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New Zealand has refined its Public Private Partnership (PPP) framework to enhance the planning, procurement, and delivery of future infrastructure projects.
In response to evolving experiences and market feedback, New Zealand has refined its Public Private Partnership (PPP) framework to enhance the planning, procurement, and delivery of future infrastructure projects. These updates aim to ensure that PPPs remain a viable and effective tool for addressing the country’s infrastructure needs.
There are several key elements in the refreshed Blueprint for PPPs:
- Risk transfer – an expectation that risks should sit with those best-placed to address them, recognising wholesale transfer of risk to private partners has undermined private appetite for new projects.
- Bid cost recognition – guidance for agencies on how to lower the time and cost burden involved in bidding to enhance competitive tension.
- Collaborative tendering – enhancements to the Interactive Tender Process to enable bidders to work better with the client to develop solutions that better fit the ask.
- Affordability Threshold and Public Sector Comparator – provision for a more reasonable non-PPP delivery comparison, and for reasonable price validation, acknowledging previous examples of unreasonable estimates.
- Claims and dispute resolution – an improved process for managing disputes to combine with other changes aimed at reducing dispute incidence (e.g., better attribution of risk, enhanced collaboration, and a more realistic affordability threshold) to drive better relationships and outcomes.
- Crown resourcing and capability – a recognition of the importance of having an informed and engaged client and robust centralised PPP capability for good project outcomes.
“The new PPP Framework sits alongside a suite of changes the Government is making to New Zealand’s infrastructure policy guidance and settings. The Government will soon publish documents updating New Zealand’s Funding and Financing Framework, Strategic Leasing guidance, and guidelines for Market-led (unsolicited) Proposals.”
Key Enhancements to the PPP Framework:
Performance-Based Payments: Payments to private partners are now more closely linked to meeting predefined performance standards, ensuring accountability and quality in service delivery. Te Waihanga
Integrated Asset and Service Design: The revised model emphasizes the integration of asset and service design, promoting solutions that are efficient and tailored to long-term service delivery. Te Waihanga
Whole-of-Life Asset Management: By incentivizing comprehensive asset management throughout the project’s lifespan, the framework seeks to optimize performance and sustainability. Te Waihanga
Optimal Risk Allocation: The updated approach focuses on assigning risks to parties best equipped to manage them, thereby enhancing project outcomes and value for money. Te Waihanga
Download the PPP framework document here
Infrastructure New Zealand has welcomed the Government’s PPP Framework..
“It’s good to see the fast pace the Government has set on this,” says Chief Executive Nick Leggett. “We need to get projects going, and in an environment where the Government doesn’t have much coin in its back pocket, PPPs make absolute sense for certain projects.”
Leggett says the Framework sets out the right incentives and accountability mechanisms to enable PPPs to play an important role in meeting New Zealand’s future infrastructure needs.
“To overcome our infrastructure challenges New Zealand must embrace private sector expertise across the design, construction and management phases of our assets.”
“Our spending on infrastructure is comparable with other developed economies, but the value we get from that investment is in the bottom 10% of the OECD. PPPs are a key tool by which we can improve this.”
“It is pleasing to see the Government take on board a number of the concepts and recommendations developed by Infrastructure New Zealand’s Funding & Financing Working Group to better refine the PPP model for New Zealand’s circumstances.”
“Assessing whether a PPP offers value for money over other delivery methods, ensuring risk is more appropriately allocated and providing for increased innovation, including through the bundling of design, construction and management requirements, are features of the Framework that the industry identified as driving better procurement decisions and ultimately leading to improved project outcomes.”
“The Framework is important for aligning the Government’s aspirations with this industry knowledge and appetite,” says Leggett.
“It also determines what the key benefits of PPP project delivery should look like and the situations in which a PPP is likely to be more successful than a non-PPP delivery model. This is critical as PPPs won’t suit all projects.”
“The acknowledgement of the limitations of the PPP model in no way diminishes it as a key tool in the infrastructure toolbox. Instead, better defining the circumstances through which we can gain the most value from PPPs enhances their place in our infrastructure delivery system.”
“Unfortunately, the application of PPPs has been poorly understood in New Zealand,” says Leggett. “We now have a chance to remedy that.”
Public-Private Partnerships (PPPs) for civil engineering and construction projects
“It is encouraging that the Government has recognised the significant costs incurred by companies when bidding for PPP projects and has provided options to help mitigate those, including through a reimbursement mechanism. This will be important to enable more competitive bidding processes.”
“I also want to acknowledge the contribution of Labour’s Infrastructure Spokesperson, Barbara Edmonds, to the Framework. If PPPs are to play a major role in our infrastructure uplift, it will be critical to achieve long-term political consensus and policy certainty around their use.”
As Infrastructure New Zealand’s recent paper, Developing and refining the Public Private Partnership model and other infrastructure financing tools in New Zealand, noted ‘the potential benefits of PPPs, and similar partnership models involving private finance, can only be realised if these models are kept up to date, incorporate industry feedback, and are fit for purpose.’
“It is obvious through the development of this Framework that the Government has taken this advice on board,” says Leggett.
Source: Infrastructure New Zealand
Source: New Zealand Government
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