jason loos
DESCRIPTION
A structural analysis of Victoria’s successful PPP policy frameworkTRANSCRIPT
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A structural analysis of Victoria’s successful PPP
policy framework
PPP Summit, Melbourne, May 2011
Jason Loos, Director, Partnerships Victoria
Department of Treasury and Finance
Agenda
1. National context
2. Partnerships Victoria’s approach to PPPs
3. Project examples
4. Future directions for Partnerships Victoria
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National context
• Development of a national approach
• COAG objective of harmonisation and consistent approach
• 2008-09 National policy and guidelines for PPPs
• 2011 National policy and guidelines for Alliancing
• 2011-2012 National principles for D&C contracting
• Role of Infrastructure Australia
• National infrastructure planning and project funding
• Ongoing reform in conjunction with jurisdictions
• Victorian framework and specific requirements
• Consistent approach with national settings
• Specific detail and fill gaps such as contract management
National dialogue – governance structure
COAG
Infrastructure
Working Group
Infrastructure
Australia
Council
Heads
of
Treasury
PPP
Sub-Group
Infrastructure
AustraliaNational
PPP Working
Group
COAG
Ministerial
Council
of Treasurers
ATC
All jurisdictions All jurisdictions
Same people
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National and State joint funding approach
• Joint funding approach to infrastructure
• Specific programs for roads, schools, public housing
• Disaster relief
• Building Australia Fund / Infrastructure Australia
• Prioritisation and planning
• Regional Rail Link
• Melbourne Metro
• PPP doesn’t preclude joint funding
• Victorian Comprehensive Cancer Centre
Agenda
1. National context
2. Partnerships Victoria’s approach to PPPs
3. Project examples
4. Future directions for Partnerships Victoria
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Victorian context
• New government
• Baillieu government has introduced new agenda / policies
• Undertaken a number of reviews of infrastructure projects
• Introduced new High Value High Risk framework
• Independent Review of State Finances –April 2011
• Financial position unsustainable in medium term
• Not well placed to absorb another material financial shock
• Current level of net infrastructure investment is insufficient
• Second IRSF report to include review of service delivery and
infrastructure
Victorian context - New asset funding 2011-12 Budget
$ million
2011-12 TEI
Budget
Business and Innovation 0.1 0.1
Education and Early Childhood Development 99.8 243.0
Health 93.5 508.6
Human Services 1.7 2.0
Justice 134.7 162.1
Planning and Community Development 13.9 13.9
Premier and Cabinet 10.0 20.0
Primary Industries .. ..
Sustainability and Environment 9.7 9.7
Transport 150.0 609.5
Treasury and Finance .. ..
Parliament 4.0 4.0
Government-wide 79.0 97.5
Total 2011-12 Budget asset funding 596.4 1 670.5
Source: Department of Treasury & Finance
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Victorian context - annual capital spend
0
1
2
3
4
5
6
7
2004-05 2006-07 2008-09 2010-11 2012-13 2014-15
$ billion
Net purchases of fixed assets Total Commonwealth funding towards fiscal stimulus and 'one-offs'
Source: Department of Treasury & Finance
Victorian context - role of DTF’s Commercial Division
Partnerships Victoria
PPP Guidance
PPP Policy
Contract Manager
Forums
PPP Projects
PPP Training
Gateway Unit Alliancing Unit
Commercial Advisory
ServicesCommercial
Division
Infrastructure Policy
Advice and Review
High Value High Risk
Department of Treasury and Finance
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Victoria’s approach to PPPs - successes
• Market confidence has been established through:
• Consistent approach
• Rigorous processes and benchmarks
• Regular pipeline of projects
• Departmental confidence has been developed through:
• Great results in design and innovation
• Single interface with provider
• Strong focus on contract management
Continuous improvement to the model
Victoria’s approach to PPPs - lessons
• Early experience led to policy developments to improve
process
• Importance of early market engagement
• Standard commercial principles to guide contract
- consistent principles combined with latest contract positions
• Interactive tender process
- greater clarity of RFP and design/functional requirements
• Release of raw PSC cost
• PSC quality assurance review
- improved last minute review and sign-off procedures
• KPI improvements adopted
-e.g. EastLink reviews adopted for Peninsula Link project
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Victoria’s approach to PPPs - lessons
• PPP model flexibility
• Peninsula Link availability model
• GFC related clauses for some projects
• Flexibility demonstrated but no major/material changes
• Separation of investment decision and procurement
decision
Agenda
1. National context
2. Partnerships Victoria’s approach to PPPs
3. Project examples
4. Future directions for Partnerships Victoria
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Desalination plant – April 2011
Artist impressionDesalination plant – impression
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Victoria’s approach to PPPs – Desalination project
• Despite some media comment – there is no state cost blow out
• PPP fee for service model
• Nominal costs released in February 2011 are the same as previously disclosed by the Auditor General in 2010
• These costs equate to the previously disclosed NPV figure (in November 2009)
• Leighton’s write down due to productivity and weather
• PPP’s allocate these risks to the consortium
Victoria’s approach to PPPs – Desalination project
• Remains on schedule for completion and delivery June
2012 as per contract.
• AquaSure will not be paid until water can be delivered
• State has flexibility to order water from 0 to 150GL per
annum in set block increments
• Payment mechanism
- water security (availability) payment
- water usage payment
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Victoria’s approach to PPPs – Royal Children’s Hospital
Pre-construction
During construction
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Current
Victoria’s approach to PPPs – Royal Children’s Hospital
Value for money
PSC $1.016b -v- PPP $946m NPV = 7% saving
• Design innovation – world class design, park integration
and outstanding in-patient unit design (eg flexible
configuration)
• Enhanced ESD outcomes – 5 star rating
• Additional area, including shell space for additional 30
bed ward
• Significantly expanded retail facilities and staff
amenities (inc state upside)
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Royal Children’s Hospital – current status
• Project is on time and on budget. (Total variations
approx. 0.6% of D&C cost)
• Construction largely complete (some internal fit out)
• Currently focussed on finalisation of FF&E procurement
and detailed transition planning
• Contractual completion dates:•21 September 2011 – Technical Completion
•22 December 2011 – Final Completion (commencement of 25
year Operating Phase)
• Proposed date for patient move – 22 November 2011
Royal Children’s Hospital – lessons for future projects
• Biggest challenge, and most critical success factor, is the
development of a quality brief (functional, architectural,
FF&E)
• Stakeholder management
• Design development – 1,000+ user group meetings. The
ability to manage users, optimise the design, and not
trigger material cost variations
• ICT – extremely complex, difficult to brief, difficult to
understand, constantly changing
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Agenda
1. National context
2. Partnerships Victoria’s approach to PPPs
3. Project examples
4. Future directions for Partnerships Victoria
Victoria’s approach to PPPs – future direction
• Improvements to the model to address bid costs
• EOI standardisation
• Review of information required in competitive bids versus
preferred bidder stage
• Review level of design requirements
• Contract departures versus mark-up
• Review of commercial principles to reflect recent
outcomes
• Desire to see future processes as two stage not three
stage – reduce occurrence of BAFO
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Victoria’s approach to PPPs – future direction
Proposed modifications to PV model
• Expand to full service PPPs• Increased ancillary services and/or full service PPP models
• Streamlined• Tailor model to suit smaller / less complex infrastructure assets
• Network PPPs • Private sector contracted to deliver, upgrade & maintain a network asset
• Increase disclosure requirements • Additional project summary information and ongoing service payment details throughout operations
Victoria’s approach to PPPs – future direction
• Emphasis on contract management
• Necessary to capture value over contract term
• PV pro-actively assist Contract Managers
• Project specific governance arrangements
• Facilitation of Contract Management training and forums
• Renewing Contract Management guidance materials with recent updates
• Refinancing
• Performance regimes (KPIs)
• End of service arrangements
• Contract management during construction
• Modifications
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Victoria’s approach to PPPs – future direction
• Pipeline of projects
• Aim to have a consistent number of projects in pipeline to
attract investment and minimise transaction costs
• Future opportunities
• Range of projects under development
- Bendigo hospital - Exhibition Centre Expansion
- New prisons - Telecommunications
- Schools - Large transport projects
- Social housing
• Working hard toward a successful outcome on VCCC
Questions?
Jason Loos, Director, Partnerships Victoria
9651 2699 [email protected]
www.partnerships.vic.gov.au
www.infrastructureaustralia.gov.au