11.1.1  PPP project objectives

PPP projects aim to improve the delivery of infrastructure services to the community in a way which provides VFM and protects the public interest.

Value for money is maximised by allocating risk optimally. In general terms, this means allocating each risk to the party best able to manage that risk. In theory, this reduces individual risk premiums and the overall cost of the project because the party in the best position to manage a particular risk should be able to do so at the lowest price.

The main drivers behind potential VFM are:

(i)  risk allocation. Pricing risk with the party who is better able to manage it at least cost;

(ii)  whole-of-life costing. Full integration of up-front design and construction costs with ongoing service delivery, operational, maintenance and refurbishment costs;

(iii)  innovation. Focuses on output specifications, providing wider opportunity and using competition as an incentive for bidders to develop innovative solutions in meeting these specifications; and

(iv)  asset utilisation. In some instances, private sector providers are motivated to develop opportunities for revenue generation beyond the government payment stream and this may be used in part to reduce the cost of services to government.

PPP projects also deliver the following results on a regular basis:

(i)  focus on service delivery. Allows a sponsoring department, or agency to enter into a long-term contract for services to be delivered when and as required; and

(ii)  predictability of costs and funding. Ensures that whole-of-life costing and budgeting are considered, providing infrastructure and related ancillary services to specification for a significant period, including any growth or upgrade requirements.