This study has analysed data relating to 206 government procurement projects, and has constructed a database for 21 PPP projects and 33 Traditional projects. The key research question was to analyse the relative efficacy of PPPs and Traditional procurement in relation to cost and time over-runs. The results can be summarised as follows:
• PPPs demonstrate clearly superior cost efficiency over Traditional procurement, which can range from 30.8 percent when measured from project inception, to 11.4 percent when measured from contractual commitment to the final outcome.
• In absolute terms, the PPP cost advantage was found to be economically and statistically significant. On a contracted $4.9 billion of PPP projects the net cost over-run was only $58 million - not statistically different from zero. For $4.5 billion of Traditional procurement projects, the net cost over-run amounted to $673 million.
• Approximately $400 billion is likely to be spent on Australian infrastructure over the next decade. If PPPs were to continue to account for a 10-15 percent share of this, based on the findings of this study (and net of bid costs), PPPs would generate approximately $6 billion in potential benefit to the community, and for reasons discussed below, the potential gain is likely to be greater than this. If PPPs were to contribute a higher share of total projects, even higher gains would be realised.
• With respect to time over-runs, on a value-weighted basis we found Traditional projects were likely to be completed later than PPPs relative to the budget. For example, between the signing of the final contract and project completion, PPPs were found to be completed 3.4 percent ahead of time on average, while Traditional projects were completed 23.5 percent behind time. This difference is statistically significant.
• While smaller Traditional projects were completed ahead of time, we found that project size had a marked (statistically significant) negative impact on time over-runs compared with PPPs, whose timeliness of completion were not negatively impacted by size of project.
• Our overall conclusion is that PPPs provide superior performance in both the cost and time dimensions, and that the PPP advantage increases (in absolute terms) with the size and complexity of projects.
• In contrast to commonly held perceptions about the relative transparency of PPPs, we found that PPP projects were far more transparent than Traditional projects, as measured by the availability of public data for this study.
• It is likely that the actual extent of benefits of PPPs to society is not fully captured by the analysis presented in this study, since:
- There is a benefit from completing projects on time and enabling the community to have access to the infrastructure facilities sooner. We have not included a valuation of this benefit;
- The PPP framework imparts another level of competition for Traditional procurement, and the lessons learned by governments participating in the PPP process with respect to risk analysis, rigorous structured project initiation through the use of business cases and other tools, have been partly transferred to the management of Traditional procured infrastructure projects; and
- The benefits identified in this study do not include the effect of PPPs' integrated provision of management, construction and ongoing operations. This is another major source of potential PPP advantage over Traditional procurement approaches that de-couple the management/ construction and operations phases, creating additional sources of inefficiency.