Labor Should Tread Carefully In Heading Down The Ppp Infrastructure Path
The Age
Saturday April 28, 2007
THE ALP national conference policy on financing infrastructure through public-private partnerships (PPPs) was revealed yesterday. The platform states: "It will continue to be necessary for some infrastructure projects to be jointly procured by the government and the private sector where appropriate. Labor recognises that PPPs have a legitimate role to play . . . however that role should be clearly defined and subject to evidence of value for money."
The only apparent concession to the critics of PPPs was the use of the 10-year government bond yield when determining the net present cost of different procurement options "in the absence of revenue streams involving market risk".If they follow the conclusion of a report done for the British Treasury, they will find that less than 10 per cent of infrastructure projects sponsored by the government face market risks in relation to revenue because their revenue is guaranteed by the government.If the ALP occupies the Treasury benches after the next election, it remains to be seen whether "risk" and "value for money" become elastic concepts and provide plenty of leeway for the proponents of PPPs at the expense of the less expensive tender process.According to the ALP platform, the infrastructure priorities and methods of financing will be managed by a new statutory authority, Infrastructure Australia (IA), whose board of directors will be drawn from the private and public sectors. IA "will develop an annual corporate plan setting out its strategy for priority infrastructure projects for approval by the Minister for Infrastructure . . . (it) will develop project and financing options for priority projects for submission to and approval by federal cabinet and report to COAG". The platform claims "Labor is also committed to high levels of transparency and accountability for all major infrastructure projects, and through IA will adopt best practices such as those established in British Columbia".It is clear that Infrastructure Australia is modelled on Partnerships BC, which has been criticised in an independent report to the Canadian Centre for Policy Alternatives (CCPA).According to the report, "the aggressive pursuit of PPPs by the BC government compromises due process and the public interest. If Value For Money (VFM) reports are to be of even limited use, they must be undertaken by an independent public body mandated to uphold the public interest. In BC, VFM reports are typically produced by Partnerships BC, which has the dual and contradictory role of both assessing the value of PPPs and pursuing them and implementing them." Several VFM reports have been produced after a contract has been signed with the private sector or withheld from public scrutiny until after a PPP has passed the point of no return."PPPs are diverting public funds into overpriced projects. If the government is paying more for something than it is worth, it raises the question of whether the new industry is adding to the public interest," the report said. The CCPA report recommended that all public projects should undergo a cost-benefit analysis that assesses the value of the project in the first place and the VFM process should be undertaken by the Auditor-General's office. Far from endorsing the ALP's Canadian model for assessing PPPs, the report said the Auditor-General's office should evaluate the role and mandate of Partnerships BC.-- kdavidson@theage.com.au
© 2007 The Age
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