to all regulations that apply to private businesses.
All things being equal, the option with the lowest Net Present Cost (NPC) should be preferred.
Agencies should not seek to proceed with a public private partnership solution unless the comparative analysis indicates that the public private partnership solution will represent better value for money than traditional delivery.