3.1.1  PPP Suitability

Projects with a total capital value exceeding $50 million have the potential to result in value for money through PPP delivery. Such capital expenditure should trigger evaluation of PPP as a potential procurement method for the relevant project. The value could include bundling together a small number of similar projects. Projects of less than $50M may also be suitable for PPP delivery if they exhibit sufficient value for money drivers. Projects below the capital expenditure threshold may also have a significant service component and therefore asignificant net present value.

Always consider if there could be merit in bundling into the construction contract asset-related services that will be needed post-construction e.g. cleaning, catering, facilities management, service delivery, operations, maintenance etc. If so, determine if the value for money drivers are present to support PPP delivery.

The following are the key value for money drivers for PPP delivery:

•  complex risk profile and opportunity for risk transfer. More rigorous risk evaluation and transfer to the private sector of those risks it is best able to manage, including those associated with providing the specified services, asset ownership and whole-of-life asset management;

•  whole-of-life costing. Full integration, under the responsibility of one party, of up-front design and construction costs with ongoing service delivery, operational, maintenance and refurbishment costs. This delivers improved efficiency through whole-of-life costing as design and construction become fully integrated up-front with operations and asset management;

•  innovation. As the PPP approach focuses on output specifications, this provides a wider opportunity to use competition as an incentive for private parties to develop innovative solutions in meeting these service specifications;

•  measurable outputs. The nature of the services enables output specifications and a performance-based contract;

•  asset utilisation. Reducing costs to government through potential third-party utilisation and through more efficient design to meet performance (e.g. service delivery) specifications;

•  better integration of design, construction and operational requirements. Ongoing operational, maintenance and refurbishment requirements become a single private party's responsibility for the contract period; and

•  competitive process. A competitive market exists and the use of a competitive process helps to encourage the private party to develop innovative means of service delivery while meeting government cost objectives.