Public Private Partnerships (PPPs) can refer to many different kinds of relationships between the government and the private sector, but these guidelines use the term to refer to long-term contracts for the delivery of a service, where the provision of the service requires the construction of a facility or asset, or the enhancement of an existing facility. The private sector partner finances and builds the facility, operates it to provide the service and usually transfers control of it to the public sector at the end of the contract. These contracts are sometimes also referred to as concession agreements.
The long-term nature of PPP contracts, the fact that these contracts are usually used for large and often complex projects which individual government agencies will engage in only infrequently, the importance of financing arrangements and the typically large bidding and contracting costs make it desirable to develop specialist expertise to support departments and agencies in the development of PPPs. In New Zealand, this role is played by the National Infrastructure Unit of the Treasury.
It is also desirable to promote a high degree of standardisation, discipline and transparency in the letting of PPP contracts through guidance material for government agencies that might be involved in letting PPPs.
The purpose of this guide is to outline for government agencies, potential bidders and the public the general direction and principles that will be adopted, the processes that are to be followed and the rationale for them. It also provides a framework for assessing whether a PPP is to be preferred over other forms of procurement in any given situation. More detailed guidance will be developed as we gain experience with PPPs, or as particular issues present themselves.
The guide draws on existing publications, including the Auditor-General's 2006 report on the key issues arising from different kinds of partnering arrangements, in particular PPPs1 and is based on guidance endorsed by the Australian Procurement and Construction Council (comprising departments responsible for procurement, construction and asset management policy for the Australian, State and Territory governments and the New Zealand government2) and being applied by all Australian, State and Territory Government agencies.
While the Australian guidance is well-developed and draws on many years of practical experience, there are a number of areas where we believe greater specificity can be provided or where New Zealand's circumstances are different. This guide therefore sets out:
• where the Australian guidance can be followed
• where a different approach should be taken in New Zealand, and
• some additional considerations that should be taken into account when deciding how to apply the guidelines in certain situations.
There are a number of areas where further work is required, including an examination of alternative approaches to documentation and the bidding process in light of Government Procurement Reform and Job Summit actions to make it easier for business to bid for government contracts (the Australian approach to PPPs is characterised by relatively high bidding costs and what appears to be highly complex contractual documentation, compared with what can be observed in South America, Canada and some parts of the United States). There are also questions around the desirability of taking a share in refinancing gains (as this reduces the extent of risk transfer) and what assurances regarding the availability of finance should be required.
These and other issues are currently being examined and will be incorporated in this guidance in future updates. The Government through the National Infrastructure Unit of the Treasury welcomes an ongoing dialogue about how this guidance can be improved.
Finally, readers should note that these guidelines should not be substituted for common sense, judgement and experience. Expert advice should therefore be sought wherever appropriate.
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1 "Achieving public sector outcomes with private sector partners", Office of the Auditor-General, February 2006. http://www.oag.govt.nz/2006/public-private/
2 New Zealand is represented by the Ministry of Economic Development.