4.6. To manage PPPs, Texas can draw upon the experience of other jurisdictions
Texas has the advantage of being able to draw upon a wealth of experience gained by other jurisdictions regarding the successful implementation of PPPs. Partnerships Victoria, for instance, was organized in 2000 by that Australian state to provide the framework for a government-wide approach to providing public infrastructure and related ancillary services through public-private partnerships.
Though each PPP project has its own unique complexity, Partnerships Victoria brings consistency to the procedures for managing and implementing projects and focuses on gaining value for money - including life cycle costing - managing risk, and protecting the public interest. The state retains delivery control of core public services, and no one form of procurement is presumed to be more efficient than another. The key issue is which form of project delivery provides the best value for money in meeting government's service objectives in a particular case.
Partnerships Victoria processes are outlined in detailed guidance material, which is comprehensive, continually revised and updated, and includes useful examples and templates. The guidelines help practitioners apply policy and processes consistently when procuring and delivering Partnerships Victoria projects. This in turn sends clear and consistent messages to the market. The guidance material can be found at www.partnerships.vic.gov.au.
Key Partnerships Victoria publications include:
• Practitioners' Guide (2001)
• Risk Allocation and Contractual Principles (2001), to be read in conjunction with the Standard Commercial Principles publication (2005).
• Public Sector Comparator (2001) to be read in conjunction with the PSC Supplementary Technical Note (2003) and Use of Discount Rates in the Partnerships Victoria Process (2003); and
• Contract Management Guide (2003)
Additional advisory notes address specific technical issues, such as 1) determining the general inflation rate for use in Partnerships Victoria projects; 2) managing interest rate risk; 3) disclosure and management of conflict of interest; and 4) the interactive tender process.
Major Stages in Developing a PPP Project110
Figure 1 Major stages in developing a Partnerships Victoria project
Closer to home, the Canadian province of British Columbia has set up a similar organization, Partnerships BC, whose job is to serve its public sector clients by providing core expertise on analyzing, structuring and managing partnership contracts. As a center of expertise, Partnerships BC can develop and transfer learnings from one project to the next. Partnerships BC publishes a set of guidance documents to assist both local governments and potential private-sector participants.
Over the last five years, British Columbia, with a population roughly one-fifth the size of Texas, has employed private financing for the procurement of nearly $3 billion in infrastructure financing - for projects ranging from mass transit to roads and wastewater treatment facilities.
Within the U.S., California has recently instituted a "Performance Based Infrastructure (PBI)" initiative, which is the state's public-private partnerships program. A key tenet and important part of the PBI strategy is the creation of "PBI California," a center for excellence that will help determine which projects can benefit from PBI, providing expertise in negotiations with PBI participants, ensuring transparency and monitoring performance.
Patterned after the successful Partnerships BC organization, PBI California will manage and implement contractual arrangements and will also assemble statewide demand in order to enhance negotiating leverage and improve terms and conditions for taxpayers and citizens.
Elements of the PBI initiative cover a wide ground, but the public policy emphasis and approach to be taken is specifically focused on a number of key factors:
• Expand the types of projects, services and government entities that can enter into PBI arrangements
• Increase contracting flexibility so the state can better negotiate with potential contractors
• Act as a repository of knowledge, understanding, expertise and practical experience in connection with PBI-related transactions
PBI will allow government and private companies to enter into contracts that make both
parties responsible for the delivery of infrastructure services. In addition, PBI is not mandatory.
It is simply an optional alternative for governments to employ if and when doing so provides
value when compared to traditional infrastructure provision.111
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110 Source: Partnerships Victoria, Practitioner's Guide, p. 14.
111 As a side note, the California PBI initiative also includes a plan to bring 20,000 new engineers into California's work force to provide the expertise necessary to accomplish the infrastructure construction objectives.