'Public-Private Partnerships' (PPPs) is often used as a general term to describe a range of arrangements between public and private entities. In this study however, we define PPPs specifically as a contracting arrangement in which a private party, normally a consortium structured around a Special Purpose Vehicle (SPV):
• Takes responsibility for the design and construction of a component of new infrastructure; and/or
• Takes over a long-term lease or concession over existing assets; and/ or
• A long-term contract to operate and manage the infrastructure.
At one end of the infrastructure spectrum, a private party will Design and Build (DB), or Design and Construct (D&C) a facility, and at the other end a private party will Build-Own-Operate and Transfer (BOOT) to the public sector after a contract period, or simply Build-Own-Operate (BOO) indefinitely. In Australia, the numerically dominant method of procurement may be termed 'Traditional procurement'. This includes all non-PPP procurement policies, including DB, D&C and 'Alliances'.1 A differentiating feature of PPPs, as defined in this study, is the use of private finance, which introduces project finance rigour to the purely physical dimension of construction and operation of infrastructure facilities.
In Australia, PPPs have been subjected to considerable controversy following some high profile 'failures' that have featured in the media. Critics have pointed to high bidding costs associated with PPPs, refinancing issues, cost overruns, construction failures, design irregularities, windfall profits, lack of transparency etc.
On the other hand, Australian governments continue to support the PPP model with well-developed implementation frameworks. The range of benefits that governments typically use to justify PPPs includes:2
• Improved focus on service;
• A requirement to pay only for defined assets or services when they are delivered;
• A very high level of confidence that infrastructure will be available on time and without cost blow-out;
• An ability to hold a provider financially accountable for performance;
• Access to the best technical and management skills;
• Improved outcomes, by using competitive forces to stimulate creativity, pricing and delivery; and
• Access to infrastructure financing without additional borrowing by the government.
The individual Australian state governments have information relating to the assessment, operation and performance of PPPs, and also on traditionally procured projects undertaken in their own jurisdictions. What has been missing from the debate that has taken place in the public arena, is an analysis of relative PPP and Traditional procurement performance that draws on this experience in any depth.
In the context of the on-going debate it is not sufficient to argue that PPPs are simply a policy by which 'third-way' governments can please financial markets (Hodge, 2007). That is why, in the absence of a fully transparent database on comparable PPP and Traditional procurement projects, the present study has undertaken to examine all the publicly available data relating to PPPs and Traditional procurement projects. In doing so, it has analysed their relative performance. The intention is for this study to contribute to a rational policy debate around the funding and delivery of Australia's future infrastructure.
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1 'Alliances' are agreements between private parties and government business units, which include a contractual sharing of risks and rewards.
2 This list is derived from Peter Fitzgerald (January, 2004), p.4.