5. Considering private sector initiatives
As noted in section 2.3, government may provide financial support to private sector initiatives where the initiatives are desirable on economic or social grounds, but unprofitable for the private sector (see section B.1 in Appendix B). Other reasons for government to support private sector initiatives include optimal risk transfer, and use of entrepreneurial skills and innovation. Private sector participation may also offer a means to increase the funding for transport initiatives.
5.1 Evaluating proposals for public funding
If a government intends to contribute financially to private sector initiatives, the proposals should be included in the prioritisation process and program development. This will ensure funding is directed to the most worthwhile initiatives.
To ensure consistent treatment of proposals, a process for assessing and prioritising each unsolicited proposal should be developed (see section B.2 in Appendix B). The process should consider evaluation criteria such as:
- Originality: Does the proposal represent a fresh idea or a fresh approach?
- Depth: How extensive is the research supporting the proposal? Have financial models and forecasts been prepared?
- Innovation: Are new engineering, financial, environmental or other techniques being put forward in this proposal?
- Benefit: What is the actual and perceived benefit to the relevant governments, the travelling public and the proponent?
- Finance: How are returns to the government achieved? When does the asset revert to the state? How will refinancing gains be dealt with?
- Viability: How have the commercial and economic risks been dealt with? What are the implications for the initiative of financial failure in operation (i.e. bondholders and stakeholders overall - relevant governments)?
These criteria could be converted into a numerical score such as those shown in Table B.2 in Appendix B. The extent to which the criteria are satisfied can be used to identify possible actions and outcomes for the unsolicited proposals. For instance, consider a situation where a way of converting the criteria to numerical scores has been devised. If 80–100 per cent of the criteria are met, a request for tender can be issued or an untendered contract can be negotiated with the unsolicited proponent. If the proposal meets only 40–60 per cent of the criteria, the relevant government agency can offer to buy the intellectual property embedded in the proposal. If less than 40 per cent of the criteria are met, the proposal is declined altogether.
5.2 Involvement through PPPs
There has been increasing private sector participation in the financing and operation of transport infrastructure initiatives in Australia. This participation has often involved joint arrangements between the public and private sectors through public private partnerships (PPPs)
Private sector involvement through PPPs should be considered by government if such involvement is consistent with specified principles and standards.
For guidance on public private partnerships see the National Public Private Partnership Policy and Guidelines.