There have been a number of inquiries into PPP projects in NSW. A possible reason for this was given by the Chair of the Public Accounts Committee Inquiry into Public Private Partnerships held in 2006:
We note that less than ten per cent of assets are provided through these arrangements. However, because they tend to be large, complex projects that can affect people's lives for a very long time, PPPs arouse a great deal of interest and passion. 12
This is possibly the reason why between 1992 and 2002, Public Accounts Committees have published 13 reports and discussion papers on PPPs, primarily focusing on accountability, governance and the financing of projects. 13
The June 2006 Public Accounts Committee Inquiry into Public Private Partnership (the Inquiry) drew heavily on two other pieces of work, being the Infrastructure Implementation Group's Review of Future Provision of Motorways in NSW December 2005, and the reports of the Joint Select Committee on the Cross City Tunnel, tabled in February and May 2006.
The recommendations from the Inquiry were wide ranging, however stressed that public trust in PPPs would be improved markedly if disclosure of project particulars, notably the entire contract, were disclosed as per recommendation 13.14 Another theme that ran throughout the Inquiry's findings was the need for a public interest test, while recommendation 20 suggested that there was a need for a standard contract. 15
NSW Treasury is the central agency responsible for the WWG and updated the Guidelines in late 2006 to:
■ reflect changes in Government structure since the publication of the original WWG in 2001
■ include a public interest evaluation, taking into account the perspectives of users and taxpayers
■ require that at certain points throughout the tender process, updated public interest evaluations are to be completed, with significant variations submitted to the BCC, and requiring summaries of the evaluations to be publicly disclosed
■ include updated sections discussing the environmental approval process to reflect the introduction of Part 3A of the Environmental Planning and Assessment Act 1979
■ provide guidance on how agencies may use bidder engagement strategies, Best and Final Offers and pre-selection negotiations, and guidance on the evaluation of non-conforming proposals
■ provide clarity on the role of the board of State Owned Corporations in the approval process for PPPs
■ provide clearer Government approval processes, including requirements to seek further BCC approvals / advice if significant project factors change, or if an agency wishes to renegotiate a PPP contract
■ provide consistency with the new FOI legislation on contract disclosure, including disclosure of the full contract and any amending deeds, excluding confidential material
■ include a standard format for the preparation of contract summaries, as agreed between NSW Treasury and the Auditor-General
■ provide for the continuation of the Steering Committee (or its equivalent), allowing the Committee to oversee the initial delivery phase of the project
■ provide consistency with the Government's Procurement Policy Guidelines.
Following consultation with Victorian Treasury and Industry, NSW Treasury published the Working with Government: Risk Allocation and Commercial Principles in May 2007, responding to the Inquiry's recommendation for a standard contract16. Although not a standard contract per se, the guidance sets out the way Government prefers to manage risk and conduct PPPs within a legal framework.
In developing the commercial principles, NSW attempted to address the contentious issues surrounding service specification, site risk, performance bonding, liquidated damages, indemnities, and default and termination procedures. NSW has gone to great lengths to ensure that the commercial principles are broadly consistent with the Victorian position.
The Newcastle Mater and Long Bay Hospital Prison and Forensic PPPs, allowed NSW to develop a common set of commercial principles and risk allocations, which now apply consistently across projects. These projects also assisted in the development of:
■ the use of a standard project deed that embodies a consistent set of underlying commercial principles and risk allocation
■ consistent engagement strategies with the private sector
■ a common set of assumptions for purposes of pricing a private sector bid.
Having key parameters known and understood by both public and private parties upfront, has enabled parties to address difficulties in the pricing of risks, as well as simplifying and shortening the procurement timeline. These developments have aided in the reduction of bid costs and reduced the time required for negotiations.
The Government has learnt to deal with risk allocation flexibly, as it is an extremely complex issue for social infrastructure PPPs, and a driver of value for money. Risk allocation requires the need for a well thought out engagement strategy, particularly at the Request for Detailed Proposal stage. NSW and Victoria have learnt that a good engagement process aids in aligning the public and private sectors understanding in optimising outcomes, resulting in an efficient allocation of risk. For example:
■ based on consultation with the private sector, Government is now willing to share some of the interest rate risk for social infrastructure PPPs
■ ensuring open communication channels between Government and the private sector during the design stage, helps draw a common consensus on service specifications, performance measures, payment mechanisms and other features of the contractual arrangement.
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12 Public Accounts Committee Inquiry into Public Private Partnerships: Report No. 16/53 (159) - June 2006. Page. vii.
http://www.parliament.nsw.gov.au/prod/PARLMENT/Committee.nsf/0/6FB3D448CE8BF349CA2570 700015952F
13 ibid., page. vii.
14 ibid., page. x.
15 ibid.,. page. x.
16 The document can be found at http://www.treasury.nsw.gov.au/wwg