Allen Consulting: Performance of PPPs and Traditional Procurement in Australia
This report by Infrastructure Partnerships Australia, Allen Consulting Group and the University of Melbourne undertakes a comprehensive national analysis of the outcomes of projects delivered by government and those delivered through partnership with the private sector. It seeks to establish the relative efficacy of public–private partnership and traditional procurement in terms of cost and time.
The study tests the notion that more competition and greater alignment of incentives and constraints will result in public–private partnership projects having reduced cost over-runs compared with traditional procurement. It also examines the factors that account for the relative success or failure of public–private partnerships and reviews the arguments and evidence on whether government's cost of capital is in fact a risk-free rate of interest and whether it can be expected to be relatively similar to the private cost of capital in the market.
The conclusions of the report are:
- public–private partnership projects have superior cost efficiency
- the cost advantage of public–private partnerships are economically and statistically significant
- the benefits to the community of public–private partnerships in dollar terms are greater
- traditional projects were more likely to be completed later than PPPs relative to budget
- In smaller traditional projects, timeliness of completion is negatively affected by the size of project
Overall, the report concludes that public–private partnership projects have superior performance in both cost and time dimensions.