Witnesses including ABN Amro, Transfield, AusCID and the Institution of Engineers Australia advised the Committee that they supported the Victorian policy framework and commented that it is more comprehensive and sophisticated than the former policy.152
AusCID also supported the high standards of probity and accountability inherent in the Partnerships Victoria documentation, and supported the use of a probity officer in ensuring the fair treatment of all bidders in projects. In its submission to the inquiry Thiess Pty Ltd advised the Committee that:153
With past downsizing of departments the required level of technical expertise may not always be readily available today in-house. The assistance by suitably qualified and experienced consultants with capacity for the task is encouraged.
Transfield Pty Ltd raised the concern that 'it is essential that greater transparency, and indeed consistency, is exhibited by the Victorian Government in the identification of projects to be delivered by the private sector on a build, fund and maintain/operate basis'.154
AusCID advised that transaction costs need to be minimised, and that this was particularly the case for smaller PPPs where standard contracts and more efficient project and contract administration would help bring forward development of these projects.155
Several witnesses noted that it is too early to pass a final judgement on the current policy. Deutsche Bank advised, however, that no significant projects had been delivered for which the relevant components of the public sector comparator (PSC) have been disclosed to bidders under the Partnerships Victoria policy.156 At that time, Deutsche Bank reported that it was keen to see the PSC developed in practice, and that government must demonstrate that a full and appropriate value for risk has been ascribed under the traditional procurement option.
Other private sector organisations emphasised the importance of specific parts of the policy, including:157
• the Partnerships Victoria Practitioners' Guide which emphasised the importance of the release of a thorough and well crafted project brief and the efficiency of the associated process;
• the importance of efficient final negotiations with preferred bidders.
The Victorian Auditor-General also advised the Committee that the Partnerships Victoria policy provided a sound foundation, stating that 'Our assessment of the framework indicates that it provides a sound platform for the development of PPPs'.158 The Auditor-General, however, qualified this by stating that the absence of an evaluation culture with PPPs to date indicated that future PPP performance could not be guaranteed:159
… given that our assessments of PPPs over the past decade have shown that key elements of effective project evaluation have not been followed, optimal outcomes from new arrangements will not be achieved unless all elements of the framework are observed.
Professor Quiggin noted that the Partnerships Victoria documents envisaged a preferred position in which governments contract with a single party to undertake design, construction, finance and operation of infrastructure, but that the position under which risk will be allocated optimally is limited, suggesting that:160
A single contractor model will be appropriate only in a minority of cases. For most infrastructure projects, standard public procurement procedures, with subsequent public ownership of the asset will be preferable.
Some academic research has noted the joint role of government as agency for the project and regulator of the process, as well as governance for the community, and has argued for the need for ongoing regulation during the concession period.161
Other commentators were also critical of the Partnerships Victoria framework. Professor Hodge, for example, was concerned that insufficient attention had been paid in the guidelines to aspects of policy, planning and public accountability:162
The commercially narrow guidelines of Victoria do seem to treat PPPs as if they were simply a purchasing decision, and leave government exposed in my view to re-learning future lessons in that public infrastructure is part of an inherently policy based fabric, that public consultation is simply part of public policy development, and that public accountability is expected throughout the process. In other words, there appears to have been a failure to recognise firstly the need for strong governance independent of the government of the day and secondly the need to see public policy as an inherent part of the PPP decision process.
Dr Duffield pointed out that the neutrality of a regulator would assist in protecting the interests of all parties including the public interest. It would also expedite negotiations, ensuring the process remained transparent and ensuring that the use of commercial in confidence clauses were not abused, thus providing open government policies and ensuring the contract was executed as agreed.163
A number of submissions highlighted the shortcomings of the current Commonwealth taxation arrangements for PPP projects. Dr Duffield commented that a number of schemes have existed over the years to assist with taxation relief for suitable infrastructure projects, for example, the infrastructure - borrowings tax-offset scheme (Division 396 of the Income Tax Assessment Act 1997 (Cwth)).164 The CityLink project, for example, relied to an extent on the availability of tax concessions.
The Committee was advised by Thiess that the current taxation regime is arguably the most critical issue facing private investment in infrastructure in Australia,165 commenting that 'it should not be necessary to create expensive and complicated structures to overcome tax rulings related to private investment in public infrastructure. The whole taxation matter is complex, it is time consuming and adds significantly to costs that are ultimately passed on to the end user and it must be resolved'. Similarly AusCID informed the Committee that:166
The most significant hurdle which is constraining increased private investment in public infrastructure is Section 51AD of the Australian Taxation Act. This provision was introduced in 1983 to prevent tax exempt parties (for example, state and territory governments) from entering into arrangements with tax paying parties (private sector) for the ownership and delivery of services (for example, infrastructure) in such a way that the federal tax revenues reduced. Typically there are leasing arrangements under which companies may receive tax-deductions and transfer the benefit of those reductions as lower costs to the public sector client. As it stands S.51AD is a serious impediment to the implementation of many forms of PPPs … the use of shadow tolling as a form of paying for infrastructure services is restricted, if not ruled out, by S.51AD as it currently stands.
In June 2003 the Commonwealth Government released for comment, an exposure draft legislation covering the taxation of infrastructure financing.167
At the time this report was prepared, these reforms were still under discussion.168
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152 For example, 'AusCID recognises Victoria's Partnerships Victoria policy as an excellent PPP framework' Australian Council for Infrastructure Development (AusCID), submission no.18, p.18
153 Thiess Pty Ltd, submission no.32, p.9
154 Transfield Pty Ltd, submission no.15, p.4
155 Australian Council for Infrastructure Development (AusCID), submission no.18, p.22
156 Deutsche Bank AG, submission number 19, p.4
157 For example Thiess, submission no.32
158 Mr W Cameron, (then) Victorian Auditor General, submission no.13, p.4
159 Ibid.
160 Professor J Quiggin, submission no.25, p.2
161 Dr C Duffield, An Evaluation Framework for Privately Funded Infrastructure in Australia, PhD thesis, The University of Melbourne, 2001
162 G Hodge, Who Steers the State When Governments Sign Public-Private Partnerships? Paper presented to the International Research Symposium on Public Management, Edinburgh, April 2002, p.9
163 Dr C Duffield, An Evaluation Framework for Privately Funded Infrastructure in Australia, PhD thesis, The University of Melbourne, 2001, p.61
164 ibid., p.44
165 Thiess Pty Ltd, submission no.32, p.12
166 Australian Council for Infrastructure Development (AusCID), submission no.18, p.23
167 Senator The Hon. H Coonan, MP, Minister for Revenue and the Assistant Treasurer, media release C062/03, Taxation of Infrastructure financing bill released for comment, 26 June 2003
168 Blake, Dawson Waldron, PPP Update, September 2006, p.15