Australia: Introducing The National PPP Policy And Guidelines

The National Public Private Partnership Policy (Policy) and National Public Private Partnership Guidelines (Guidelines) (as developed by Infrastructure Australia) have now been endorsed by the Council of Australian Governments (COAG). The Policy and Guidelines aim to implement an agreed national framework for the procurement and delivery of public private partnership (PPP) projects.

The Policy and Guidelines are comprised of the following documents:

• National PPP Policy Framework;
• National PPP Guidelines Overview; and
• National PPP Detailed Guidance Material:

Draft Commercial Principles for Economic Infrastructure have also recently been released by Infrastructure Australia for public submissions and comment. Once finalised, it is anticipated that these Commercial Principles for Economic Infrastructure will also be included in the Detailed Guidance Material referred to above.

At present, each State and Territory separately determines the approach it takes to the tendering, procurement and delivery of PPP projects (and associated commercial risk allocation), often based on their own separately published guidance material. This has led to inconsistent approaches to tendering, procurement, project delivery and risk allocation across jurisdictions – resulting in tendering inefficiencies for bidders and higher bid costs. The Policy and Guidelines purport to address these cross-jurisdictional inconsistencies by providing a consolidated, uniform, 'best practice' national framework for the cost effective procurement and delivery of PPPs. According to Infrastructure Australia, the Policy and Guidelines "offer major reform gains in terms of consistency and harmonisation of policy and practices across jurisdictions. The package aims to encourage the consideration of PPPs, ensure consistent application of best practice across Australia and encourage private sector investment in public infrastructure in Australia."

However, a number of elements of the Policy and Guidelines appear to deviate from this principle of cross-jurisdictional uniformity.

For example, the Commercial Principles for Social Infrastructure (Volume 3 of the Detailed Guidance Material) provide (in respect of certain risks and contractual issues) for the adoption of a "menu type methodology where jurisdictions have the flexibility to choose between a number of defined approaches for dealing with a particular risk, or contractual issues..." As a result, it will be open to each State and Territory to determine how certain risks and contractual issues will be addressed and to develop and issue their own guidance material accordingly. The draft Commercial Principles for Economic Infrastructure appear to adopt a similar approach.

The application of the Policy and Guidelines also remains subject to an element of flexibility. The Jurisdictional Requirements (Volume 6 of the Detailed Guidance Material) (Jurisdictional Requirements) provide that the application of the Guidelines to the provision of infrastructure will be "determined by individual jurisdictions." Therefore, notwithstanding the endorsement of the Policy and Guidelines by each jurisdiction via COAG, the actual adoption and implementation of the Policy and Guidelines for particular projects appears to be left to each jurisdiction to determine – raising the prospect of not only inconsistency in approach across jurisdictions, but within jurisdictions themselves.

The Jurisdictional Requirements also identify EOI and tendering as being areas where individual jurisdictions will continue to have the flexibility to maintain or develop their own individual requirements. In doing so, the Policy and Guidelines appear not to have addressed one of the more significant private-sector criticisms of PPP project procurement – ie that PPP tendering requirements have, to date, been overly onerous and complex and lacked sufficient uniformity (both within jurisdictions and across jurisdictions), leading to unnecessarily high bid costs and reducing the attractiveness of bidding for a project.

Given the level of flexibility inherent in the Policy and Guidelines (and the consequent cross-jurisdictional divergence in approach to tendering and the treatment of particular risks and contractual issues that is likely to arise), it seems unlikely that the Policy and Guidelines will fully achieve their aim of harmonising policy and practices across jurisdictions and reducing transaction costs – at least as far as "social infrastructure" PPP projects are concerned. However, the Guidelines themselves (in the Jurisdictional Requirements) recognise the need for further harmonisation in the future, and the commitment of each jurisdiction to that harmonisation process.

The endorsement of the Policy and Guidelines therefore represent a step in the right direction.

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