Current arrangements to evaluate and monitor private investment in public infrastructure were detailed in the Department of Treasury and Finance submission. The following major evaluation tasks were outlined:192
• option appraisal, where various available options are considered in terms of scale, output specification, risk transfer and the potential market;
• the business case, where there is a detailed construction of a business case, including output specification, indicative costs, construction of a preliminary
public sector comparator, statement as to government commitment and cost benefit analysis;
• government approval, where there are four examinations of a PPP project by Cabinet or a committee of Cabinet;
• bid evaluation, where expressions of interest are assessed against each other and also for value for money against the most efficient public sector method; and
• a fifth evaluation task is also noted by the department in post-commissioning, where it is a requirement to ensure that the contract provides the level of value for money for which it was originally designed.
The Department of Treasury and Finance indicated that the primary mechanism used by the Victorian Government to evaluate the effectiveness of private sector investment in public infrastructure projects was the aim of value for money, and the quantitative construction of a PSC.193 The department explained that the PSC was a tool estimating the whole-of-life risk adjusted cost of a project if it was financed and operated by government, and asserted that it provided a fall back delivery option for government. One of the keys to constructing the PSC is the reference project.194
The most likely and efficient form of public sector delivery that could be employed to satisfy all elements of the output specification, as outlined in the Project Brief, based on current reasonably achievable best practice. The defining attribute of the Reference Project is that government retains ownership and operational responsibility [but not necessarily direct delivery] over the infrastructure and related services. In many cases, the public sector service delivery method may involve a significant element of outsourcing or third party contractor involvement including a variety of design and construct (for example, turnkey), operation and maintenance agreements.
While the Committee accepts this information, the alternative delivery option was not particularly clear.
In terms of monitoring PPP projects, the Auditor-General emphasised that while the broad framework for evaluating prospective PPPs is set out in the policy documentation, the effective management and monitoring of these arrangements, once established, is critical to the outcomes achieved.195 Retaining the detailed in-house knowledge of the arrangements once a contract is signed, for example, has been a major issue in the United Kingdom.196
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192 ibid., pp.15-17
193 ibid., p.20
194 Department of Treasury and Finance, Partnerships Victoria Guidance Material, Public Sector Comparator, Technical Note, June 2001, p.8
195 Mr W Cameron, (then) Victorian Auditor-General, submission no.13, p.5
196 Report on Operational PFI Projects by Partnerships UK, March 2006, p.10