Builder eyes public-private partnership in NZ

The Government may not be selling public assets at the moment but in Australia the private sector has been constructing and managing new public buildings for a while and one of the companies doing it would happily come to New Zealand.

Melbourne-based Plenary Group has built courts, schools, hospitals, research centres and defence accommodation for Governments in Australia and Canada using a so-called availability public-private partnership (PPP) model.

Its flagship project is the A$1.4 billion ($1.8 billion) Melbourne Convention Centre, which it says was delivered on time, on budget, with the highest of green credentials to an appreciative public in 2009.

Some business people in New Zealand believe there would have been a better outcome for taxpayers if the controversial Supreme Court building in Wellington had been built using this model and that the model will be used for a new prison project in New Zealand this year.

Wellington-based Morrison & Co has set up a fund targeting social infrastructure PPPs and Plenary Group, which has a partnership with Deutsche Bank, is among the overseas companies likely to be a competitor.

Plenary Group principal John O'Rourke said New Zealand officials might think that no one would be interested in PPP projects in New Zealand because they were too small.

"That is not a barrier to someone like us. We would be more than happy with a range of $50 million to $100 million to $200 million projects if we knew there was an ongoing consistent pipeline to bid on."

Plenary has been eyeing New Zealand, in part because of its similar operating environment to Australia. It has offices in three provinces in Canada.

"Our concern with the New Zealand market is - is there a policy framework that wants to embrace the model? There's been murmurings of one-off looks at projects. What we are looking for is an over-arching view, a model across government," O'Rourke said.

The private sector typically builds and runs the building for 25 years and the public sector pays a fee for its availability.

The building reverts to public ownership at the end of the 25 years.

Critics do not like the private sector turning a profit on any public asset and say the returns are too high.

O'Rourke was coy on the return Plenary makes on its projects, saying it was a privately owned company. But he did say that public building projects were less risky than roading projects and rates of return on equity were typically low double digits.

The development of a market for social infrastructure PPPs in Australia had been a slow grind but it was starting to take off now and the public had lost its "uncomfortableness" with it.

"We are now starting to see some analysis done independently that says it is actually value for money and in comparison Governments are saving money."

Governments were also notorious for neglecting buildings once constructed. "A key feature of the PPP is maintaining public assets in the same working order as the completed building."

Commentators have said that New Zealand has bucked an international trend in not actively pursuing a PPP programme. The Treasury is examining Government procurement and has set up a national infrastructure unit. It has identified a better-performing public service as a key driver of productivity.

- NZPA