Public private Partnerships: What does the future hold?

Michael Regan, Jim Smith, Peter Love

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

5 Citations (Scopus)
7 Downloads (Pure)

Abstract

Internationally, Public and private Partnerships (PPPs) are being used across a wide variety of economic and social infrastructure projects in more than 85 countries. PPPs are a procurement methodology that brings a rigorous risk-weighted approach to major projects using a competitive bid process and private sector expertise and innovation. PPPs are achieving a number of significant improvements in major project procurement and improved public service delivery. This paper considers the prospects of PPPs from the perspective of government clients and their promoters of PPPs and whether current volatility and uncertainty in the capital markets in Australia will affect the feasibility of privately financed infrastructure, and specifically, the PPP method of procurement. A survey of financial advisers and lenders indicates that present market conditions will be placing PPPs under pressure. Future PPPs will be subject to new disciplines - lower leverage, higher reserves, stronger underlying credit credentials, higher debt service coverage criteria and higher cost debt. This will affect both bid depth and state/government risk allocation with lenders expected to take a tougher approach to the support of delivery and operational risks. This suggests some impact on the value for money outcomes for the PPP model in the short-term. The characteristics of PPPs will be reviewed in this paper using national and international sources in order to identify those features that will be essential in this new economic climate. From the literature and views of experts gained form its survey, the authors suggest that present market conditions do not close the door on PPPs, but do provide an opportunity for both government and industry to develop a more refined model that is more appropriate for the new environment. This may require a more scientifically costed approach to risk allocation, state guarantee support, improved underlying credit credentials and a rethinking of patronage risk. It is a shared responsibility. It is also likely to be a further step in the continuing evolution of alternative major project procurement mechanisms.

Original languageEnglish
Title of host publicationCOBRA 2009 - Construction and Building Research Conference of the Royal Institution of Chartered Surveyors
Place of PublicationLondon
PublisherRoyal Institute of Chartered Surveyors (RICS)
Pages462-474
Number of pages13
ISBN (Print)9781842195192
Publication statusPublished - 2009
EventConstruction and Building Research Conference of the Royal Institution of Chartered Surveyors: RICS COBRA 2009 - Cape Town, South Africa
Duration: 10 Sep 200911 Sep 2009

Conference

ConferenceConstruction and Building Research Conference of the Royal Institution of Chartered Surveyors
Abbreviated titleRICS COBRA 2009
CountrySouth Africa
CityCape Town
Period10/09/0911/09/09

Fingerprint

Economics
Innovation
Costs
Industry
Uncertainty
Financial markets

Cite this

Regan, M., Smith, J., & Love, P. (2009). Public private Partnerships: What does the future hold? In COBRA 2009 - Construction and Building Research Conference of the Royal Institution of Chartered Surveyors (pp. 462-474). London: Royal Institute of Chartered Surveyors (RICS).
Regan, Michael ; Smith, Jim ; Love, Peter. / Public private Partnerships: What does the future hold?. COBRA 2009 - Construction and Building Research Conference of the Royal Institution of Chartered Surveyors. London : Royal Institute of Chartered Surveyors (RICS), 2009. pp. 462-474
@inproceedings{7d6de4e6b0e04f3085e643795ef82cb4,
title = "Public private Partnerships: What does the future hold?",
abstract = "Internationally, Public and private Partnerships (PPPs) are being used across a wide variety of economic and social infrastructure projects in more than 85 countries. PPPs are a procurement methodology that brings a rigorous risk-weighted approach to major projects using a competitive bid process and private sector expertise and innovation. PPPs are achieving a number of significant improvements in major project procurement and improved public service delivery. This paper considers the prospects of PPPs from the perspective of government clients and their promoters of PPPs and whether current volatility and uncertainty in the capital markets in Australia will affect the feasibility of privately financed infrastructure, and specifically, the PPP method of procurement. A survey of financial advisers and lenders indicates that present market conditions will be placing PPPs under pressure. Future PPPs will be subject to new disciplines - lower leverage, higher reserves, stronger underlying credit credentials, higher debt service coverage criteria and higher cost debt. This will affect both bid depth and state/government risk allocation with lenders expected to take a tougher approach to the support of delivery and operational risks. This suggests some impact on the value for money outcomes for the PPP model in the short-term. The characteristics of PPPs will be reviewed in this paper using national and international sources in order to identify those features that will be essential in this new economic climate. From the literature and views of experts gained form its survey, the authors suggest that present market conditions do not close the door on PPPs, but do provide an opportunity for both government and industry to develop a more refined model that is more appropriate for the new environment. This may require a more scientifically costed approach to risk allocation, state guarantee support, improved underlying credit credentials and a rethinking of patronage risk. It is a shared responsibility. It is also likely to be a further step in the continuing evolution of alternative major project procurement mechanisms.",
author = "Michael Regan and Jim Smith and Peter Love",
note = "{\circledC} Copyright The Authors",
year = "2009",
language = "English",
isbn = "9781842195192",
pages = "462--474",
booktitle = "COBRA 2009 - Construction and Building Research Conference of the Royal Institution of Chartered Surveyors",
publisher = "Royal Institute of Chartered Surveyors (RICS)",

}

Regan, M, Smith, J & Love, P 2009, Public private Partnerships: What does the future hold? in COBRA 2009 - Construction and Building Research Conference of the Royal Institution of Chartered Surveyors. Royal Institute of Chartered Surveyors (RICS), London, pp. 462-474, Construction and Building Research Conference of the Royal Institution of Chartered Surveyors, Cape Town, South Africa, 10/09/09.

Public private Partnerships: What does the future hold? / Regan, Michael; Smith, Jim; Love, Peter.

COBRA 2009 - Construction and Building Research Conference of the Royal Institution of Chartered Surveyors. London : Royal Institute of Chartered Surveyors (RICS), 2009. p. 462-474.

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

TY - GEN

T1 - Public private Partnerships: What does the future hold?

AU - Regan, Michael

AU - Smith, Jim

AU - Love, Peter

N1 - © Copyright The Authors

PY - 2009

Y1 - 2009

N2 - Internationally, Public and private Partnerships (PPPs) are being used across a wide variety of economic and social infrastructure projects in more than 85 countries. PPPs are a procurement methodology that brings a rigorous risk-weighted approach to major projects using a competitive bid process and private sector expertise and innovation. PPPs are achieving a number of significant improvements in major project procurement and improved public service delivery. This paper considers the prospects of PPPs from the perspective of government clients and their promoters of PPPs and whether current volatility and uncertainty in the capital markets in Australia will affect the feasibility of privately financed infrastructure, and specifically, the PPP method of procurement. A survey of financial advisers and lenders indicates that present market conditions will be placing PPPs under pressure. Future PPPs will be subject to new disciplines - lower leverage, higher reserves, stronger underlying credit credentials, higher debt service coverage criteria and higher cost debt. This will affect both bid depth and state/government risk allocation with lenders expected to take a tougher approach to the support of delivery and operational risks. This suggests some impact on the value for money outcomes for the PPP model in the short-term. The characteristics of PPPs will be reviewed in this paper using national and international sources in order to identify those features that will be essential in this new economic climate. From the literature and views of experts gained form its survey, the authors suggest that present market conditions do not close the door on PPPs, but do provide an opportunity for both government and industry to develop a more refined model that is more appropriate for the new environment. This may require a more scientifically costed approach to risk allocation, state guarantee support, improved underlying credit credentials and a rethinking of patronage risk. It is a shared responsibility. It is also likely to be a further step in the continuing evolution of alternative major project procurement mechanisms.

AB - Internationally, Public and private Partnerships (PPPs) are being used across a wide variety of economic and social infrastructure projects in more than 85 countries. PPPs are a procurement methodology that brings a rigorous risk-weighted approach to major projects using a competitive bid process and private sector expertise and innovation. PPPs are achieving a number of significant improvements in major project procurement and improved public service delivery. This paper considers the prospects of PPPs from the perspective of government clients and their promoters of PPPs and whether current volatility and uncertainty in the capital markets in Australia will affect the feasibility of privately financed infrastructure, and specifically, the PPP method of procurement. A survey of financial advisers and lenders indicates that present market conditions will be placing PPPs under pressure. Future PPPs will be subject to new disciplines - lower leverage, higher reserves, stronger underlying credit credentials, higher debt service coverage criteria and higher cost debt. This will affect both bid depth and state/government risk allocation with lenders expected to take a tougher approach to the support of delivery and operational risks. This suggests some impact on the value for money outcomes for the PPP model in the short-term. The characteristics of PPPs will be reviewed in this paper using national and international sources in order to identify those features that will be essential in this new economic climate. From the literature and views of experts gained form its survey, the authors suggest that present market conditions do not close the door on PPPs, but do provide an opportunity for both government and industry to develop a more refined model that is more appropriate for the new environment. This may require a more scientifically costed approach to risk allocation, state guarantee support, improved underlying credit credentials and a rethinking of patronage risk. It is a shared responsibility. It is also likely to be a further step in the continuing evolution of alternative major project procurement mechanisms.

UR - http://www.scopus.com/inward/record.url?scp=84855931679&partnerID=8YFLogxK

M3 - Conference contribution

SN - 9781842195192

SP - 462

EP - 474

BT - COBRA 2009 - Construction and Building Research Conference of the Royal Institution of Chartered Surveyors

PB - Royal Institute of Chartered Surveyors (RICS)

CY - London

ER -

Regan M, Smith J, Love P. Public private Partnerships: What does the future hold? In COBRA 2009 - Construction and Building Research Conference of the Royal Institution of Chartered Surveyors. London: Royal Institute of Chartered Surveyors (RICS). 2009. p. 462-474