PSCs for Social Infrastructure

PSCs for social infrastructure are calculated as the estimated NPV of a project's cash flows based on traditional infrastructure procurement and whole-of-life operational and maintenance costs. This is because revenue derived from social infrastructure is primarily (if not completely) sourced from Government, through availability based payment mechanisms. The PSC for social infrastructure projects are cost-driven, and Government generally retains most, if not all, of the demand risk.

The cash flows for social infrastructure in the PSC will include three core components:

•  the base costs of delivering the services specified in the project brief based on traditional delivery through a general government agency;

•  a competitive neutrality adjustment (if applicable), covering any expenditure-based State and Local Government taxes, fees and charges that the agency is not required to make by virtue of its Government-owned status; and

•  an estimate of the expected cost of risks that could potentially crystallise over the life of the project. The PSC should be able to distinguish between the expected cost of risks that would be retained by the Government and those that would be transferred to the private sector.

The National Guidelines outline the detailed methodology to determine the discount rates for the PSC and to evaluate PPP Bids for social infrastructure PPPs.