Mixed views on Victoria’s revamped PPP rules

The reform could weight on Australian contractors by increasing contract complexity and public oversight, according to a law expert.

The Victorian government has announced new requirements for the state’s PPP projects in a move that it says will provide greater certainty to project procurement, financing and delivery.

The updates include a reformed PPP procurement model with a standardised tendering process and contract, new financing options and an updated contract management guide. 

The Partnerships Victoria framework, which incorporates the new requirements within Australia’s National PPP Policy and Guidelines, applies to public infrastructure projects involving an estimated state expenditure of more than A$50 million. The Department of Treasury and Finance will oversee policy implementation and project governance, while the Office of Projects Victoria will monitor project assurance and delivery.   

Procuring agencies should consider state capital contributions as an alternative to full private financing when there are liquidity constraints, the treasury suggested. Additional structuring options, like debt funding and early debt paydown, could also be deemed viable options by the government as long as they help lower costs compared to standard PPP financing.

A more consistent approach to PPPs means government and bidders will save time by focusing on project-specific issues – reducing bid costs and negotiation time – while improving transparency for the private sector, the state Treasury said. 

Some observers recognised the reform’s advantages, but said these could come with negative side effects.
“Standardised documentation has not always been well received by contractors in the past, and a similar approach in the UK led to an increase in derogations, or requested changes to some of the clauses in the standard contract,” said Simela Karasavidis, a Melbourne-based infrastructure partner at Pinsent Masons. 

“In theory, this is welcome assistance, but the level of oversight and control proposed may not be welcome by the industry,” she noted, suggesting contractors should be kept up to date on government updates and their potential effects on project planning. 

“It is unclear how this additional oversight and control will impact on procurement timetables, particularly where project time frames are tight for political reasons.”

Victoria has contracted 27 PPP projects worth around A$12.7 billion ($9.75 billion; €8.8 billion) since 2000. The Victorian Outer Suburban Arterial Road PPP will be the state’s first PPP project to be tendered under the new requirements.