More big projects to be considered as PPPs

Wednesday 11th August 2010

All government infrastructure projects worth more than $25 million will be considered as possible public-private partnerships in a bid to improve the management of the Crown’s $220 billion-plus assets, Finance Minister Bill English announced today.

While departmental chief executives will have greater discretion than in the past to pursue capital spending projects worth less than $15 million, consideration of alternative procurement will be required for $25 million-plus projects.

“PPPs will only be appropriate for some projects, but we believe putting this to the test will increase price competition and ensure taxpayers get the best possible value for money,” said English, in a speech to the New Zealand Council for Infrastructure Development.

He warned also that there was unlikely to be the same long pipeline of PPP opportunities as exists in Australia, where 50 projects worth about $30 billion are on the books, but represent only 20% of all infrastructure investment occurring across the Tasman.

“New Zealand is smaller and this means there will be more small and medium-sized projects and there is unlikely to be the same constant pipeline of PPP projects there is in Australia.”

These projects were likely to be “both more varied and of a more one-off nature” than in Australia.

“However, that will mean good entry-level PPP opportunities for smaller or emerging firms, allowing them to move up the value chain and extend into Australia,” said English.

“With the commercial property market experiencing a lull, government projects are supporting the infrastructure sector on this side of the Tasman,” said English.

“In the three months to May this year, government projects made up about 55% of non-residential building consents,” while an estimated 80% of jobs on projects worth more than $5 million are government-generated at present.

The government was the country’s largest asset owner by far, with a “huge responsibility” to manage it well, and a “poor” track record, English said.

“Before we came into government, there was very little knowledge in the public service and little work being done about where this value resided, which assets were rising in value, which were dropping and why.

“Crucially, there was almost no work being done on how to raise the bar on how we manage the government’s assets”, despite the potential to make substantial gains with even small improvements in asset management.

“While our opponents are obsessed with the subject of asset sales, we’re getting on with the unglamorous, but far more important task of improving the public sector’s management of the government’s large asset base” with a wider stock-take of the government’s asset base.

As a result, the government would issue the first of a new, annual Government Investment Statement setting out asset and liabilities, identifying emerging issues, and outlining asset management plans.

“We believe this level of transparent information, in a regular publication, will allow the public to demand a much greater level of accountability from the government and lead to significantly better decision-making across the public sector,” English said.

Businesswire.co.nz

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