Abstract
Public-private partnership (PPP) concession agreements are awarded by National, State and local public agencies that contract with private companies to finance and deliver infrastructure as a long term service to governments and their citizens, rather than having the private firms design and build infrastructure assets to be financed, operated—and, hopefully, maintained—by government. PPPs are similar to the emerging model of selling business or personal software as a cloud-based service (SaaS) rather than as a product licensed by the user—a model that that has transformed and disrupted the enterprise software industry. Australia is a world leader in PPP infrastructure delivery, and has had over two decades of experience in delivering civil and social infrastructure services to its citizens via PPP concessions. Along the way, the public and private participants in infrastructure PPPs have developed practices and a mature institutional framework necessary for this kind of long-term, risky public-private commercial partnership. This study reports the findings from in-depth interviews with 25 senior executives of public and private participants in PPP infrastructure projects from the three Eastern Australian States with the longest history of PPP delivery. Based on the results of those interviews, we develop a governance model for infrastructure service delivery: the government selects infrastructure projects, guided by a non-partisan, expert infrastructure prioritization panel, and contracts for the delivery of these prioritized infrastructure services with a private concessionaire financed by long-term institutional investment capital. The concessionaire is a private entity in charge of financing, designing, constructing, operating, and maintaining the infrastructure service. The government supervises the infrastructure service, to safeguard public interest. The government also provides an institutional framework, with contracts and authorities necessary for the interaction between the public and private actors.
Highlights
A great deal has been written about the pros and cons of delivering civil and social infrastructure services via public-private partnership (PPP) concessions (Tang et al, 2010), but much less about the governance challenges arising from potential conflicts of interest between the various public and private parties within different phases of Levitt and Eriksson Journal of Organization Design (2016) 5:7
(4)Contracts between the special purpose vehicles (SPVs) and its construction and operations contractors. These empirical observations of current practice suggest that public utility, institutions, and coordination issues are of importance for PPP infrastructure service, and lead us to form a governance model for infrastructure service delivery
The insights about ways to mitigate the significant governance challenges of PPP delivery that have evolved from this shared experience over more than two decades can serve to generate a set of focused research questions for academics to explore in greater depth, and provide high-level guidance to federal and state agencies in countries like the US that have had far less experience delivering infrastructure services via PPP concessions
Summary
A great deal has been written about the pros and cons of delivering civil and social infrastructure services via public-private partnership (PPP) concessions (Tang et al, 2010), but much less about the governance challenges arising from potential conflicts of interest between the various public and private parties within different phases of Levitt and Eriksson Journal of Organization Design (2016) 5:7. (3)Internal decisions of the SPV board and its key executives over the lifecycle of the concession; and (4)Contracts between the SPV and its construction and operations contractors These empirical observations of current practice suggest that public utility, institutions, and coordination issues are of importance for PPP infrastructure service, and lead us to form a governance model for infrastructure service delivery. Research methodology and approach The insights presented in this paper are derived from a set of semi-structured interviews that the first author conducted with more than 20 senior executives drawn from key participants in PPP investment and delivery — governmental PPP bodies and infrastructure agencies, pension funds and aggregators of pension funds, infrastructure developers, investment banks, investment arms of construction firms, lawyers and bankers — over a 2-week period during December 2015 in three Australian States: Victoria, New South Wales and Queensland. Evolved from this shared experience over more than two decades can serve to generate a set of focused research questions for academics to explore in greater depth, and provide high-level guidance to federal and state agencies in countries like the US that have had far less experience delivering infrastructure services via PPP concessions
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