Question

Question 1
-You are a member of the Partmerships Victoria Team managing the procurement of the Footscray Hospital. It has been announced that this project will be delivered as a PPP.
-You have been asked to provide a briefing note to the Treasurer addressing the following questions from his Chief-of- Staff:

-Why is this hospital being delivered as a PPP？

-The Northern Beaches Hospital PPP appears to have faced some problems and is now subject toa Parliamentary Inquiry. Will we encounter the same difficulties and how are we approaching the scoping of the project?

-It is understood that based on previous precedent, the private sector is likely to use non-recourse project finance and set up a special purpose company; what does this mean, what risks does it present for government and how will we protect ourselves?

Answer 1

PPP refers to Public Private Partnership. It is a funding model in which Local or state government and Private sector comes together for complete the project. In this model Government provides resources to the Private sector to operate and complete the project and private sector invest its funds and develops said projects.

There may be various reasons for adoption of PPP For Footscray Hospital.

there may be possibility that government lacks fund to invest in the hospital.Hospital may be better equipped and developed through PPP. Project can be efficiently completed by PPP . Cost incurred by government on the project can be saved.It will help to provide better public services. completion of project on time can be done with the help of PPP.

Government May inccure extra cost in Development, bidding and ongoing costs in PPP projects compared to Traditional type of financing of the project. Private sector will perform only for what it is paid to perform and no more than that, government will be assumed to be accountable for the quality of the project by the public. All these difficulties can be faced, For reducing above difficulties we should monitor the work frequently for quality purpose, we should try to reduce the cost incurred unnecessary during bidding and development.

non-recourse project finance means Financing the project with the debt in which if company defaults payment to the debtors then debtors have rights on the equity assets of the company and special purpose company means setting up a company like joint venture in which different parties comes and forms entity for specific project and entity gets dissolve after the completion of the project or dispute among the partners. It may be risky in the form of High interest payment to the debtors from the company and in case if default governments assets may be at risk. For overcoming this risk it should be take care that company performs project implementation efficiently and effectively and the financing of the project should be balance of the equity and debt and debts should be issued only for the security of specified assets.