International Construction Law Review
IMPROVING THE OUTCOMES OF PUBLIC PRIVATE PARTNERSHIPS—LESSONS FROM AUSTRALIA
OWEN HAYFORD
Partner, Clayton Utz, Sydney
1. INTRODUCTION
Public Private Partnerships, or PPPs, enjoy a good reputation for delivering projects on time and within budget. But there have been some high-profile failures, and they remain controversial.
The Australian PPP model is not without fault. There is room for improvement. This article considers the strengths and weaknesses of the PPP model, perceived and real, and suggests how PPPs can be improved.
2. WHAT ARE PPPs?
The term PPP has been used to describe numerous arrangements in which the public and private sector work together to achieve an outcome. PPPs usually involve private sector finance.1 They also typically involve the bundling of design, construction, maintenance and sometimes other services into a single long-term “whole of life” contract.2 For the purposes of this article, the term PPP will be limited to contractual arrangements that have both of these features.
There are two basic types of PPP in Australia. The first is where the primary revenue stream or source of funding that repays the private sector finance used to build the facility takes the form of a service (or availability) payment from government. The Australian policy guidance calls this a “social infrastructure PPP” because this model is typically used for schools, hospitals, prisons and other “social” (i.e., non-income producing) infrastructure.
The second is where the primary source of funding takes the form of charges paid by the users of the infrastructure, such as tolls paid by the users of a toll road. This is called an “economic infrastructure PPP” because it is typically used for roads, railways and other “economic” (i.e., income-producing) infrastructure.
1 But not always. For example, franchising arrangements like Sydney ferries and Victorian trains and trams are often referred to as PPPs even though they do not involve private sector finance.
2 But again not always. For example, the Sydney Desalination Plant, Brisbane Legacy Way and Chatswood Transport Interchange projects do not involve private sector maintenance.
The International Construction Law Review [2013
458