Results Management for Public Sector
Excellence – Public-Private Partnerships
Singapore
19-23 August 2013
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Agenda
• Background to PPPs in Australia
• The Partnerships Victoria PPP Framework
• The PPP Procurement Process
• Strengths, Weaknesses and Lessons
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Agenda
• Background to PPPs in Australia
• The Partnerships Victoria PPP Framework
• The PPP Procurement Process
• Strengths, Weaknesses and Lessons
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Background – Government and PPPs in Australia
Australia has three levels of government:
• The Federal Government:
• Plays a lead role in national infrastructure policy
• Has published the National PPP Guidelines (based on
previous State Guidelines)
• Six State and two Territory Governments:
• Are responsible for most major infrastructure projects
• Have all signed up to the National PPP Guidelines
• Some States have extensive PPP experience
• Local Governments:
• Are responsible for local infrastructure
• Generally do not enter into PPPs
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
The Australian Context
Australia:
Victoria:
• The sixth-largest nation after
Russia, Canada, China, the
United States and Brazil
• Australia’s smallest mainland
state
• Population: Approx. 23 million
• Population: Approx. 5 million
• Largest share of manufacturing
of any Australian state
Melbourne:
• Australia’s second largest city
(after Sydney)
• Population: Approx. 4 million
• Australia’s largest port
• The world’s most liveable city
(Economist Intelligence Unit)
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Why PPPs have emerged
To attract private sector
investment and “expand
the fiscal space”
To drive efficiency
(PPPs can “deliver
value for money”)
To drive sectoral reform
• In developing and
transition economies,
government budgets
can only meet a
fraction of the
community's
infrastructure needs
• PPPs (particularly in
sectors where user
charging is possible)
can be used to deliver
additional
infrastructure without
calling on government
budgets
• For some projects,
there is an expectation
that PPP delivery
offers opportunities for
private sector
efficiencies and hence
better value for money
than traditional
infrastructure
procurement.
• A reform program that
includes PPP provides
an opportunity to
reconsider the
assignment of sector
roles to remove any
potential conflicts and
to consider a private
entity as a possible
sector participant.
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Agenda
• Background to PPPs in Australia
• The Partnerships Victoria PPP Framework
• The PPP Procurement Process
• Strengths, Weaknesses and Lessons
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Development and Use of the PPP Model in Victoria
1980s/90s: PPP style projects in a number of sectors
1980s: Overriding concern was to achieve off balance sheet
financing
– Avoidance of limits for State borrowings.
– Little risk transferred.
– Financiers’ rate of return assured.
1990s: Belief that increased private sector involvement in
infrastructure services could drive growth and efficiency
– Economic and financial outcomes from these projects were largely
positive.
– However, the quest for maximum risk transfer and private sector
efficiencies led to some projects being unsustainable.
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
A new approach…
“Australia's approach to procuring PPPs changed when
Partnerships Victoria released a policy framework in
2000 which sought to retain core assets and include the
private sector where it could provide value for money and
deliver infrastructure.”
• Inspiratia Market Insight, 7 March 2011
(http://www.inspiratia.com/transport/insight/read/New-South-Wales-/)
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Development and Use of the PPP Model in Victoria
• June 2000: Partnerships Victoria policy introduced
• Provides a framework for integrating private investment into
public infrastructure
• Clear aim of achieving value for money in the public interest
• No presumption that the private sector is more efficient in
building and operating public assets
• Focus on whole of life costing
• Optimal, rather than maximum, risk transfer to the private
sector
• November 2008: Infrastructure Australia policy and
guidance released
• Largely consistent with Partnerships Victoria approach
• Agreed to by all jurisdictions through COAG
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
The current Policy and Guidance Framework
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
The current Policy and Guidance Framework
• The Partnerships Victoria Framework requires
compliance with both:
• the National PPP Policy and PPP Guidelines; and
• the Victorian specific requirements outlined in the
Partnerships Victoria Requirements document and its
annexures.
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Partnerships Victoria is NOT:
•
•
•
•
Another bucket of money
An alternative to the Cabinet funding process
A financial device to get things off the balance sheet
Simply about building things
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Partnerships Victoria – Its role in meeting infrastructure
needs
• Partnerships Victoria delivery does not suit all needs
• Partnerships Victoria is one delivery option – others
include design and construct, project alliances
• Partnerships Victoria is expected to account for around
10% of Victoria’s infrastructure needs
• Applicable to more complex projects where outputs
can be measured, and there is scope for innovation
and whole-of-life efficiencies
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Characteristics of likely PPP candidates:
• Scale: $50-100m + (in some sectors, such as
water/wastewater, projects can be smaller)
• Measurable service outputs
• Non-core services
• Risk transfer
• Long term
• Innovation
• Market appetite
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Recent PPP projects include:
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Value for Money
Victorian Government Purchasing Board guidance:
– Value for money denotes, broadly, a balanced benefit measure
covering quality levels, performance standards, risk exposure,
other policy or special interest measures (e.g. environment
impacts), as well as price. Generally, value for money is
assessed on a ‘whole of life’ or ‘total cost of ownership’ basis,
which includes the transitioning in, contract period and
transitioning out phases of a contractual relationship. It is often
used in the sense of the ‘long term sustainability of value for
money’, denoting that the State focuses on choices that ensure
value for money outcomes are promoted and protected in
successive anticipated contracts.
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
What is “Value for Money”?
Melbourne – Hobart flights, evening of 16 October 2012:
Airline
Airfare
Extras
Convenience
(Arrival Time, PM)
On time Arrivals
(%, May 2012)
Cancellations
(%, May 2012)
Jetstar
$74
$12
9:50
79.4
0.7
Qantas
$122
$0
8:15
88.1
0.7
Virgin
Australia
$104
$12
9:00
85.9
1.3
Value for money cannot be judged on the price of one input!
Data collected 15 July 2012. Sources:
• Prices and arrival times: www.wotflight.com.au
• Extras: Foster Infrastructure estimate
• On time / cancellation performance: www.bitre.gov.au
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Institutional Arrangements
• Projects are a result of an asset requirement identified
by a line agency/department
• This “Client Agency” may engage a separate delivery team
within the same agency, or in another Department (for
example, Major Projects Victoria) to manage the project
delivery process
• All Ministers have power to enter into PPP contracts
• In Victoria, the Treasurer is responsible for PPP policy
• Therefore, a Partnerships Victoria Unit exists within the
Department of Treasury and Finance, managing the
implementation of this policy
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Portfolio Responsibility for Projects
Sample PPP Projects
Responsible Department
New Hospital Projects
Department of Health
EastLink Toll Road
Department of Transport
Southern Cross Station
Waste Water Treatment
Projects
Department of Sustainability and
Environment / Relevant Water Authority
Prisons, Court Buildings
Department of Justice
New Schools
Department of Education and Early
Childhood Development
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Why is the Department of Treasury and Finance
involved?
• PPPs are large and complex contracts that involve
construction and maintenance of infrastructure, but
also have inherent “fiscal risks”
• Long term liabilities
• Contingent liabilities
• Line agencies (for example, a Transport Department)
are focussed on service delivery (such as transport
outcomes) and may be uninterested in fiscal risks
• But the Department of Treasury and Finance is interested
in fiscal risks
• The Department of Treasury and Finance develops
and implements whole of government procurement
and financial management policies
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Partnerships Victoria Unit – Key Roles
Policy Role
• Development of policy
and guidance material:
Project
Tendering
Advisory Role
• Represented on Project Steering Committee and
Working Group
• Process guidance
• Provide expert commercial advice
• Standard commercial
principles
• Ensure policy issues identified / addressed
• Liaison with other
jurisdictions
• Maintain integrity of Partnerships Victoria:
• Policy positions
• Process
• Monitor budgetary issues
• Facilitate Treasurer’s approvals
• Development of policy
and guidance material
Contract
Management
• Effective contract
management
• Provide expert commercial advice
• Ensure policy issues identified / addressed
• Maintain integrity of Partnerships Victoria policy
positions
• Monitor budgetary issues
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Agenda
• Background to PPPs in Australia
• The Partnerships Victoria PPP Framework
• The PPP Procurement Process
• Strengths, Weaknesses and Lessons
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Projects
originate from
a service
need…
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
PPPs are not an end in themselves…
PPP Projects
Service
Outcomes
Schools /
Classrooms
Better Education
Hospitals
Improved Health
Roads
Transport Amenity
It is the service outcomes enabled by the PPPs that are really important…
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
The Service Need – Strategic Assessment
• The strategic assessment identifies the:
–
–
–
–
requirement to meet the identified business needs
anticipated benefits and timelines
alignment with government policy directions
fit with departmental or agency strategic priorities
• Enables government to decide whether it is worth
proceeding either to options analysis or to develop a
business case
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Is this a problem or a solution?
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Proving the Solution – Business Case / Feasibility
Study
• The business case or feasibility study should:
– validate or amend the project assumptions
– clarify the quantitative and qualitative costs, risks and benefits
from a whole-of-life perspective
– provide a project plan that will steer the project’s
implementation
• The business case or feasibility study should enable
government to decide whether the investment should
be funded, taking into consideration:
– The merits of the investment
– The merits of other competing investment proposals
– The available budget
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Business Case – Outcomes
The Business Case enables government to answer three
key questions:
1. Should the project be funded?
–
This is the Investment Decision
2. How should the project be delivered?
–
This is the Procurement Decision
3. What governance arrangements should be put in
place?
–
This is the Governance Decision
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Combining Funding and Financing Alternatives to
Deliver Infrastructure
Funded through
User Charges
Project delivered
by a Government
Business
Enterprise (e.g.
Government
owned Toll Road)
PPP with User
Charges (e.g.
PPP Toll Road)
Government Finance
(for example,
through government
borrowings)
Private Sector
Finance
Traditional
Government
Infrastructure
Delivery (Budget
Sector)
PPP with
Government
Payments
Funded through
Taxes
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Characteristics of likely PPP candidates:
•
Large scale:
•
•
•
•
•
•
•
Minimum size depends on features of the particular
market
Measurable service outputs
Non-core services
Risk transfer
Long term
Innovation
Market appetite
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Selecting a delivery model
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Hypothetical waste treatment project
– Should PPP be a short-listed delivery model?
• Is it large-scale and long-term?
 ($100m plus, long-life asset)
• Are there measurable outputs?
 (Treatment of waste to comply with environmental regulations etc)
• Are there opportunities for risk transfer?
 (Design, construction, operation, incoming waste(?), energy cost(?))
• Is there scope for innovation?
 (Significant scope in design, construction and operation)
• Is there market capability and appetite?
 (Market testing; Private sector delivery and operation of waste
treatment plants has occurred elsewhere)
• Are there non-core services?
 (Operation of the plant)
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
“Validation” of short-listed models – Key Questions
• Does the analysis identify a range of precedent
projects, and review their outcomes, for each of the
short-listed delivery methods?
– Bent Flyvbjerg (global project risk guru) has established that a
“reference class” of past comparable projects is a far better
indicator of outcomes than a project team’s internal work
– Where a precedent project was unsuccessful, was that due to
the wrong choice of delivery method, or other factors?
• Has there been any market sounding in relation to
procurement options?
– While this is not always necessary, it is appropriate where the
project is complex or unusual, or where a particular shortlisted delivery method has not been used for a similar project
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Hypothetical waste treatment project
– Precedents
Yokohama City Waste Treatment Facility
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Hypothetical waste treatment project
– Selecting a delivery model from a shortlist
Objective
PPP
Traditional
Delivery
Budget certainty


Time certainty




Stakeholder
management


Market interest


Total score
11
9
Flexibility for
scope changes
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
•
Delivery models are
qualitatively assessed
against project/procurement
objectives
•
The objectives may be
weighted
•
If the analysis has identified
specific weaknesses of the
preferred model, mitigants
are considered
Peninsula Link (a road PPP) – Issues considered in
making the procurement decision
•
•
•
•
•
•
Risk management
Value for money
Time to deliver
Market interest
Scope changes – the extent to which the
procurement option assists the State in managing
and implementing changes to the functional
requirements of the Project.
Stakeholder management – the extent to which the
procurement option effectively manages the
involvement in the Project of stakeholders, including
road users, residents, community stakeholders,
environmental stakeholders and Government
stakeholders.
Source: Linking Melbourne Authority and Department of Treasury and Finance (Victoria), Peninsula Link Project Summary
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Disraeli Bridges (Canada) – Delivery Options Analysis
PPP
Source: Deloitte & Touche LLP and affiliated entities, Disraeli Bridges Project: Value for Money Report
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Selecting a model from the short-list – Key Questions
• Are the objectives/criteria against which models have
been tested appropriate in view of the project
objectives and expected benefits? Are they consistent
with the basic principles of procurement and
appropriate to identify the best value for money
outcome for government?
• Does the analysis examine both the strengths and
weaknesses of each model against each of the
objectives?
• Is that analysis consistent with information in the
business case – particularly the risk analysis, but also
other sections such as stakeholder analysis?
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Selecting a model from the short-list – Sense check
• There is no single “right” delivery method for any one
project
• Sometimes it is obvious from the start that a particular
method is suitable for a particular project…
• … but it is still worth going through the decision making
process
• Sometimes the choice can be influenced by factors
external to the project
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Preparing for PPP Procurement
• Put together the team
– Government project team
– External technical, commercial and legal advisers
• Establish project governance arrangements
• Finalise procurement strategy
• Develop:
•
•
•
•
•
Technical specification
Services specification
Commercial principles
Payment mechanism
Draft contract
• Establish data room?
• Secure site?
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
The Public Sector Comparator (PSC)
•
•
The PSC represents the
hypothetical risk adjusted
cost of the project if it was
delivered by government (not
as a PPP)
The PSC functions as both
an affordability benchmark for
government, and a tool for
assessing value for money
delivered by PPP bids
Value for Money
Saving
PPP Bid Price
$
Raw Costs
Transferred Risk
•
The PSC is developed by
costing government’s
“reference project” – this
involves extensive input from
design advisers, engineers,
quantity surveyors,
commercial advisers and
maintenance and operations
advisers
Retained Risk
Public Sector
Comparator
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
PPP Bid
Benefits of the Public Sector Comparator
The PSC assists government to:
• Ensure that its liabilities under a PPP contract will be
affordable
• Better understand the project and what it should be
asking for in its tender documentation
• Assess whether PPP bids offer value for money
compared to traditional infrastructure delivery
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Challenges with Public Sector Comparators
• The usefulness of the PSC is heavily dependent upon
government’s ability to accurately cost the project
• The comparison of PPP bids to the PSC is heavily
dependent upon the discount rate used to convert
cash flows to net present values
• The PSC is most applicable to projects in which the
private sector’s revenue consists of payments by
government – it is less applicable to projects in which
the private sector’s revenue consists of user charges
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Use of the PSC in Australia – The New Royal
Children’s Hospital Project – The PSC
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Use of the PSC in Australia – The New Royal
Children’s Hospital Project – Comparison of the
Winning PPP Bid to the PSC
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
The Evolving Use of the PSC
• Traditionally in Australia, the raw PSC has been
disclosed to bidders, but not the risk adjustments
• In Victoria (and New Zealand and Canada),
government is now using a different approach in some
projects:
• The full PSC is disclosed to bidders (that is bidders are told
exactly how much government is willing to spend)
• Government provides bidders with a “scope ladder” –
additional items of scope that can be added to or removed
from the project to enable bidders to match the cost of their
bids to the public sector comparator
• This approach focusses on the “benefit” side of the value
for money equation – government is seeking the greatest
level of benefits possible for a fixed price
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Market engagement
• Often commences informally at the business case
stage
• Is an important input to the procurement strategy
• Occurs formally though a tender process
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Informal market engagement
• A two-way process:
– The market needs to understand the potential future project
pipeline
– Government needs to understand the market’s capability
when evaluating options and developing procurement
strategies
• Requires prudence where projects are not yet
approved by government, and to ensure the process
remains fair
• The process should be carefully planned, with
questions designed to produce meaningful and useful
responses
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Pre-Qualification
Purpose of the pre-qualification stage:
– Formally advise the market of the project and the services that
government seeks
– Communicate proposed timelines, evaluation criteria, hurdles
– Confirm level of market interest
– Allow potential bidders to comment on the proposed project
structure
– Enable government to form a view on bidders’ capability of
delivering against the project objectives
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Pre-Qualification Requirements
• Information requested typically includes:
– Details of consortium members, the nature of their agreement
to bid as a consortium and indicative terms of arrangements of
any SPV
– An overview of bidder’s proposed approach to the project –
only to the extent necessary to:
• Ensure the Project Brief accommodates any particularly
creative solution; and
• Demonstrate the bidder understands government’s
requirements
– Details of bidder’s expertise and financial position
• No details of proposed financing required
• Shortlisting strategy should optimise competitive
outcome in the next stage of the process
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Casey Hospital – Short-listed Bidders
• 10 pre-qualification
responses received
• Short-listed bidders
– Progress Health (ABN-AMRO,
Multiplex Constructions,
Multiplex Asset Management)
– Public Health Infrastructure
Consortium (Babcock &
Brown, Leightons, Honeywell)
– Berwick Partnership
(Deutsche Bank, Theiss,
Tempo)
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
The Bidding Package (Request for Proposals)
The Bidding Package:
– Signals government’s commitment to deliver the project
(subject to hurdles)
– Provides detailed information to bidders
– Sets out requirements on which bidders must respond
– Sets out the basis for bid evaluation
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
The Bidding Package (Request for Proposals)
The Bidding package includes:
– Output specification and associated requirements
– Commercial principles
– Draft contract
Interactive workshops may be used to give tenderers the
opportunity to:
– Discuss the development of their designs and concepts
– Seek clarification and feedback on the output requirements
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
How much information does government request?
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
A Tale of Two PPP Programs…
Australia
Spain
Extensive
documentation required
Bid Requirements
Very brief bid
Extensive quantitative
and qualitative VfM
evaluation
Evaluation
Evaluation focuses on
key financial parameter
Committed financing
required at time of bid
Financing at Bid Stage
Financing sought after
contract is signed
Very high – tens of
Very low – less than one
millions of dollars for toll Private Sector Bid Costs
million dollars for toll
road projects
road projects
Land acquisition by
government, mostly
prior to contract signing
Land Acquisition
Land acquisition by
private party after
contract signing
High
Certainty at Contract
Signing that Project will
be completed
Low
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Value for Money Evaluation
Value for Money
Evaluation
Quantitative
Bid v PSC /
Benchmarks
(Tendered
Services)
Impact on
Core govt
Services
(Non Tendered)
/ Users
Credit
issues
Qualitative
Service
delivery
Sustainability
Tax
Issues
Experience
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Design
amenity
Unquantifiable
risks
From bid evaluation to financial close
• Bids inevitably include departures from the bidding
package
• Options for government may include:
– Appointment of, and negotiation with, a preferred proponent
– Dual negotiations
– A BAFO (Best and Final Offers) process
• Understand the competitive dynamics
• Balancing the efficiency for moving forward to a preferred
proponent and contract execution against the risk of
leaving issues unresolved when the competitive tension
has been lost
• Negotiations can be conducted without compromising
probity
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Once a deal is agreed
• Advisers and project director give formal sign-offs:
– Compliance with policy
– Consistency with business case / project objectives /
commercial principles / risk allocation
– Preferred proponent due diligence
– Value for money
• Report to approval authority
• Contract execution occurs, followed by financial close
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
The Transition out of the Tender Process
• The government project team may disband once
financial close is reached, but the project has really
only just begun
• There must be a structured handover to the contract
management team
• Robust contract management arrangements should be
implemented
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Management of Unsolicited Proposals
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Management of Unsolicited Proposals – Key Questions
• If the project is such a good idea (and good use of
resources), why isn’t it already a priority for
government?
• How can we ensure that the project solution offers a
good outcome for society, not just for the proponent?
• Can we require the initial proponent to compete in an
open tender process for the right to undertake the
project? If so, on what terms?
• What intellectual property does the initial proponent
have in the project concept? How can we protect that
intellectual property?
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
“Government sources confirmed [Industry Funds Management] handed in the unsolicited
bid to the Department of Treasury and Finance in late May in the wake of the state
budget…
…It is believed the government concluded that a competitive tender process would be
more politically palatable.”
- “Bid for east-west project rejected”, The Age, Melbourne, 15 August 2013.
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Transparency and Disclosure
• PPP Contracts are made publicly available on the
internet
• Some commercial in confidence information is redacted
• Government publishes a PPP Project Summary for
each project, containing:
•
•
•
•
•
•
Project background
The value for money outcome
Key commercial features
Risk allocation
The bid evaluation criteria
The public interest test
• Government’s financial statements include disclosure
of all PPP liabilities
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Agenda
• Background to PPPs in Australia
• The Partnerships Victoria PPP Framework
• The PPP Procurement Process
• Strengths, Weaknesses and Lessons
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Key success factors of Victoria’s PPP Program
• Commitment
•
•
The private sector knows that government is serious about
PPPs
We have political champions (who don’t interfere in the
process)
• Consistency / Certainty
•
•
•
We say what we are going to do…
…do it…
…and stick to it
• Commerciality
•
•
Our PPPs make sense for government…
…and also for the private sector.
• Continuous improvement
•
We continually build on lessons from projects and respond to
changes in the PPP environment
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
What we do well
1. Strong policy framework ensures projects are framed as
part of the solution to a well defined problem
2. Robust budgeting processes ensure PPPs are only used
where they offer value for money
–
No “balance sheet bias”
3. Comprehensive focus on value for money through the
tender process
4. Flexible procurement process allows government to
maximise competitive outcomes
5. Extensive interaction with the private sector
6. Transparent disclosure of contracts, project summaries
and accounting impacts
7. Institutional arrangements with checks and balances
8. Effective knowledge management
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
What we find challenging
1. The project pipeline is patchy
•
This limits public and private sector capacity development
2. Government transaction costs are high
•
Consequently, smaller projects cannot be delivered as
PPPs
3. Private sector bid costs are very high
•
These are the price of a comprehensive value for money
focus, but can reduce private sector interest in projects
4. Private sector market constraints exist:
•
•
Two company groups dominate large civil engineering
projects
Four major Australian banks have significant market
influence
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Key Lessons – The PPP Framework
• Victoria has a successful PPP framework
•
But this relies upon Australian procurement rules and market
behaviour, and cannot necessarily be replicated in other
countries
• PPP frameworks must be integrated with broader
government asset investment and budgeting processes
•
•
Understand the problem through robust planning processes
Allocate resources robust budget processes
• Define the roles and responsibilities of the line agency and
budget authority to create checks and balances
• A political champion is important
•
But should not interfere in act outside of agreed project
governance arrangements
• The Public Sector Comparator can assist government to
ensure projects are affordable and assess the value for
money offered by private sector bids
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013
Key Messages – PPP Procurement
• Focus on value for money
• Prequalification is an important process to ensure a
strong competitive field at the bid stage
• The bidding package needs to be carefully thought
through – you get what you ask (and pay) for
• Beware of leaving too much unresolved when a
preferred bidder is appointed… or when a contract is
signed
• Unsolicited proposals require careful management
Results Management for Public Sector Excellence – Public-Private Partnerships | August 2013