Governments and project financiers may achieve better value for money in adopting alliancing as a form of delivery structure in delivering PPP projects in Australia (rather than the traditional risk transfer methods)

Abstract

The objective of the paper is to test whether governments in Australia and project financiers can achieve better value for money in adopting alliancing as a form of delivery structure in delivering complex PPP infrastructure projects in Australia (rather than the traditional risk transfer methods).

The paper looks at the development of PPPs in Australia (including current approaches by the Commonwealth, State and Territory governments in delivering major social and economic infrastructure projects), and the use of private sector capital and risk allocation patterns in PPP projects. It goes on to analyse the value for money framework used in Australia, which primary focus on the use of the Public Sector Comparator (PSC) model and government's approach on risk transfer (and not necessary optimal risk allocation).

The paper also looks at areas of future research where project sponsors (including governments) and project financiers of major complex projects should be reconsidering their risk management approach towards alliancing projects.

The paper then provides an overview of PPP policies and experiences in Australia and internationally (in particular, the United Kingdom). It discusses the on-ongoing reforms undertaken (which includes reforms to the value for money appraisal process and more direct government participation in the risk management and control of PPP projects) in the United Kingdom and Australia.

The paper provides an overview of relationship contracting (in particular, alJiancing) including the legal conceptual basis, use of price competition and discusses the future way in using alliancing in privately financed projects or PFI PPPs.

The paper then discusses how government can achieve better value for money in adopting relationship contracting or having greater risk sharing in delivering complex PPP projects, recent trends in financing PPPs and greater focus on partnership in delivering projects.

The paper concludes by discussing the survey results from an interview of relevant "players" in government and industry bodies and their advisers to identify the "drivers" and "impediments" using alliancing and other forms of relationship contracting in the delivery of economic and social infrastructure and services.