2.3  Projects suitable for private financing

Projects likely to have potential to provide value for money using a PFP delivery method are those with some or all of the following attributes:

•  Scale: Normally projects with a total contract value of $50 million or more; which could include bundling together a small number of similar projects; or a regional infrastructure management package are also possibilities.

•  Duration: Long service delivery periods, possibly up to 25 years or more.

•  Service focus: The services(s) required should be capable of specification in terms of measurable outputs that can be translated to a performance contract.

•  Non-core activities: Significant non-core services and support activities that currently divert management and skilled staff in the public sector.

•  Innovation: The project is of sufficient complexity to encourage innovative approaches (in terms of design and technology) that can deliver value-for-money.

•  High maintenance: Alternatives to old infrastructure with high operating costs.

•  Technology: Scope for cost savings and improved services through new technology.

•  Risk allocation: Capacity to allocate appropriate significant risk to the private sector.

•  Complexity: Complexity and other features that encourage innovative solutions.

•  Market appetite: A real business opportunity that will attract a number of competent bidders.

•  Public interest: Procuring the project as a PFP is in the public interest (see Appendix 2).

Core services, which must be delivered wholly by Government, fall outside the PFP framework. In this context core services relate to the physical delivery of public services, such as clinical services in health and teaching in education. The services within the PFP that may be privately provided would be those that support the main service function (for example providing accommodation, cleaning and maintenance20).

The BCC will also consider whether it is in the public interest to procure a capital works project as a PFP. The nature of this evaluation is discussed further in Chapter 3 and Appendix 2 of these Guidelines.

Prospect Water Filtration Plant (Photo courtesy of Australian Water Services Pty Ltd)

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20    For further guidance on which services may constitute non-core services in social infrastructure projects, see paragraph 17.1.1 of the NSW Risk Allocation and Commercial Principles for PFPs.