2.2.1 PPP differences with traditional procurement
Table 1 shows some of the key differences in procurement methodology.
Table 1: Traditional Procurement and PPPs
Government purchases an infrastructure asset | Government purchases infrastructure services |
Short-term design and construction contracts (two to four years) | One long-term contract integrating design, build, finance and maintenance |
Input-based specifications | Output-based specifications |
Government retains whole-of-life asset risk | Private sector retains whole-of-life asset risk |
Payment profile has a spike at the start to pay for capital costs, with low ongoing costs | Payments begin once the asset is commissioned. The payment profile is relatively even, reflecting the level of service provision over the longer term of the contract |
Government is usually liable for construction time and cost overruns | Private contractor is responsible for construction time and cost overruns |
Government operates the facility | Government may or may not operate the facility |
Government manages multiple contracts over the life of the facility | Government manages one contract over the life of the facility |
Often no ongoing performance standards | Performance standards are in place. Payments may be abated if services are not delivered to contractual requirement |
Handover quality less defined | End-of-term handover quality defined |