A cop-out or good
Tim Colebatch, November 3, 2006
What are public-private
PPPs cover a wide range of contracts
in which governments pay the private sector to finance, design,
build and operate public infrastructure. The essential feature
is that the private sector takes on the Government's
responsibilities for a price.
CityLink. EastLink. The Southern
Cross (formerly Spencer Street) station redevelopment. The new
County Court building. The Showgrounds redevelopment. The new
Royal Children's Hospital. The proposed rebuilding of rundown
Why do governments want to hand
these jobs to private developers?
The Victorian Government argues that
it allows more projects to be built, encourages innovation,
transfers risks (eg, of cost overruns) off the budget to the
private sector and can lead to faster completion at lower cost.
Critics see the heavy use of PPPs as driven by a fear of taking
on significant debt, and hence being labelled by its opponents
as financially irresponsible.
If the Government is right, then
what's wrong with PPPs?
Critics question whether they really
do provide value for money. In reality, cost overruns do end up
being paid by governments (eg, at Southern Cross station). The
private sector faces higher borrowing costs and must make
profits on top of costs, while the whole process costs a fortune
in consultants' fees and finance charges. A key issue in
Victoria is the secrecy surrounding PPP contracts, which are
largely treated as "commercial in confidence". The all-party
Public Accounts and Estimates Committee has concluded that it is
impossible for the public to know whether it is getting value
for money because so little information is released.
What reforms are in train?
Treasurer John Brumby has promised
to release more information in future. But critics want an
independent inquiry into whether past PPPs have delivered value