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Public Private Partnership‘an alternative procurement delivery
model in Defence’
Kitty MarmanidisDirector Public Private Partnerships
Informa National PPP SummitSydney, 4 June 2014
Overview
• Defence PPP Projects – snap shot
• Key Benefits to Government of PPP
• PPP Assessments within Defence
• Range of procurement delivery models
• Value for Money considerations
• Risks
• Key disadvantages of PPPs in the
Defence context
• Defence Key Issues
Australia’s Progress ….. not there yet
Defence PPP Projects – snap shot
Headquarters Joint Operations Command
Approx. $1.4 billion over 30 years
The General John Baker Complex
Headquarters Joint Operations Command
HQJOC Project was the AIPM National Winner of Project Management Achievement
Awards 2009 –Construction/Engineering in
excess of $100 million and ACT winner of Construction &
Engineering >$100 million.
HQJOC Project won the inaugural Infrastructure Partnerships Australia 'Project of the Year'
award for 2009.
SINGLE LEAP
(Single Living Environment and Accommodation Precinct)
Single LEAP Phase 1 - approx. $273m or $680m over 30 years
Single LEAP Phase 2 –accommodation Larrakeyah, NT
Single LEAP Phase 2 –accommodation at Australian
Defence Force Academy, ACT
Canberra Times - photo Scott Shirley
Key Benefits to Government of PPP
Appropriate Risk Allocation
Fixed time and price: construction and operational risks are passed to the private sector
Financing costs reflect the project’s risk: financial risks are passed to the private sector
Financing due diligence reduced risks: public sector service delivery risks are reduced through the use of rigorous project finance due diligence processes
Key Benefits to Government of PPP
Certainty of Service Quality
Maintenance obligations rest with the private sector: private financing ensures secure long term funding streams for maintenance/repair, minimising lifecycle costs and maximising benefits
Certainty of service delivery: the service is provided to the agreed standard and thus consistency of quality is assured
Key Benefits to Government of PPP
Effectiveness and Efficiency
PPPs allow the public sector to focus on core functions
PPPs drive innovation
PPPs are more accountable and transparent
Key Benefits to Government of PPP
Value for Money
Better value for money
Harnessing private sector skills
Public sector does not pay if private sector does not deliver
Better Governance
Approval Processes
Strong project governance
- Project Governance Board
- Project Steering Committee
PPP’s Optimise Risk Transfer
Value
for
Money
Risk Transfer to
Private Sector
Optimal
Value for
Money
PPP Suitability
In accordance with National PP Policy and Guidelines (2008)
Initial PPP Suitability Checklist for Major Capital Facilities (MCF) Projects
Initial PPP Suitability Checklist for Major Capital Equipment (MCE) Projects
Initial PPP Screening PPP is best used where:
• the duration of the project > 15 years
• opportunity for appropriate risk transfer
• feasibility of bundling design, build, operation, support and disposal of the materiel
• there is potential for third party utilisation of the materiel
• a performance based contracting regime
• the ability to specify outputs
• scope for innovation
• high level of private sector interest in the project
Range of procurement delivery models
Acquisition (Build Only)
Acquisition (Design & Build)
Acquisition (Design,
Build,
Operate, Maintain)
Managing Contractor
Early Contractor Involvement
Degree of Private Sector Participation
Leasing
Public Private Partnership
Project Alliancing
Value for Money (VfM)
Current policy is the assessment of VfM is against the Public Sector Comparator (PSC) - VfM is demonstrated because the PPP option costs less than the PSC for the project
Getting the risk allocation right
Ensuring VfM throughout the term of the contract
Risks
Approval Processes
Too much focus on the transaction
Inappropriate risk transfer applied to projects
Finding the Right Projects and gaining support
Not having a pipeline of projects
Capturing Information/Records Management (for the term of projects)
Failure to realise value for money
Key disadvantages of PPPs in the
Defence context
Reduced flexibility to deal with equipment
Reduced flexibility to change requirements over time
Degree of complexity
Longer procurement timetable
Significant higher transaction costs eg internal costs and external advisers fees
Key disadvantages of PPPs in the
Defence context
Availability of internal expertise
Significant consequences of poor contract management
May not be suitable where design riskis significant
Greater Government scrutiny
Defence Key Issues
Military Operations
Development of Project and approvals
Contract Development andManagement
Asset Utilisation
Extent of Risk Transfer
Budgeting for PPPs
Other matters ……
Gaining organisational and stakeholder support
Affordability considerations
PPPs are an alternative, value for moneyprocurement delivery model for Defence
It is the transfer of appropriate risks whencombined with the discipline of privatefinance which makes PPPs a more effectivemodel
Questions ?
Kitty MarmanidisDirector Public Private Partnerships Defence Materiel OrganisationDepartment of DefenceEmail: [email protected]
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