During 2000, the Bracks Labor State Government established Partnerships Victoria, an adaptation of the existing PPP framework favoured by the State (Partnerships Victoria 2006a: p.4). This new program was developed as part of the Government's commitment to build world-class infrastructure across Victoria (Brumby 2004: p.2) with an aim to become a yardstick for PPP policy development and implementation (Brumby 2004: p.1; The World Bank 2007: p.52), both within Australia (Brumby 2003: p.10) and internationally (Treasurer of Victoria 2003).
The Partnerships Victoria policy applies to the provision of public infrastructure and related services (Partnerships Victoria 2006a: p.4) where the present value of Government and / or consumer payments amounts to more than $10 million (Partnerships Victoria 2006b: p.4). All proposed projects must pass a public interest test (the PSC) (Department of Treasury and Finance 2007a) which in this jurisdiction focuses on quality, quantity and timeframe outputs (Partnerships Victoria 2006a: p.4).
Although there is no single preferred form for PPPs, most share a number of common characteristics (Partnerships Victoria 2006b: p.5). These include:
- Risk transfer. There should be clear allocation of risk with appropriate penalty clauses (Partnerships Victoria 2006b: p.5). For pricing and management reasons, risk is assigned to the party considered to be best placed to manage and control it at least cost (Partnerships Victoria 2006a: p.11; Department of Treasury and Finance 2007a).
- Governance and accountability. Full accountability of the private party to government is to be achieved through well defined governance structures that include clarifying key roles and responsibilities, risk and evaluation frameworks (Partnerships Victoria 2006b: p.5; Partnerships Victoria 2006a: p.12).
- Performance standards. A specification of flexible, measurable and practical standards should be put in place. These standards incorporate Key Performance Indicators (KPIs) that are linked to incentives for meeting or exceeding targets (Partnerships Victoria 2006b: p.5; Partnerships Victoria 2006a: p.11).
- Payment structure. Where relevant, payment (by instalments) should be linked to successful delivery of services (Partnerships Victoria 2006b: p.5). Payments can be adjusted if performance standards are not met, and new controls put in place (Partnerships Victoria 2006a: p.11).
- Performance monitoring. Arrangements should define responsibilities of government with respect to monitoring outcomes (Partnerships Victoria 2006b: p.5) and ensuring a sufficient level of performance data is available in conjunction with the monitoring of KPIs (Partnerships Victoria 2006a: p.11).
The purchasing of services should therefore give Government a degree of strategic flexibility whilst retaining control over performance deliverables (Partnerships Victoria 2006a: p.4), improving the likelihood that sought after VfM outcomes are obtained. Moreover, and at a theoretical level, the best VfM outcomes occur when there is the ideal allocation of risk between the public and private partners (English 2007), and at a more practical level, it arises from significant and complex capital projects where there are opportunities for innovation and risk transfer (Brumby 2004: p.4).
To date, PPP delivered in Victoria have ranged from Social Infrastructure projects including correctional facilities and hospitals (such as the new Royal Children's Hospital project), to economic projects involving transport infrastructure (Partnerships Victoria 2006a: p.9) such as the EastLink toll road.