PPP PROJECTS

PPP projects

PPP projects

Abstract

The purpose of this study is to critically specific governance requirements of public-private partnerships (PPPs) with the objective of understanding what constitutes sound governance of these projects and conceptualises a framework that sets out the structure, resources, communication, reporting and monitoring systems that are essential for PPP governance that is consistent with an organisations corporate or strategic vision.

Design/ Research Methodology

General governance requirements are explored through a literature review of corporate, major capital projects and long-term PPP arrangements. These governance requirements have been cross-analysed based on the literature, interviews with senior project managers and investigation of different governance arrangements used on Australian PPP projects.

Findings

It is concluded that the governance principles and requirements for PPPs is similar to best governance practice but there are significant differences between how traditional projects and PPPs are governed due in part to the multiple parties responsible for the governance.

Practical implications

The conceptual framework developed provides a succinct summation of how sound governance would sensibly be shared between the government and the private sector for PPPs.

Originality/value

Three distinct PPP governance models are provided and these are a valuable thought starter for the ongoing management of PPPs. Keywords Governance, Public sector organizations, Private sector organizations, Partnership, Risk management, Australia Paper type Conceptual paper

PPPs and governance

In today's turbulent “post-global financial crisis” environment, governments at any level are confronted with an increasing demand for services but with a significantly diminished revenue base. Public-private partnerships (PPPs) have been used over the past 20-30 years by governments in developed countries to finance infrastructure projects to meet the public's demand for services such as, for example, road systems.

In the last decade, this has been broadened to include capital projects such as schools, water reclamation schemes, hospitals and prisons; infrastructure traditionally managed within government capital budgets. PPP projects in Australia appear to meet the functional requirements as specified by Grimsey and Lewis (2004), and by and large, most of these PPPs have been successfully governed. However, there are examples where the public has been disappointed with the outcomes, resulting in adverse publicity for government and commercial losses for the private industry participants. For example:

The Sydney Cross City Tunnel (NSW Auditor General, 2006), due to inadequate traffic forecasting.

Southern Cross Station in Melbourne, Victoria (Duffield and Regan, 2004), due to construction delays caused by interface risks materialising. The private sector did not meet their expected construction cost budget.

City Link toll road, Melbourne, Victoria (Maclellan, 2010) - due to the requirement for remedial work on a leaking tunnel.

Southbank - Technical College and School (Allens Arthur Robinson, 2005) which experienced lengthy delays in construction.

A PPP can be defined as a long-term contract based on service outputs where there is significant risk transfer to the private sector. Typically, these long-term contract obligations involve design, major procurement, operation of a facility and/or maintenance along with the provision of significant private finance (UNECE, 2008). Key characteristics include:

long-term (often about 30 years) service provision; ...