5  Key principles in the application of PPPs

Value for money

Value for money is paramount and achieving the best value for money outcome should be the key consideration at all stages of a project. Value for money is a combination of the service outcome to be delivered by the private sector, together with the degree of risk transfer and financial implications for government. Quantitative factors are tested by comparing the outputs and costs of PPP proposals against a neutral benchmark, called the Public Sector Comparator, which is adjusted for risk (where these risks can be reliably quantified). Just as important are considerations around the qualitative factors such as the impact of design on service provision.

Public Interest

Consideration of public interest requires:

•  ensuring that procuring the project as a PPP is not contrary to the public interest; and

•  after a decision has been made to procure a project as a PPP, ensuring that the procurement process is structured to ensure that the project continues to be in the public interest.  

Each jurisdiction will have its own methods for considering public interest matters.

Risk Allocation

The principle governing risk transfer is one of optimal risk allocation. Risk will be allocated to whoever is best able to manage it, taking into account public interest considerations. Government's preferred allocation of risk is outlined in the National Commercial Principles documents.

Output Oriented

Projects should focus on the specification of what services are to be delivered rather than how they should be delivered in order to maximise the opportunity for innovation. Performance measures should be established to ensure that the required services are delivered in accordance with the output specification.

Transparency

Transparency and openness are important requirements of all government procurement. The use of PPPs should not diminish the availability of information on the use of government resources to Parliaments, taxpayers and other stakeholders. There should be an emphasis on transparency and disclosure of the processes and outcomes, acknowledging the need to protect commercial confidentiality where appropriate.  

Accountability

Agencies are responsible for the delivery of their outputs including where PPPs are used to deliver those outputs. Agencies cannot transfer this accountability to the private sector. The conduct of the public sector should always be such that confidence in the probity of the partnership model and the way in which it is implemented can be maintained at all times.

Engaging the market

Bids will be invited only when it is clear that there is scope for a private proponent to deliver value for money. Projects to be delivered within the Policy must have the government's approval beforethe formal involvement of the private sector.

Implementation of the Policy and Guidelines will be in a professional, fair, equitable and open manner ensuring probity and minimising of tendering costs. Standardised approaches should be used consistently to reduce transaction time and cost.