On time PPPs still more conventional than government procurement

Public-private partnerships (PPPs), which account for 10 per cent of Australia’s infrastructure projects, have made headlines with $440 million worth of major cost blowouts and delays, yet many argue they are still value for money. 

The success of PPPs was called into question this week when Downer EDI announced a second cost blowout, of $250m, to its NSW Waratah train project.

However, Infrastructure Partnerships Australia chief executive Brendan Lyon said the PPP model would still be supported.

"There has been a range of studies done, based in Australia and around the world, that have looked at their cost and time performance and every single study has found quite comprehensively that the public-private partnerships have a lot to offer taxpayers and governments," he said.

Allens Arthur Robinson partner Phillip Cornwell said PPPs provided value for money, because the private sector was generally more efficient at delivering projects.

"There is fierce competition among the private sector to win PPP projects, which helps to ensure that the state gets value for money," he said.

"There have been several studies done that have shown, time and again, that the on-time completion rate of PPPs is way ahead of more conventional government procurement."

Mr Cornwell said all construction companies had to be sensitive about risk, and the tension with PPPs was that they were a competitive process, so the private sector did not always get it right.

"We have seen some problems in the development phase of some PPPs, but as a general rule the problems have been faced by the private sector builder rather than the government granter of the concession," he said.

The market severely punished Downer for the Waratah blowouts, with its shares down 20 per cent on Thursday, but Mr Lyon said the PPP model meant taxpayers were not affected by the overruns.

"Under a traditional model, there would be no accountability for the project running late. Under a PPP, the risk has been transferred away from taxpayers."

With a few tweaks to some models and the evolution of others, Mr Lyon said, PPPs would continue to be the most efficient model to harness private capital and innovation.

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