Public private partnerships (PPPs) are a relatively new and innovative procurement method for large and complex projects. PPPs in their current form came into use in Australia in the mid-1980s with projects like the Sydney Harbour Tunnel and the utility privatisations in Victoria. In the early 1990s, PPPs were first used to finance social infrastructure including corrective services and health projects and the Victorian Government introduced a formal private infrastructure financing policy. In 2001, this policy was formalised as Partnerships Victoria and applied to a wide range of social and economic infrastructure projects using a rigorous project selection and evaluation procedure. PPP programs were introduced in most OECD countries at this time and adopted progressively by the commonwealth, state and territory governments in following years.
PPPs are presently used by governments to acquire economic and social infrastructure services in industry sectors such as land transport, energy, justice, agriculture, health and education.1 A PPP may take several forms although at the centre of most variants is a contractual arrangement that provides for a private consortium to deliver an asset or service, to or on behalf of, the state. However, the term is also broadly applied to many and various contractual arrangements involving the state and private firms. In many developing countries, the term is used to describe most procurement contracts including medium-term service contracts and outsourcing. In developed countries, it refers to privately financed long-term contracts with the state for the provision of assets and/or services by private firms including build own operate transfer (BOOT) arrangements.
In Australia, the term is only applied to projects specifically approved and processed under PPP policy frameworks set up by the commonwealth, state and territory governments. The first state government to develop and implement a comprehensive PPP policy was Victoria although there were earlier BOOT transactions for economic infrastructure in New South Wales (the Sydney Harbour Tunnel), Queensland (the Sunshine Coast Motorway) and Victoria (Melbourne's Citylink).2 The Partnerships Victoria policy states that the objective of the program is the strategic use of public and private sector resources including innovation and risk transfer to achieve improved value for money and better services to the community. A growing body of evidence supports the view that PPPs are delivering better quantitative and qualitative outcomes than alternative procurement models. The advantages include improved value for money outcomes and better quality public services.
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1 It is argued that PPPs are no more than a substitute for public capital and to the extent that private capital contributes to a growing national capital stock, this is partly true. Nevertheless, PPPs are a comparatively minor form of infrastructure procurement accounting for less than 10% of capital spending by Australian governments.
2 In 2000-01 the Victorian Government's Department of Treasury and Finance set up a dedicated PPP unit, Partnerships Victoria, to develop policy, guidance and assist project implementation in that state.