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Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
Jason Loos
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Jason Loos

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A structural analysis of Victoria’s successful PPP policy framework

A structural analysis of Victoria’s successful PPP policy framework

Published in: News & Politics
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  • 1. A structural analysis of Victoria’s successful PPP policy framework PPP Summit, Melbourne, May 2011 Jason Loos, Director, Partnerships Victoria Department of Treasury and FinanceAgenda1. National context2. Partnerships Victoria’s approach to PPPs3. Project examples4. Future directions for Partnerships Victoria 1
  • 2. 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 managementNational dialogue – governance structure Ministerial COAG Council of Treasurers COAG Infrastructure Heads ATC Infrastructure Australia of Working Group Council Treasury PPP Infrastructure National Sub-Group Australia PPP Working Group All jurisdictions All jurisdictions Same people 2
  • 3. 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 CentreAgenda1. National context2. Partnerships Victoria’s approach to PPPs3. Project examples4. Future directions for Partnerships Victoria 3
  • 4. 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 infrastructureVictorian 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 4
  • 5. Victorian context - annual capital spend $ billion 7 6 5 4 3 2 1 0 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 Net purchases of fixed assets Total Commonwealth funding towards fiscal stimulus and one-offs Source: Department of Treasury & FinanceVictorian context - role of DTF’s Commercial Division Department of Treasury and Finance Infrastructure Policy Commercial Advisory Advice and Review Services High Value High Risk Commercial Division Gateway Unit Alliancing Unit Partnerships Victoria PPP Training PPP Guidance PPP Policy PPP Projects Contract Manager Forums 5
  • 6. 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 modelVictoria’s approach to PPPs - lessons• Early experience led to policy developments to improveprocess • 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 6
  • 7. 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 procurementdecisionAgenda1. National context2. Partnerships Victoria’s approach to PPPs3. Project examples4. Future directions for Partnerships Victoria 7
  • 8. Desalination plant – April 2011Artist impression – impression Desalination plant 8
  • 9. Victoria’s approach to PPPs – Desalination project• Despite some media comment – there is no state costblow out • PPP fee for service model• Nominal costs released in February 2011 are the sameas previously disclosed by the Auditor General in 2010• These costs equate to the previously disclosed NPVfigure (in November 2009)• Leighton’s write down due to productivity and weather • PPP’s allocate these risks to the consortiumVictoria’s approach to PPPs – Desalination project• Remains on schedule for completion and delivery June2012 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 9
  • 10. Victoria’s approach to PPPs – Royal Children’s Hospital Pre-constructionDuring construction 10
  • 11. CurrentVictoria’s approach to PPPs – Royal Children’s HospitalValue for moneyPSC $1.016b -v- PPP $946m NPV = 7% saving• Design innovation – world class design, park integrationand outstanding in-patient unit design (eg flexibleconfiguration)• Enhanced ESD outcomes – 5 star rating• Additional area, including shell space for additional 30bed ward• Significantly expanded retail facilities and staffamenities (inc state upside) 11
  • 12. Royal Children’s Hospital – current status• Project is on time and on budget. (Total variationsapprox. 0.6% of D&C cost)• Construction largely complete (some internal fit out)• Currently focussed on finalisation of FF&E procurementand 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 2011Royal Children’s Hospital – lessons for future projects• Biggest challenge, and most critical success factor, is thedevelopment of a quality brief (functional, architectural,FF&E)• Stakeholder management• Design development – 1,000+ user group meetings. Theability to manage users, optimise the design, and nottrigger material cost variations• ICT – extremely complex, difficult to brief, difficult tounderstand, constantly changing 12
  • 13. Agenda1. National context2. Partnerships Victoria’s approach to PPPs3. Project examples4. Future directions for Partnerships VictoriaVictoria’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 recentoutcomes• Desire to see future processes as two stage not threestage – reduce occurrence of BAFO 13
  • 14. Victoria’s approach to PPPs – future directionProposed 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 operationsVictoria’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 materialswith recent updates • Refinancing • Performance regimes (KPIs) • End of service arrangements • Contract management during construction • Modifications 14
  • 15. 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 jason.loos@dtf.vic.gov.au www.partnerships.vic.gov.au www.infrastructureaustralia.gov.au 15

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