Part 3: Considering partnering as a procurement choice

Achieving public sector outcomes with private sector partners.

3.1
Public entities need to consider fully a range of issues in reaching a decision to take a partnering approach and in choosing the type of partnering arrangement that will be most suitable. The entity’s deliberations should include comparing different procurement alternatives, including traditional approaches.16

3.2
When deliberating, a public entity could well need to make a conscious effort to change its culture favouring traditional forms of procurement.

3.3
In this Part, we discuss the characteristics that can be expected of partnering arrangements. We identify the need for the public entity to prepare a detailed business case, and describe the main factors they should consider as part of the business case. We emphasise that effective decision-making when deciding on a route to procurement will depend on the public entity having sound governance and accountability arrangements in place.

3.4
We also highlight the importance of robust project management, and internal and external controls, throughout the processes of choosing a procurement option and selecting the preferred partner.

Project characteristics

Do the project characteristics lend themselves to a partnering arrangement?

3.5
The project’s characteristics will significantly influence whether it can be delivered using a partnering arrangement and, if so, which partnering model will most likely achieve the outcomes sought for the project.

3.6
The focus of partnering arrangements is usually on specifying the facility or service needed, leaving the private sector party to decide how best to design and construct the facility or provide the service. How outputs are defined will probably affect the opportunity for bidders to be innovative in designing their inputs. Although there are public entities in New Zealand that are experienced in this approach, it will probably be a challenge for public entities that are used to framing contract requirements in terms of inputs by way of, for example, processes and technical specifications.

3.7
Partnering arrangements that involve designing, constructing, and operating infrastructure are usually for a long term, for up to 20 or 30 years. Partnering arrangements in other jurisdictions that involve private financing have been set up mainly for major capital projects. In Australia and the United Kingdom, governments have provided advice about the monetary value of projects that makes them suitable for this type of procurement approach (see Appendices 6 and 7).

3.8
Partnering arrangements involving private financing may also be suitable for much smaller capital projects, and there is some evidence in New Zealand of financing smaller projects in this way (for example, Cooks Beach Sewage Treatment Plant). Other jurisdictions have bundled projects – such as school buildings in the State of Victoria, Australia – together to make them more attractive to the private sector. However, this will present a challenge when it involves several public entities with different cultures and governance requirements.

3.9
Project alliances are usually set up to design and build infrastructure, often when there are many uncertainties related to the project that may result in significant risks. However, there is some evidence overseas of a move to set up project alliances to provide services. For example, in the United Kingdom a standard partnering (or alliance) contract has been prepared that is suitable for building maintenance programmes.

3.10
In all cases, the cost of setting up and managing a partnering arrangement needs to be assessed against the total value of the project and the benefits that will be derived from adopting this approach compared to traditional procurement approaches.

Governance and accountability

Can the public entity set up and maintain the necessary governance and accountability framework for a partnering arrangement?

3.11
Partnering arrangements are “not a substitute for strong and effective governance and decision-making by government, which continues to be responsible and accountable for the project or service in a way that protects the public benefit”.17

3.12
Public entities are ultimately accountable for delivering public services, and cannot transfer this responsibility to the private sector. It is thus imperative that a public entity considering entering into a partnering arrangement has a sound basis for:

  • making the initial decision to choose this approach to procurement;
  • managing its implementation and long-term operation; and
  • effectively carrying out its accountability obligations to the public.

3.13
An over-riding requirement will be effective governance. A strong governance framework includes open and clear arrangements in areas such as:

  • organisational commitment and leadership;
  • corporate procurement policy and guidance;
  • decision-making about all aspects of the project and procurement (for example, the procurement route to be adopted, contract specification, selection of preferred partner, and operation of the contract);
  • change management;
  • roles and responsibilities;
  • succession arrangements;
  • authorities and delegations;
  • reporting and accountability;
  • performance management; and
  • stakeholder consultation and communication.

3.14
Vital to setting up an effective partnering arrangement are:

  • strong leadership from the top level of the public entity to maintain momentum and ensure that there is proper accountability and control;
  • clear definition of roles and responsibilities of those involved in the governance framework, including personnel involved in procuring and managing the partnering arrangement, such as the Board, Elected Members, and senior managers; those involved in the day-to-day management of the contract; and external stakeholders (project management arrangements are discussed later in this Part);
  • identification of relevant authorities and delegations in writing; and
  • arrangements for public scrutiny of performance under the contract (discussed in paragraphs 4.20-4.34).

Preparing a supporting business case

Can the public entity underpin a partnering arrangement with a sound business case?

3.15
A detailed business case should be prepared, with financial modelling, to support the project and the preferred procurement route.

3.16
The public entity should assess different procurement options either before or as part of preparing the business case. Options assessed should include traditional approaches to procurement, and the business case should set out a full justification for the chosen procurement option, including how it supports the organisation’s vision and strategic plan.

3.17
The business case should:

  • identify clear objectives for the project, including its contribution to the public organisation’s vision and policy objectives;
  • assess the degree of top-level commitment that will be required;
  • show that the project and the preferred procurement route are in the public interest;
  • assess the likely level of market interest;
  • consider the risks of the preferred procurement route;
  • show an overview of the structure of the proposed arrangements, including arrangements for governance and accountability, project management, and contract management;
  • assess value for money from the preferred procurement route, including a comparison with other procurement options;
  • examine funding options;
  • consider risk allocation (which will inform the value-for-money assessment);
  • examine the affordability and financial implications of the project and preferred procurement route;
  • consider legislative compliance;
  • consider accounting issues;
  • consider the effect on employees;
  • identify key stakeholders; and
  • identify the key information that the public entity will need to receive throughout the term of the arrangement to effectively carry out its monitoring processes and public accountability obligations.

3.18
Most of these issues are covered in this Part. Issues relevant to contract management are discussed in Part 4.

3.19
The business case should also outline the procurement process, timescales, and costs involved.

Contribution to vision and policy objectives

3.20
The partnering arrangement should fit with, and help to achieve, the public entity’s vision. This is particularly important because most partnering arrangements require considerable investment, both financially and in staff time, including that of senior managers.

3.21
The public entity should give special consideration to long-term partnering arrangements, where it will be important to assess how much the arrangement will contribute to future policies and plans for service delivery. A local authority will need to determine whether the project should be considered as part of its community outcomes processes, and how the project supports its Long-Term Council Community Plan.

Top-level commitment

3.22
To implement a partnering arrangement successfully, politicians and senior management need to commit to adopting this route to procurement. They also need to provide the necessary direction and control throughout the life of the project, which can be very long. The business case should assess the cost of providing this high level of commitment over the project term.18

Governance and accountability

3.23
The business case should address the proposed arrangements for governance and accountability described in paragraphs 3.11-3.14.

3.24
In the case of project alliances and joint ventures, the public entity will need to determine whether it has the statutory authority to undertake the project in the manner proposed, and whether it is prepared to give up its decision-making autonomy. Transit New Zealand has adopted an approach to project alliances where it gives up most of its decision-making autonomy but keeps its right to make major funding decisions.

3.25
A project alliance is usually governed by a joint body, which is often called a project alliance board (PAB). The PAB usually includes one or 2 representatives of the public entity (the practice of Transit New Zealand is to make 2 appointments), and one or 2 representatives from each of the contractors. The PAB provides governance, sets policy and delegations, and monitors performance. All decisions of the PAB must be unanimous.

3.26
A joint venture usually involves forming a company in which the public entity and private sector participant(s) hold shares. The joint venture company operates at arm’s length from the shareholding entities.

3.27
The public entity will need to consider carefully how PABs and joint venture companies are established. For example, setting up a PAB or joint venture company could result in a new “council organisation” or a new “council-controlled organisation” within the meaning of the Local Government Act 2002, entailing specific governance requirements.

Risks in adopting a partnering arrangement

3.28
The key risks that the public entity will need to consider at the time of preparing a business case are:

  • that poor performance by the private sector party will affect the public sector party’s ability to deliver core or essential public services, especially if the public sector party cannot delegate a duty of care or other statutory obligation to people receiving these services;
  • a possible change of political control of the public entity, resulting in a change of policy that may affect the partnering arrangement; and
  • poor contract management by the public entity19 (see Part 4).

3.29
Realisation of these risks could affect the value-for-money outcome of the project and damage the reputation of both parties.

3.30
In the case of a project alliance, the private sector participants are usually selected solely on their technical and quality attributes, and the budget is usually not agreed between the parties until after the selection process has been completed.20 This means that there is uncertainty about the budget for a long period, and a risk that the whole process could be aborted after significant resources have already been invested in reaching this stage.

3.31
It will be vital for the public entity to determine whether it can, and (if so) how it will, manage these risks. We discuss issues relevant to risk allocation in paragraphs 3.43-3.51.

Public interest

3.32
An assessment of whether or not a project is in the public interest will depend on the nature of the partnering arrangement being proposed. The types of issue that are likely to need considering include:

  • the requirements for accountability and transparency, balanced against the need for commercial confidentiality;
  • the ability to ensure continuous provision of essential services, despite any breaches on the part of the private sector party; and
  • the need to safeguard the rights of disadvantaged groups in the community.

3.33
An overall assessment will probably be based on whether the benefits to the public interest from the project being delivered by a partnering arrangement outweigh any potential harm. Australian state governments have devised public interest tests that may be a useful reference.21

3.34
Other jurisdictions have defined limits for the types of service that a partnering arrangement may provide. Generally, a partnering arrangement is considered suitable for providing ancillary services, such as facilities management, and services where the public organisation lacks expertise (a good New Zealand example is managing entertainment events at Auckland’s indoor arena, described in Appendix 1). Public sector policy may dictate that the public sector should directly deliver front-line services, which often involve a high degree of direct engagement with people, such as hospital care and teaching in schools.

Market interest

3.35
To ensure a competitive process, the public entity will need to decide whether there are enough independent private sector companies that wish to participate – including, for example, construction and service companies and financial institutions to provide capital investment. This will require researching the market before making a decision to opt for a partnering approach.

Assessing value for money

3.36
When making a decision about the procurement route to adopt, the public entity will need to show through the business case how a partnering approach is superior to other procurement options.

3.37
A value-for-money assessment considers the benefits of a partnering approach against the costs of doing so. Value for money does not necessarily mean lowest cost,22 because there may be a number of benefits that justify higher costs.

3.38
A key issue will be risk allocation. An important question will be whether transferring specific risks to the private sector party – that it may not be possible to transfer through a traditional procurement approach, or through sharing risks – will achieve value for money. Risk allocation is discussed in paragraphs 3.43-3.51.

3.39
Several other factors will be important in assessing value for money – including, for example, the scale of the project relative to the transaction costs, the whole-of-life costs, the potential to free up public sector staff to concentrate on key service delivery activities, greater asset utilisation, and the scope for innovation (such as business practice and technology application).

3.40
Bidding costs for both public and private sector parties are usually high compared with traditional methods of contracting. Costs can be controlled through the quality and clarity of tender documents. However, many partnering arrangements are complex, and the need for lengthy procurement processes and complex contract documentation will have a significant effect on costs. In the case of a project alliance, there will also be costs in establishing the project team, and creating and maintaining the alliance culture. The overall value-for-money assessment should take these costs into account.

3.41
There are a number of models that assess value for money, including cost-benefit analyses and the “public sector comparator” (refer to United Kingdom and Australian models).23 The public sector comparator defines the notional cost of delivery through the most efficient public sector method, and assesses it against the alternatives offered by a partnering arrangement.

3.42
For long-term projects, assessing value for money can be particularly difficult. Inevitably, assumptions will have to be made, and the validity of public sector comparators has been challenged for this reason. It will also be important not to overestimate benefits and underestimate costs, which has been a criticism levied against partnering arrangements in other jurisdictions.

Risk allocation

3.43
Risk allocation between the public and private sector parties is central to partnering arrangements, and forces the parties into explicitly identifying and costing risks. How risks are allocated will depend on the characteristics of individual projects and the type of partnering arrangement entered into.

3.44
Among the risks associated with major infrastructure projects24 are:

  • design and construction;
  • operation and maintenance;
  • patronage and revenue (for example, that the demand for a service, such as a toll road, or the revenue it will generate, will vary from that initially projected);
  • technology and obsolescence;
  • legislative and political change (such as a change of government or council), resulting in a change of policy;
  • failing to obtain statutory approvals or re-approvals during the term of the arrangement, or approvals that contain conditions that will have a significant effect on the project;25 and
  • financial (for example, that the financial structure is not sufficiently robust to provide fair returns to debt and equity over the life of the project).

3.45
The Australian and New Zealand Risk Management Standard26 provides a best-practice generic framework for identifying and managing risks.

3.46
In the case of most types of partnering arrangement, there is a well-established principle that the party best able to manage the risks should bear them. Seeking to transfer inappropriate risks to the private sector party will probably add to the cost of the arrangement.27

3.47
Under a project alliance, participants collectively assume all risks associated with the project, regardless of whether these risks are within the control of the alliance and whether participants have considered them in advance. This excludes any risks that the alliance participants specifically agree to retain individually. It should also be noted that financial consequences of risks that materialise are usually shared only up to the point where private participants’ profits are lost. Beyond this point, risks are usually borne solely by the public sector participant.

3.48
A DBMO contract may be suitable in circumstances where it is likely that value for money will be achieved through a high degree of risk transfer to the private sector party, and it is known that the private sector party will be able to manage this degree of risk more effectively than the public sector party.

3.49
If the project is very complex and there are many uncertainties – such as with the physical environment or the price of goods or services required – risk sharing through a project alliance or joint venture may be more appropriate.

3.50
In allocating risks to the private sector party, it is very important to decide whether the private sector party is legally and financially capable of accepting these risks and whether the public sector party is legally, financially, and politically capable of transferring them.

3.51
An example of unsuccessful risk sharing is the Latrobe Regional Hospital – a PPP entered into by the Victorian state government and a private sector consortium, Australian Hospital Care Limited (AHCL). The Victorian Auditor-General noted in a report in June 2002 that:

Although the contractual arrangements for the privatisation of the Latrobe Regional Hospital were successful in transferring financial risk to the private sector, the social responsibilities of the State meant that any threat to public health and safety or hospital service provision could not be allowed to occur. In this case, the State stepped in when it appeared that a risk to the provision of ongoing hospital services was increasing. The final outcome was that AHCL was able to avoid the full financial risk obligations embodied under the contractual arrangements.28

Financing and affordability

3.52
The decision on the type of partnering arrangement to adopt will be directly affected by whether there are realistic options for financing that arrangement. For example, private financing to fund construction costs in whole or in part may be a realistic option only if there is evidence that financial institutions are prepared to back private sector companies in making bids.

3.53
Affordability will also need to be assessed as part of the supporting business case. It should be assessed over the long term, especially in view of the fact that payments under a partnering arrangement may have a significant, ongoing effect on operations budgets.

3.54
Other significant costs that will need to be considered are procurement costs, transition costs involved in establishing the partnering arrangement, and ongoing client-side costs of contract management.

3.55
Affordability will need to be managed throughout the life of a partnering project. There should be regular reporting of affordability issues to senior management and at Board or Elected Member levels.

Compliance with legislation

3.56
The public entity will need to assess the lawfulness of the proposed procurement arrangement (see paragraphs 2.23-2.26). Sector-specific legislation in New Zealand acts as a constraint to adopting partnering arrangements for certain types of infrastructure or services. Relevant statutory provisions also provide the context in which New Zealand public entities operate, and would need to continue to operate under a partnering arrangement.

3.57
Requirements to comply with statutory processes (for example, obtaining Ministerial approval, or consultation and consents required in terms of the Resource Management Act 1991) should be described, including how long these processes are likely to take. The public entity will need to determine whether these processes should be undertaken before or after the contractual agreement has been entered into, whether responsibility for obtaining specific approvals or consents should lie with the public entity or the private sector party, and how risks related to these processes should be managed.

Accounting issues

3.58
The public entity will need to ensure that, in entering into a partnering arrangement, it will be in a position to comply with generally accepted accounting practice throughout the term of the arrangement.

3.59
In preparing the business case, it will be important for the public entity to determine what is the appropriate accounting treatment that best reflects the substance of the partnering arrangement. Generally accepted accounting practice is currently not fully established in this area, and is expected to continue to evolve over the next few years. This evolution may give rise to changes in current accounting treatment for many public entities, which are expected to include:

  • increased recognition of assets subject to partnering arrangements on the balance sheets of public entities; and
  • increased disclosure by both public sector and private sector parties about partnering arrangements.

3.60
Public entities should be mindful of such potential changes in generally accepted accounting practice when identifying information required to be provided by private sector parties during the course of partnering arrangements. Whatever the nature of the arrangements entered into, the public entity will need to provide within the contract for receipt of the necessary information, to enable the public entity to comply with generally accepted accounting practice.

Effect on employees

3.61
The public entity should assess the potential effect on employees of entering into a partnering arrangement, including how it might need to protect their interests. Recent amendments to the Employment Relations Act 2000 refer to how employees should be treated under business asset sales and purchases – including provisions for the automatic right of transfer for “vulnerable” employees, the requirement to consult in good faith with employees over restructurings, and the compulsory insertion of “employee protection provisions” in employment agreements.

Stakeholder involvement

3.62
Relevant stakeholders should be involved, and have their views considered, in the preparation of the business case. The types of stakeholder will depend on the project, but could include service users, ratepayers, employees, key players in the market, voluntary agencies, local community and other special interest groups, planning authorities, government departments, and health bodies.

3.63
There are likely to be statutory consultation requirements, such as those required under the Local Government Act 2002 and Land Transport Management Act 2003.

Project management responsibilities

3.64
The public entity will need to have strong internal arrangements to manage effective procurement of a partnering arrangement and to manage the contract once it is awarded. This will include well-defined responsibilities for day-to-day project and contract management, and internal and external audit controls.

3.65
Here we describe project management responsibilities covering the stages of the project from preparation of the business case to start of the contract. Contract management after the contract is awarded is described in Part 4.

3.66
United Kingdom29 and Australian30 guidance defines the following specific roles that need to be identified and designated in the case of PPPs and PFI, which are also likely to be relevant to other types of partnering arrangement.

  • Project steering committee – To direct delivery of the project, monitor achievement of business case objectives and their continuing validity, assist with complex policy issues, and set in place appropriate project governance and reporting arrangements.
  • Project sponsor – This might be a chief executive officer or director, an Elected Member, or member of the governing Board who is responsible for promoting the project to other Elected Members or Board members and stakeholders, and for being involved in important negotiation meetings.
  • Project director – A senior manager (for example, the chief executive officer or director) who is responsible for ensuring that the appropriate project management structure and adequate resources are in place to deliver the project objectives.
  • Project manager and project management team – The project manager, supported by a project management team, will be responsible for:
    • preparing the business case;
    • determining a budget for project delivery;
    • preparing project and procurement plans;
    • preparing an output-based specification;
    • reporting progress to the Board, council committee, or other governance body, and other stakeholders;
    • managing project risk;
    • appointing and managing external advisers; and
    • leading negotiations with bidders.

3.67
The composition of the project team will depend on the type of project, but could include service managers, finance managers, and external advisers (technical, legal, financial).

Use of external advisers and consultants

3.68
Public entities require a high level of expertise to implement partnering arrangements successfully, and face significant risks without this expertise. It will be vital for public entities to ensure that they have people on their staff with a high degree of commitment and the right level of skills and expertise before entering into this type of arrangement. However, it is likely that most public entities will have to use external expertise to manage specific aspects of the procurement – for example, to provide commercial, technical, financial, and legal advice, and to manage both the procurement process and aspects of contract management once the contract comes into effect.

3.69
The public entity will need to retain overall responsibility for effective project management and the major decisions that will be part of this, and external experts will need to be managed. Therefore, it is vital that the public entity ensures that:

  • it has internal experts that have been adequately trained to carry out this role effectively; and
  • the terms of reference, timescales, and basis of fees for external experts are clearly defined.

3.70
Concerns have been raised in the United Kingdom about the variable quality of advice provided to public entities by external consultants, which can have a direct effect on the length of time and cost of implementing PPP or PFI projects.31 It is therefore vital that public entities employing consultants conduct a rigorous process for their selection.

Retention of expertise

3.71
The public entity will need to plan for the establishment and retention of skills that will be required within its organisation throughout the life of the project. One concern often raised is that partnering arrangements lead to staff who have been involved in setting up and implementing the arrangements transferring to the private sector with their new expertise.

3.72
It is vital that the public entity has a programme in place for skills transfer and training to minimise this risk and the public entity’s possible reliance on the long-term use of external advisors.

Stakeholder involvement

3.73
Effective involvement of stakeholders will make a significant contribution to the quality and success of outcomes. In addition to the need to consider the views of stakeholders as part of preparing the business case, it will be important to ensure that key stakeholders are kept informed and involved as the project progresses. Relevant stakeholders should be identified from the outset, and arrangements for their involvement documented and given to them.

Selecting the preferred partner

3.74
It will be vital to ensure that the process for selecting a private sector partner is fair and transparent, and stands up to public scrutiny. Good practice guidelines for undertaking procurement in the public sector apply, including our own guidelines (Procurement: A Statement of Good Practice, June 2001).

3.75
Partnerships Victoria has published specific guidance for public organisations procuring capital works and services through a PPP.32 Australian guidance also exists for setting up project alliances.33 These sources of guidance may provide a useful reference.

3.76
Partnerships Victoria guidance emphasises the need to ensure that:

  • Sufficient time is invested in devising a well-thought-through selection process and high-quality bid documents.
  • Timelines are carefully managed. Failure to meet critical dates will probably increase bid process risk, and the costs of both the public entity and private sector bidders. However, as highlighted in the United Kingdom’s guidance,34 attempting to rush the procurement to achieve an early service start date will also be a mistake. In the case of contracts of long duration, the long-term disadvantages of such an approach are likely to far outweigh the benefits.
  • The selection process is properly resourced (see paragraphs 3.64 to 3.70).
  • The requirements of the public entity, and any constraints and hurdles to be met for the project to move forward, are well thought through, effectively communicated, and held consistent throughout the process.
  • The process is managed according to well-prepared probity principles and a probity plan (see paragraph 3.81).

3.77
The need for a complex and costly procurement process also raises legal risks for the process and the need for the public sector entity to ensure that it acts in accordance with any contractual obligations that the process may establish. It will be important to engage appropriate legal advice about the procurement process before the process starts.

Audit controls

3.78
It will be important throughout the process of making the decision to opt for a partnering arrangement, and during the partner selection process, to ensure that arrangements are in place for the involvement of internal and external audit. This involvement should provide assurance to the public entity and other stakeholders (such as Parliament) that the decision-making and selection processes stand up to public scrutiny.

3.79
Both financial and performance auditing will be required. Auditors will need to be able to review both the value-for-money assessment of the arrangement and the accounting treatment.

3.80
The evaluation of bids for a partnering arrangement will probably include a number of criteria that involve the exercise of informed judgement – such as an assessment of the extent of innovation and the ability of the public and private sector parties to establish a good working relationship – and there are significant risks that transparency and fairness may be compromised.

3.81
Existing overseas guidelines35 recommend preparing a comprehensive probity plan (which may be part of the procurement plan), to ensure that transparent and sound processes are in place and followed. The plan should include the means of ensuring that the process is consistent and fair and that conflicts of interest are declared and managed, and define how commercially sensitive information should be handled. It is advisable to appoint an independent probity auditor to provide assurance that the selection process meets public sector probity requirements.

16: See “Assessing value for money”, paragraphs 3.36-3.42.

17: Phillips Fox, Public Private Partnership (PPP) Services.

18: “One of the lessons that emerge from PFI/PPP projects is that the public sector does not just pass them over to private sector partners without having to think about them any longer. The time and effort of senior people in departments and agencies is, in fact, not released through PFI/PPP, so this vehicle should not be viewed as a denial of responsibility, but as an engagement of continuing responsibility in a new way.” Sir John Bourn (2004), in ‘The new agenda: how PFI/PPP is adapting to deliver future services’, PFI/PPP conference, National Audit Office, United Kingdom.

19: Partnerships Victoria guidance material, Contract Management Guide, June 2003.

20: Recently project alliances in other jurisdictions have introduced price competition, though there are currently very few examples and much debate about whether this runs counter to the philosophy of alliancing.

21: Partnerships Victoria policy, June 2000; Queensland Government State Department, Guidance Material for public private partnerships; New South Wales Government, Guidelines for Privately Financed Projects, November 2001.

22: Value for money “is the optimum combination of whole life cost and quality (or fitness for purpose) to meet the user’s requirement, and does not always mean choosing the lowest cost bid. It should not be chosen to secure a particular balance sheet treatment.” HM Treasury, Value for Money Assessment Guidance, August 2004.

23: Partnerships Victoria guidance material, Public Sector Comparator, June 2001, and Supplementary Technical Note, July 2003; HM Treasury, Value for Money Assessment Guidance, August 2004; and Quantitative Assessment User Guide, August 2004.

24: Partnerships Victoria guidance material, Risk Allocation and Contractual Issues, June 2001.

25: In conventional contracting, it is often better to obtain approvals before contractual commitments are made. However, in a partnering arrangement where it may be important to give the private sector partner the opportunity to be innovative with design, it may be appropriate to seek approvals after the contract has been awarded, which carries a risk.

26: The Australian/New Zealand Standard AS/NZS 4360:2004: Risk management.

27: “Public Private Partnerships, Governance and Accountability Issues”, Russell A Walker, Assistant Auditor-General, State of Victoria, National Conference of Parliamentary Environment and Public Works Committees, July 2004.

28: Report on Public Sector Agencies, June 2002.

29: Audit Commission, PFI/PPP Audit Guide 2001/2.

30: Practitioners’ Guide (June 2001), Partnerships Victoria guidance material.

31: PFI: meeting the investment challenge (July 2003), HM Treasury.

32: Partnerships Victoria guidance material, Practitioners’ Guide, June 2001.

33: Introduction to Project Alliancing (on engineering and construction projects), April 2003 update, Jim Ross, Project Control International Pty Limited.

34: Audit Commission, PFI/PPP Audit Guide 2001/2 (unpublished internal guidance).

35: New South Wales Government, Guidelines for Privately Financed Projects, and Partnerships Victoria.

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