PPPs can constrain flexibility of future public policy decision making. This is particularly so with user-charge PPPs.
For example, the existing Sydney toll road concessions are an impediment to the implementation of a consistent network wide road-user charging policy across the Sydney orbital network (let alone the broader Sydney or NSW road network), as any changes to the tolling arrangements for those parts of the orbital network operated by existing concessionaires require their agreement. Those existing concession agreements also contain provisions which can require the government to compensate the concessionaire for the loss of toll revenue associated with certain transport policy decisions, such as the development of alternative roads or transport options which take traffic away from the toll road.
Governments should avoid making contractual promises that fetter the ability of future governments to implement their policies, as such promises are unenforceable under Australian law. Rather, it is helpful for PPP contracts to reflect the legal position by expressly stating that they do not affect the ability of the government of the day to implement its policies. It is, however, appropriate for a PPP contract to:
• record any agreed assumptions as to future government actions which underpin the private sector's investment in the project; and
• require government to compensate the SPV if future government actions depart from the agreed assumptions and this adversely affects the SPV.