24 Aug 2012

Backers say PPPs could give more value for money

11:30 am on 24 August 2012

The financial backers of the country's first two social infrastructure public-private partnerships have given the Government's tendering processes the thumbs up.

But they say further improvement will be needed to get the best deal for the taxpayer on future projects.

A new primary school to be opened in Hobsonville early next year (followed by a secondary school on the same site a year later) is the first social infrastructure PPP.

The project will be designed, built and maintained by the Learning Infrastructure Partners consortium in return for annual payments for the next 25 years before being handed back to the Government.

Speaking at a conference in Wellington this week was Stephen Proctor, from Morrison & Co's Public Infrastructure Partnership (PIP) fund, which will partly fund the schools project.

Mr Proctor, who worked on PPPs in Britain in the 1990s, says the time it took to wrap up the deal with the Ministry of Education was the quickest he had encountered.

He says consequently they were able to make savings on what was a very small project on the scale of PPP procurement.

"We were able to cut our cloth to enable us to actually deliver a school, which in the first round was I think $3-$4 million cheaper than the public sector comparative."

Bidding process seen as improvable

But Mr Proctor says the bidding process needs to be streamlined even further, because something like 80% of New Zealand construction projects are under $60 million.

The Government recently announced the Puhoi to Wellsford and Transmission Gully highways will be considered as PPPs.

Duncan Olde, of Macquarie Capital New Zealand, which is arranging finance for the $900 million new men's prison at Wiri, also being built as a PPP, says the roading announcements are a definite boost.

He says there's good interest, particularly with projects of that scale, but it's likely to be more challenging for smaller projects.

Mr Olde says paying unsuccessful bidders' professional fees could attract more interest in smaller projects. With more bidders, he says, the bids would probably be more competitively priced and thus promote better value for money for the taxpayer.