Strategies to reduce barriers to competition
Competition for Australian PPP projects has been good and they generally achieve strong value for money. However, the complexity of Australian PPPs and the consequent cost to bidders of the procurement process means that the risk of being unsuccessful is high unless bidders can spread it across a number of projects. As noted above, compared with some international jurisdictions, the number of PPP projects undertaken in any year and the announced pipeline of future PPP projects in Australia is limited. Hence, bidders are reluctant to expand their teams without a clear pipeline of projects, may withdraw from the market, and will be selective about projects for which they bid, potentially reducing competition.
Although process inefficiencies and bid costs are in themselves a barrier to competition, the key issue identified within the Australian PPP market is the sporadic nature of the project pipeline and the current limited ability of existing and potential new market participants to undertake an informed assessment of likely PPP projects.
Accordingly, we recommend the implementation of processes that act to improve both the visibility and certainty as to the Australian PPP pipeline, including:
a. as early as possible announcement of potential future PPP projects
b. more consistent and rigorous application of the National PPP Guidelines on the criteria for determining whether PPP procurement is appropriate for a project
c. continued commitment and leadership from politicians and senior bureaucrats within the Commonwealth and each of the various jurisdictions in support of the use of PPPs in appropriate circumstances
d. where possible, continued focus on improving national co-ordination of the release of projects to the market by greater liaison between jurisdictions, acknowledging the difficulties in achieving this.
Strategies to improve the efficiency of the PPP process and reduce bid costs
Although bid costs would become less of an issue following development of a stronger and more certain Australian PPP pipeline, inefficient processes continue to impact the value for money outcomes achieved by Governments. Accordingly, we recommend that initiatives to improve efficiency and reduce bid costs (as well as Government side transaction costs) remain a key priority, including:
e. rationalising information requested that is neither required to evaluate bids nor required for certainty at contractual close, particularly relating to some aspects of design and to general corporate processes
f. recruitment, development and retention of more high quality Government project team members, in particular the project director and key team members responsible for managing each of the various disciplines
g. ensuring governance structures empower the project team to deliver the project while enabling effective and efficient decision making so as to prevent unnecessarily protracted and uncertain timeframes
h. only using more than one bid stage where absolutely necessary, either because of changed market conditions or where no bidder has made an acceptable proposal.
Other strategies recommended
In addition to the above, we recommend consideration of a range of other initiatives that should provide incremental improvement in competition in the PPP market and the efficiency of PPP procurement processes. We have described these initiatives in more detail in Sections 6 and 7 of this report.