A PPP can broadly be defined as a long-term arrangement between the public and private sector for the development, delivery, operations, maintenance, and financing of service enabling public infrastructure. Depending on the sector and type of PPP model chosen after an assessment of all the options, the revenue source for the private sector could be solely a regular payment by the Government or include some alternative sources of revenue such as user charges. Traditionally, the key types of PPPs fall into the following categories:
• Availability PPP, in which the source of payment from Government to the private sector for the development, operations and maintenance, and continued availability of an asset is in the form of a service payment. Availability PPPs have most commonly been used to deliver social infrastructure in the health, education and justice sectors. Under an Availability PPP, the Government pays the private party a service fee for the availability of the asset and services associated with that infrastructure.
• User-charge PPP, in which the primary revenue stream to the private sector is in the form of user fees, and the private party bears demand risk. User charge PPPs, often termed Economic Infrastructure PPPs, are commercially viable (stand-alone) projects with limited financial support or contribution required from Government and may involve economic infrastructure such as toll roads and regulated water assets. The Regulated Asset Base Model (RAB Model) will also fall under this category of PPP (e.g. Thames Tideway Tunnel in the UK).
Modern PPPs are often bespoke and there can be variations to these models, particularly in the case of User-charge PPPs and the RAB model. In all cases, Responsible Agencies must consult with NSW Treasury on the approach to the model and the mechanics to ultimately assess the PPP project for value for money.
PPPs usually have the following principal features:
1. Design and construction of public service-enabling infrastructure assets through public and/or private sector financing
2. Engaging the private sector for a specified period for the delivery of related services through the operation or management of services; and
3. Contribution by the NSW Government through land, capital works, availability payments, other payments, risk sharing, revenue diversion or other supporting mechanisms
Any 'related services' contracted to the private sector should be determined on a per project basis at the early planning stage of each infrastructure project.
In New South Wales, a PPP is likely to meet the definition of a financial arrangement as defined in section 6.7 of the Government Sector Finance Act 2018 (GSF Act); in all cases a Joint Venture Arrangement (JVA) and in most other cases a Joint Financing Arrangement (JFA), defined in sections 6.11 and 6.12 respectively of the GSF Act. A separate statutory approval from the Treasurer2 is required to enter into a PPP, in addition to the project approval from Cabinet.
A PPP project procured through an unsolicited proposal process must also comply with the Unsolicited Proposals: Guide for Submission and Assessment3 (the Unsolicited Proposals Guide).
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2 See Government Sector Finance Act 2018 (NSW) (GSF Act), particularly Part 6 Division 6.2 section 6.11. (meaning of joint financing arrangement).
3 Available at https://www.nsw.gov.au/contact-us/unsolicited-proposals/.