A Public Private Partnership (PPP) is a legally binding contract between government and business for the provision of assets and the delivery of services that allocates responsibilities and business risk among the various partners. Historically, they have a strong record of delivering on time or ahead of time, and to budget.
As PPPs are becoming more widely used, it is imperative that practitioners understand this procurement option, be familiar with the requirements of it, and be conversant with the draft standard contract. Recently, Resolve Group’s Nigel Griffith attended a course in Public Private Partnerships in New Zealand. PPPs involving central government are overseen by the National Infrastructure Unit (NIU) of the Treasury. The NIU is the focal point for economic and financial assessment and advice on all such PPPs and ensures application of the NIU Guidelines. A copy of the draft standard contract is available on the NIU website.
The Treasury approach to PPPs is that performance regimes must be better than the public sector can provide, the project must be of sufficient scale (high up-front costs of between $50m – $100m), the cost of the project cannot be greater than the public sector comparator (PSC), and the required timeframe for service delivery needs to be less than 2-5 years. The project interface complexity has to be reviewed (how hard is it?), as does market capability (can strong legal, financial teams be raised?). If legislative change is required, it needs to be factored in.
Treasury looks for opportunities for innovation in asset design and to improve whole-of-life asset management/costing, innovation in service delivery arising from the assets, transfer of risk, and potentially bundled services.
Nigel has written a clear and comprehensive overview of this procurement method as a resource for all Resolve Group staff, and has also made it available for you to download in PDF form here: PPP Presentation – Dec 2012.