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Review Recommendations Will Strengthen PPP Process

“The independent review of the Transmission Gully project provides valuable recommendations to improve public private partnership (PPP) procurement in New Zealand. These will ensure that the model continues to provide decision makers with an option to achieve best value for money in delivering major public infrastructure,” says Infrastructure New Zealand Policy Director, Hamish Glenn.

“A PPP is a long term contract between a client and a private sector consortium to design, build, finance and maintain an asset, with the client retaining full ownership of the asset. Bundling all these activities in one package for an asset lasting 30 years is extremely complex, so PPPs tend to be used for large projects where the benefits can be shown to outweigh the costs.

“Seven PPPs have been signed in New Zealand. Each of the five operational contracts was delivered on budget for the Crown.

“The Government launched this review following concerns that the PPP model used to procure Transmission Gully had not performed as intended.

“It’s important to note that Transmission Gully successfully passed all the value for money tests designed to protect the taxpayer from project time and cost overruns, or assets which do not meet essential community needs.

“But what the interim review released today shows is that there were several issues in the process, including that original cost estimates for the project were too low, encouraging bidders to seek out ways to reduce costs which did not necessarily provide best value, and that PPP project governance can be strengthened.

“It is important that these recommendations are quickly implemented to maintain confidence across the general public and industry that the model provides a viable infrastructure procurement option.

“New Zealand has a very large nation-building investment programme ahead. Use of private capital to manage public cashflows, inject innovation, attract international expertise and better allocate risk is critical to successful delivery.

“PPP is one such way to leverage private investment to achieve public outcomes. The review recommendations ensure that PPPs continue to provide decision makers with a genuine option to deliver major infrastructure,” Glenn says.

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