Public Private Partnerships Essential To Providing Infrastructure

 

New RICS report looks at the role of PPPs
 
At a time when Government is introducing public spending cuts post-financial crisis, Public Private Partnerships (PPPs) will continue to play an essential role in redressing the infrastructural investment gap, suggests a new report from RICS.
 
The Future of Public Private Partnerships finds PPPs have proven to be an effective method for the procurement of infrastructure projects over the last ten years. However, the research also contends that steps must be taken in order to establish a best-practice framework to ensure the successful provision of this procurement model.
 
The report maintains that constraints on Government spending and the focus on tackling national debt will increase the requirement for substantial volumes of private sector capital to meet essential infrastructure needs. It also suggests the proposed establishment of a National Infrastructure Bank will support PPPs and help reduce borrowing costs on essential infrastructure projects.
 

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The Future of Public Private Partnerships reflects the views and experiences of key stakeholder groups across five key PPP markets, and suggests the following:
 
  • Government support is fundamental to the functioning of a robust PPP market. This support can take the form of clear and consistent regulatory and legal frameworks as well as the creation of an infrastructure project pipeline to improve transparency and encourage private sector investment.  
  • Elongated and complex tender processes result in disproportionately high bid costs, discouraging contractor participation and undermining the credibility of ‘competitive tendering’.
  • The provision of robust risk transfer and whole-life-cost data relative to conventional forms of procurement is essential to ensure the credible and objective evaluation of PPP projects so that true ‘value for money’ evaluations can be undertaken.
  • In order to secure future private investment, particularly from institutional investors, the construction industry needs to communicate more clearly the investment potential of infrastructure as an investment asset class including risk-return characteristics and diversification benefits. Additionally, it is essential to improve the transparency of infrastructure investment markets to enable performance benchmarking across asset classes and to create innovative investment vehicles to best match investor risk profiles and investment capacities.
 
Commenting on the report, David Bucknall, Chairman, RICS UK Construction/ QS Board, said:
 
“While there is no denying PPPs have suffered reputational damage in the past they remain a viable and important tool for helping us meet the UK’s infrastructure challenge. Amid fiscal austerity, it is critical for government, financial institutions and the construction industry to work together to develop best-practice for partnership-based procurement. This must now evolve to deliver the government’s objectives of 20 per cent reduction in the whole life cost of built infrastructure.”

     
   
 
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