PFPs - New Government Infrastructure Policy

Today the New South Wales Government released an updated "Working with Government: Guidelines for Privately Financed Projects".

It also issued for public comment a draft "Working with Government: Risk Allocation and Commercial Principles".

The objective of earlier "Guidelines for Privately Financed Projects" is well understood in the market place. The Guidelines set out the processes followed by the Government in developing up, testing and approving privately financed infrastructure projects.

The Guidelines have been updated and revised to reflect the Government's experience on projects in recent years, particularly the handful of social infrastructure projects (the Schools 1 and 2 PPP Projects, the Newcastle Mater Hospital Project, the Long Bay Forensic and Prison Hospital Project and the Bonnyrigg Social Housing Project). They have also been updated and revised to incorporate the findings of various Parliamentary and Government inquiries into PFPs in the last two years.

Key changes to the Guidelines are:

• Government processes will now require a Public Interest Evaluation - a value for money test from the perspective of users and tax payers.
• The Public Interest Evaluation must be updated during the tender process. Summaries of it will be publicly disclosed.
• The Guidelines take into account the new environmental approval process under Part 3A of the Environmental Planning and Assessment Act.
• The Guidelines set out how Government agencies should engage with bidders during the tender process.
• Requirements for approvals from the Budget Committee of Cabinet are tightened, particularly if major parameters of the project change.
• The Guidelines set out a standard format for the preparation of contract summaries.

NSW Treasury is inviting comments from the private sector on the draft Risk Allocation and Commercial Principles (the draft Commercial Principles). Comments are due by 22 January 2006.

The draft Commercial Principles focus more on social infrastructure projects (for example, schools and hospitals) rather than economic infrastructure projects such as toll roads. Nevertheless, it can be expected that, where in an economic infrastructure project there is no underlying reason for a different risk allocation from that set out in the draft Commercial Principles, government agencies are likely to prefer to follow the Commercial Principles.

The draft Commercial Principles exhibit a high degree of commonality with their Victorian equivalent, Partnerships Victoria. But, there are some areas of difference. However, the Victorian Government has moved on on some issues since it first issued its commercial principles and, accordingly, the areas of difference may not be very significant.

In broad terms, the draft Commercial Principles reflect the risk allocation in and terms of the Project Deeds for the five NSW Social Infrastructure projects to date, particularly the two hospitals and two schools projects.

The Working With Government Guidelines for Privately Financed Projects are available for download by clicking here .