An evaluation framework for privately funded infrastructure projects in Australia

For reasons of efficiency, accountability for performance, productivity and monetary policy, Australian governments will continue in the short to medium term to involve private firms in the provision of social and economic infrastructure. This study investigates the provision and management of engineering infrastructure such as roads, water supply, airports and electricity in the context of private involvement. Private involvement is possible through contracting out specific tasks or projects, private responsibility for the provision and operation of infrastructure services, (the many options here collectively being called concession agreements with subsequent contractual arrangements), or full privatisation of service provision. This study focuses on the initiation of projects involving the provision of infrastructure by privately funded concession contracts and considers the decisions taken by Government during this phase of a project’s life. The study has investigated appropriate methods to evaluate and assess the likely outcomes from such projects from the perspectives of Government, Private Proponent and other stakeholders who include the general public, users of the service, lobby groups etc. (The 'other stakeholders' have many different objectives and are collectively referred to throughout this study as public(s) to reflect the situation that there is no single collective public view). A detailed review of the potential and likely demand for private involvement in infrastructure in Australia concluded that the use of concession contracts as a delivery system will continue and is likely to become more popular. This conclusion has been confirmed by recent statistics from the Australian Bureau of Statistics. A review of project initiation practice has included both theoretical techniques and actual procedures and actions adopted for recent Australian projects. This review has considered all phases of a project's life, from Government initially approaching the private sector until the service life of the concession contract is complete, typically a 20-to-30-year period. An extensive number of Australian case studies have been reviewed to ascertain trends and relationships between the project initiation process and the success or otherwise of project outcomes. Findings of this review were that concession contracts are very complex, having a multitude of facets and that generalisations in terms of modelling and or decision processes are inadequate to truly accommodate all likely scenarios. A number of areas were identified where improvements can be made to current practices, namely: - Greater separation of government's, dual roles to provide functions of governance and to provide economic management. - Changes to current project implementation practice through the inclusion of confirmation of project objectives, through a detailed technical review of the project prior to award and in fine tuning of when certain information is provided. - The inclusion of risk modelling into the project initiation and approval process to improve the quality of decisions. Proposed enhancements to these areas have been developed and in part verified through: - The proposal of the concept of separating the dual roles of government through the use of an "Independent Regulator". - The development of detailed decision-making guidelines, based on risk analysis, to assist in the choice of the most appropriate proponent to award a concession contract given a number of invited submissions. The proposed criteria for award of a concession contract includes consideration of technical, financial, social and environmental issues.