Relationshipbased Procurement for the Provision of Infrastructure Peter Davis, Marcus Jefferies and Peter Ward Faculty of engineering and built environment School of architecture and built environment October 2015
Relationship Contracting: A Case Study of the Top Ryde PPP 3 Aim: The specific is to map current approaches to successful risk management of Public-Private Partnerships (PPPs) via a case study project. Critique of the Top Ryde PPP project was performed and the findings will be presented as a case study example.
What is a PPP? 4 PPP stands for Public Private Partnership A PPP is a method of procuring infrastructure that has the following key features: public infrastructure (economic or social) privately finance privately built, (owned) & operated for a fixed term eg. 25yrs core service delivery retained by Government BOOT, BOT & BOO, are precursors to PPPs. Examples of projects include, The Sydney Harbor Tunnel Stadium Australia (2000 Olympic Stadium) Melbourne City Link
Brief History of PPPs in Australia 5 1990s 2001-2006 2006 to date 1990's Victoria gives lead with privatization, outsourcing and BOO & BOOT Projects 1996: National Competition Policy, supported by Competition Principles Agreement endorsed by all Australian governments. 2001: PPP manual Partnerships Victoria released. Other states follow releasing PPP policy documents. 2003: 1st National PPP Forum held; Vic. 'Fitzgerald' review & NSW 'Parry Inquiry released. 2006: NSW Parliamentary Inquiry into Cross City Tunnel & PPPs. 2006: NSW & Victoria announce continued use of PPPs as well as increase use of public debt to meet infrastructure shortfall. 2008: National PPP Guidelines prepared and endorsed by Infrastructure Australia and various State, Territory & Commonwealth Government.
PPP Infrastructure Types 6 Roads Railways Bridges Motorways Tunnels Economic PPPs Social PPPs Hospitals Schools Prisons Public Housing Aged Care Tertiary Education
Social Infrastructure PPPs in Australia 7 The first privately financed social infrastructure project in Australia was Junee Correctional Centre, NSW, in 1993. This was followed by a number of Correctional Centres & Hospitals mainly in Victoria & NSW such as: Women's Correctional Facility, Deer Park Metropolitan Women's Correctional Centre Fullham Rural Men's Prison & Port Phillip Prison Port Macquarie Hospital, Latrobe Mildura Hospital
Criticism of Social Infrastructure PPPs 8 Cost of bid preparation Abandoned projects Bid assessment uncertain lowest price as opposed to best value Restrictive briefs do not encourage innovation from private sector Risk model in PSC is simplistic and out-dated Current PPPs are token partnerships Public Sector must make PPPs more attractive to Private Sector clarify the risk and transfer more responsibility High transaction costs for marginal business opportunity
Generations of Australian PPPs 9 1st Generation Motivation for PPP market driven by the public sector desire to access private capital minimise debt transfer risk Contractor led consortiums, e.g. Thiess, Leighton, Baulderstone 2nd Generation PPP market maturing risk transferred to party that is best able to carry the risk Financier driven consortiums e.g. Westpac, ABN Amro, Macquarie Bank
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Tendering for PPPs 11 Examples of (high) costs incurred during tender bid preparation $2-3million per bidder for NSW schools project with additional $2.5million for State Govt. input. Contract amount $130 million. $6million for Defence Accommodation project. Printing costs alone of tenders $90,000 X 3 = $270,000 Public Sector Comparator (PSC): after analysis of PSC it results in changes in scope of project, not contract value.
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Relationship Contracting: A Case Study of the Top Ryde PPP 13 Objectives: 1. The private sector views PPPs as complex, non-standardised, high level of documentation, inadequate risk transfer and lack of appropriate rewards particularly with regards to the operation of core services. How can a shift be successfully implemented a move towards standardised documentation
Relationship Contracting: A Case Study of the Top Ryde PPP 14 Objectives: 2. PPPs have relatively high bid costs. How can they be minimised/reduced? 3. Difficult to develop true partnerships between the public and the private sectors in bidding risk allocation environments of PPPs as they are frequently adversarial. How can successful relationships be developed and the process value added?
Relationship Contracting: A Case Study of the Top Ryde PPP 15 Objectives: 4. Current PSC model is inaccurate and results in the public sector reducing the project scope before increasing the budget. It does not reflect current costs or the cost of risk transfer to the private sector. How can the benchmarking process be more transparent? 5. Current Government perception of PPPs is based around a private funding for public infrastructure model. PPPs should involve a shift of risk, not funding, and they should motivate all parties to take responsibility for their actions and delivery, making projects more accountable and measurable. How can appropriate risk transfer be facilitated?
Top Ryde PPP 16 Significant upgrade to Australia s first regional shopping centre Mixed use development - retail, commercial, residential, public services $800 million 78,000 m2 Developer signed a 49 by 50 year lease 2007 construction starts 2009 stage 1 opens 2012 centre fully operational 2014 expansion involving 653 apartments added above centre not part of original $800m development
Project Partners 17
Top Ryde PPP: Observations (1) 18 The TRIPARTITE DEED served to clarify the roles and responsibilities of the three key players, City of Ryde, Road Transport Association Bevillesta (developer) The tone of the Tripartite Deed was not adversarial The roles and responsibilities of each party were discussed, agreed formalised at the start of the project
Top Ryde PPP: Observations (2) 19 A 3-LAYER COMMUNICATION MODEL was established and embraced by all the parties to manage the PPP The three levels consist of: Weekly PPP Communication Meetings hosted by the Main Contractor (Lend Lease [BLL]) and attended by CoR, RTA, and other stakeholders i.e. Project Verifier. The meeting served to advise and discuss progress, certification issues, focus points for co-operation, feedback from the local community and communications required with local residents about future work.
Top Ryde PPP: Observations (3) 20 PCG (Project Control Group) Meetings initiated and hosted by CoR weekly as appropriate, bringing together Project managers operating on behalf of the CoR, Developer, MC and RTA to overview general progress, identify and mitigate risks and issues, ensure information flow is timely, agree points of collaboration, resolve contentious issues, defuse potential problems and agree action points for all participants to ensure the project proceeds as smoothly as possible.
Top Ryde PPP: Observations (4) 21 High Level PCG Meetings held every 2-3 months according to need specified in the Tripartite Deed, chaired by an independent person. Given RTA's concurrence role in the PPP, the principal attendees have been the City of Ryde and the Developer. These meetings provided a platform of supervision, negotiation and control of the direction of the PPP works relative to the Voluntary Planning Agreement and design intent of the overall project. This forum is principally concerned with policy, direction and the progress of the project at a strategic level.
Top Ryde PPP: Observations (5) 22 PLANNING APPROVAL was based on the best traffic solution to minimise impact to the community but at the same time maximise customer efficiency. By working with both state and local authorities the best outcomes for all parties were negotiated and long term agreements were developed with the government departments that benefited the centre owner and supplied the community with facilities and infrastructure for the future growth of councils land. The RTA are able to remove all on grade crossings along Devlin street vastly improving travel time on the network through improved signalised junctions.
Top Ryde PPP: Observations (6) 23 The PPP MODEL used a very low risk, maximum outcome solution for local government. In removing all design and maintenance risk the council were able to supply infrastructure to the community at an administration cost. The model also provided a framework for the RTA to work within which streamlined approvals and provides an efficient way of achieving the final infrastructure. Limited involvement of State Govt entities, with emphasis on Local Govt, helped to streamline communication The various stakeholders' project managers have remained unaltered during the project and as a small team remained focused and consistent facilitators for their organisations. Private sector expertise and $ Commitment and work ethic of Council Officers
Conclusions 24 A PPP consortium is a temporary organisation with a complex network of players with competing goals and objectives. Social, as opposed to economic, infrastructure PPPs are complex. Currently there is a lack of transparency, not just the bidding process, but also the identification of risks and opportunity for the broader community and stakeholders. PPPs are part of the procurement landscape for all Aus States and Territories with National Guidelines now used. 3 key aspects of Top Ryde PPP: the delivery model; risk management; and communication within confides of relationship management. Top Ryde is an excellent example of how PPPs can be successful, rewarding and provide value for money to all stakeholders including the broader community.
25 QUESTIONS?