The private sector is eyeing Western Australia’s new hospitals as prime candidates for public private partnerships (PPP), which involve the private sector funding, building and running what has traditionally been government infrastructure.
The private sector is eyeing Western Australia’s new hospitals as prime candidates for public private partnerships (PPP), which involve the private sector funding, building and running what has traditionally been government infrastructure.
Speaking at a CEDA seminar earlier this month, Macquarie Bank divisional director Mick Lilley said WA had a “huge requirement for health care infrastructure”.
“You have an opportunity to not just build the same hospital using different procurement methods, you have an opportunity to think through how best to provide health care,” he told the seminar.
Multiplex Constructions WA managing director, John Flecker, said his company had been involved in a number of PPPs for health infra-structure and they appeared to work very well.
Department of Treasury and Finance director Robert Mianich said PPPs in WA would most likely involve social infrastructure, since the Gallop Government had ruled out toll roads.
“One obvious project that requires investigation is the new 600-bed tertiary hospital earmarked for the southern suburbs,” Mr Mianich said in reference to the planned $420 million Fiona Stanley Hospital.
The Government also plans to spend about $350 million on the redevelopment of Sir Charles Gairdner Hospital, and plans several smaller hospital projects.
The supporters of PPPs say they deliver financial certainty to government, since any blowout in construction or operating costs is borne by the private sector.
They also believe PPPs can foster improved services, since the private consortium that designs and builds the facility is responsible for ongoing maintenance and service delivery.
In other states, PPPs have been used for everything from new hospitals to new schools.
In the NSW Schools Project, a consortium led by ABN Amro was responsible for funding, designing, building and managing nine new schools. The consortium’s services extend to provision of photocopiers, library facilities and building maintenance.
In the health sector, a prime example is the 229-bed Berwick Hospital in Melbourne.
A private consortium, also led by ABN Amro, is responsible for design, construction and ongoing facilities management while the state is responsible for clinical services.
WA has limited experience with PPPs, with the latest being the $195 million district court project in the city.
The Western Liberty consortium, led by ABN Amro and Multiplex, started work on the project in June. As well as design and construction, they will provide key services, including custodial and security, for up 25 years.
Attorney-General Jim McGinty approved the court project but, wearing his health minister’s hat, is not so keen on hospital projects.
He told WA Business News the Government was receptive to private sector involvement in health projects but this would not extend to provision of services in hospitals.
Mr Flecker said this was a major impediment to a PPP.
“The difficulty we face in WA at the moment is service provision with linen, laundry, catering and cleaning. Under government policy they are either public or they are across the whole health portfolio,” he said.
“They can’t be taken out as part of one project. If that can be solved, then health is certainly a big area where PPPs should work.”
Speakers at the CEDA seminar agreed that an ongoing issue was managing interaction between competing bidders and the government agency sponsoring the project.
“The big criticism I have of PPPs being done in Australia is that they are still being run in an adversarial manner,” said Mr Lilley.
He said that, while everyone wanted a transparent deal, Macquarie was frustrated by its inability to talk with end-users of its projects, which made it hard to come up with innovative design and service ideas.
Mr Flecker wholeheartedly supported this comment.
“You need to be able to tell the people as they are bidding, that, yes, you are going down the right track. Otherwise everybody is wasting their time and effort,” he said.
He suggested a “soft process” for selecting the partner, then using an “alliance type format” to firm up the price.
Mr Flecker said the interactive bidding process for Perth’s district court project was constructive but “not as good as it could have been”.
Mr Mianich said that process needed to be extended further in the next project. “I would like to see a bit more interaction at the bid stage in regard to commercial aspects as well as design aspects,” he said.
However, he cautioned that losing bidders would criticise the process if government started sharing ideas with competing bidders.
Mr Mianich said participants in PPP projects should not underestimate their complexity.
“I’ve also noted there can be a bit of resistance to change in terms of how the [government] agencies approach such deals, because quite frankly they are more work,” he said.
