Govt paves way for private sector deals

Infrastructure Minister Bill English. Photo / Mark Mitchell

The Government is stepping up plans to allow the private sector to play a bigger role in the delivery of infrastructure.

Infrastructure Minister Bill English will today reveal that public agencies proposing projects with a whole-of-life cost of more than $25 million will consider and evaluate alternative procurement options including a public private partnership (PPP).

The Business Herald understands that the Government believes that PPPs will be appropriate only for some projects.

But it believes that putting projects to a "public private comparator" test will increase price competition and ensure that taxpayers get the best possible value for money.

In an interview for the "Getting Smart about Infrastructure" report published in today's Herald, English said the Corrections Department had been able to more accurately forecast expected bed numbers as a result of using a public private comparator method.

The Government has said it will use a PPP to develop the Wiri prison and is considering using PPPs for some new school buildings.

English is expected to set out the Government's decision in a speech to the NZ Council for Infrastructure Development's "Building Nations" symposium in Auckland today.

The National Infrastructure Unit - which sits in Treasury - will advise the Government on the most appropriate type of PPP that each project proposal should be evaluated against.

The unit will be tasked with broad oversight of PPPs by checking departments are following best practice when they assess projects as to their suitability for a public-private partnership.

Last month, Education Minister Anne Tolley said for a schooling PPP, the private sector would finance, build and maintain school property over a long-term contract - probably around 25-35 years.

The operation of the school would remain the responsibility of the board of trustees. The Government would retain ownership of the land throughout.

The Business Herald expects several other measures will be announced aimed at improving how the Government invests in infrastructure and manages its large asset base.

In this year's Budget, English signalled plans to regularly publish a Government Investment Statement which will clearly set out the Crown's assets and liabilities, identify any emerging issues and state how the Government plans to manage its large and growing investment in taxpayers' assets.

The Government currently holds about $220 billion in Crown assets and this is set to grow by about $30 billion over the next four years. On the infrastructure front, the Government currently invests about $6 billion a year in new projects and maintenance.

English made clear it is critical the Government manages its asset base effectively.

"Even small improvements in this area could yield substantial gains to reinvest in vital public services and assets like schools, housing and hospitals.

"This Government is committed to improving the public sector's management of its large asset base."