Australian governments face an ever growing tension
between demand for more and better public infrastructure and
increasing fiscal constraints. The resulting 'infrastructure
gap' means governments must look for new ways to deliver
priority infrastructure which will maximise value for money
To date, public private partnerships (PPPs) have
predominantly been used to deliver single-asset major
infrastructure projects, such as a tollroad or
However, by 'bundling' multiple assets into a
single project, governments can also use the PPP model to deliver
smaller-scale assets which, on their own, have traditionally been
considered too small to provide value for money as a
THE DEMAND FOR SMALL-SCALE INFRASTRUCTURE
Discussion on the infrastructure gap has focussed on the need
for large-scale projects such as roads, rail and ports.
However, governments are also under pressure to deliver smaller,
but no less important, local infrastructure such as schools, police
and fire stations, libraries and leisure facilities.
In addition, governments need to fund the ongoing cost of
maintaining and upgrading existing assets such as local roads,
bridges, water, sewage and lighting infrastructure.
The benefits of delivering (and maintaining) infrastructure as a
PPP, including access to private sector funding and the increased
efficiencies provided by private sector involvement in project
delivery, are well documented.
However, a PPP also carries considerable transaction and
financing costs. Critically, those costs do not necessarily
decrease simply because the asset being delivered is smaller in
size or value.
Individually, small-scale assets are therefore unlikely to
achieve sufficient value for money outcomes if delivered as a PPP.
However, the use of multi-asset or 'bundled' PPPs provides
a potential means of overcoming this.
A POTENTIAL SOLUTION
'Bundling' essentially involves the consolidation of a
number of smaller assets into a single PPP project.
A private sector entity may be engaged by government to design,
construct, operate and/or maintain those assets under a single
The concept of bundling is not new. Both in Australia and
internationally, for example, the use of multi-asset PPPs to
deliver new schools projects is relatively well established.
However, with limited exceptions, the use of multi-asset PPPs has
not yet been expanded to encompass other small-scale asset
THE BENEFITS OF BUNDLING
Innovation and efficiency – The delivery
of small-scale assets as a single PPP project will enable
governments to access the benefits traditionally associated with
innovative design solutions which include input from the
private sector entity that will be responsible for operating the
a focus on whole-of-life asset cost and performance;
greater incentives to deliver the project on time and within
more efficient service delivery, by linking the private
sector's payment entitlement to the achievement of specified
The economies of scale gained by engaging a single private
sector entity to deliver multiple assets may also provide cost
savings to government.
More efficient procurement and contract
administration – Delivering multiple assets as a
single project will enable governments to:
procure a number of smaller assets through a single,
large-scale procurement process, thus minimising transaction costs;
deliver multiple assets under a single contract with a
consistent risk allocation, enabling more efficient contract
administration and allocation of resources.
Access to broader markets – A single,
large-scale project is also more likely to attract interest from
experienced market participants than a series of smaller projects
to deliver individual assets.
The potential applications of the multi-asset PPP model are
Multi-asset PPPs are now being used in the UK and United States
to upgrade, replace and maintain existing civil infrastructure such
as street lighting and bridges.
Under this approach, a private sector party is engaged under a
single contract to upgrade or replace a large number of assets
within a geographical area, and is then paid to maintain and repair
that upgraded infrastructure over a concession period.
By 'bundling' multiple assets into a single project,
governments may also potentially use the PPP model to deliver new
classes of asset, such as local road and water infrastructure and
community facilities such as libraries, which have not
traditionally been considered suitable for PPP delivery.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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