© The Treasury

The Role of Public Private

Partnerships in New Zealand

Infrastructure Dan Marshall

Senior Advisor, PPP Programme 2 April 2014

© The Treasury

Outline

First Principles: The role of PPP in New

Zealand infrastructure

Reflections on the first three years – what

we have learned

Looking forward

2

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First Principles

PPP is about: better outcomes

Enhanced levels and quality of service for an

equivalent cost to that of the public sector

Performance regimes that require levels of

performance higher than the public sector

3

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First Principles

PPP is about: paying for performance

Absolute alignment of focus on outcomes

Unitary Charge 100% at risk

4

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First Principles

PPP is about: a catalyst for change

Improving how we think about service delivery

Driving continuous improvement

Promoting wider network implementation

5

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First Principles

PPP is about: asset design and whole of

life asset management

Outcome driven asset design

Historic procurement – a race to the bottom

Long-term perspective – recognising the future

cost of today’s decisions

6

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First Principles

PPP is about: innovation in services

delivered from assets

Outcome driven service delivery and asset

design

International best practice

Focus on operations and service models

7

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First Principles

PPP is about: real risk transfer

Identification and recognition of project risk

Allocation of risk to appropriate party

Development of risk management processes

8

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First Principles

PPP is not about:

off balance sheet funding

lowest cost procurement

solving procurement process problems

9

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Reflecting: PPP - The Early Years

5

10

projects to market

2 projects banked

3 versions of the standard form

Project Agreement released

$1.8b worth of infrastructure under PPP

procurement in New Zealand

~

2 public binding rulings

obtained

© The Treasury

Reflecting: PPP - The Early Years

5

11

projects to market

2 projects banked

3 versions of the standard form

Project Agreement released

$1.8b worth of infrastructure under PPP

procurement in New Zealand

~

2 public binding rulings

obtained

$220b investment in infrastructure

in New Zealand

© The Treasury

Reflecting: A Client Agency Perspective

“ A flagship project for the Department, and very important

for our goals of reducing reoffending, lifting overall

performance across the Department and ensuring better

public value ” Ray Smith

Chief Executive – Department of Corrections

12

“ [PPP] will allow the NZ Transport Agency to establish a

performance-based contract based on very specific

service, quality and value-for-money outcomes.” Geoff Dangerfield

Chief Executive – NZ Transport Agency

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Reflecting: A Client Agency Perspective

“ At Hobsonville Point, we will be creating a school that

allows for students to become the best they can be in all

areas of development through strong relationships,

shared learning design and high expectations of our

whole community.” Daniel Birch

Foundation Principal – Hobsonville Point Primary

13

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Reflecting: A Client Agency Perspective

14

“ PPP opens the door for private sector innovations that are

not always achievable under traditional public sector

procurement methods, and today’s decision gives us the

certainty we need to move ahead and deliver the

important economic and safety benefits of this project.”

Geoff Dangerfield

Chief Executive – NZ Transport Agency

© The Treasury

Reflecting: A Client Agency Perspective

15

“ It soon became clear to me that the project had been

designed to encourage collaboration, and provide the

private sector with the freedom and incentives needed to

deliver different and innovative solutions ”

Ray Smith

Chief Executive – Department of Corrections

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Reflecting: Lessons learned

We can close deals with outcome based

performance regimes

It is the outcomes that count

A pipeline can be useful - and a problem

16

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Reflecting: Lessons learned

Whole of life analysis adds value

Process clarity and understanding is

crucial

How we engage is critical

17

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Currently: we’re thinking about

Depth of the construction market

Ensuring lessons learned are captured and

applied

Management of projects post financial close

The finance market

18

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Currently: we’re thinking about

How we ensure network wide application of

innovation

How we optimise engagement with the

market

How we reduce uncertainty and complexity

for the private sector

19

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Currently: we’re thinking about

The application of PPP principles more

broadly

The scope for private sector involvement in

non-PPP infrastructure projects

Ensuring the New Zealand PPP model is

well understood

20

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The future: PPP in New Zealand

Proving PPP – entering the operating phase

The maturing of the New Zealand model

and market

A clear and present pipeline

The promised guidance material

21

© The Treasury

The future: PPP in New Zealand

In procurement: – NZ Transport Agency (Transmission Gully)

– Ministry of Education (4 new schools)

– Department of Corrections (Auckland Prison)

Business case: – NZ Transport Agency

Of interest: – Ministry of Health

– Canterbury Earthquake Recovery Authority 22

© The Treasury 23

“ When you consider the New Zealand PPP model,

fundamentally it has service outcomes and whole

if life considerations at its core – it is not merely

about tricky financing or clever contracting”