28/01/2010 - 00:00

Government to roll-out at least four PPPs

28/01/2010 - 00:00

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THE state government last week started to flesh out its long-awaited plans for public private partnerships, revealing that it was likely to pursue PPPs in the health, education, correctional services and utilities sectors.

THE state government last week started to flesh out its long-awaited plans for public private partnerships, revealing that it was likely to pursue PPPs in the health, education, correctional services and utilities sectors.

Treasurer Troy Buswell said the government would “actively pursue PPPs when they offer value‑for‑money and are in the public interest”.

“This year, expressions of interest will be sought from industry for at least four PPPs in these important areas,” he said in a statement.

Mr Buswell said a number of other infrastructure projects would progress through planning stages and be released to the market during 2011.

This represents a major development for WA, but is a modest step compared to Labor governments in other states, which are proceeding with PPPs in schools, hospitals, roads, prisons, water supply and other sectors.

That trend has not stopped WA’s labour movement, and in particular the powerful Liquor, Hospitality & Miscellaneous Union, from trying to characterise the WA government as extremist and ideologically driven.

The attack has also ignored the success of the one major PPP project that has proceeded in WA in recent years.

The $195 million District Court building in Perth’s CBD was developed by a private consortium that was appointed by the former Labor government.

The Western Liberty consortium, led by banking group ABN Amro and construction company Brookfield Multiplex, designed, funded and constructed the building and is responsible for running it for 35 years.

Supporters of PPPs believe that combining design, construction, funding and operation delivers more certainty for government and a more efficient outcome.

Mr Buswell said PPPs were part of the state government’s push to bring forward infrastructure investment and maximise value with innovative delivery of infrastructure and services.

Specific PPP projects in WA are likely to include hospitals, water supply facilities and prisons.

Water Corporation chief executive Sue Murphy told WA Business News last year that she was evaluating a PPP for its Mundaring water treatment plant, worth up to $300 million.

The East Rockingham wastewater plant and water supply projects in the West Pilbara may also be developed as PPPs.

In the health sector, Health Minister Kim Hames said earlier this month the planned Midland Health Campus may be run as a PPP, along similar lines to the Joondalup Health Campus

However the first cab off the PPP rank in WA will be the private operation of a new 80-bed Young Adults Prison.

Outlining the rationale for this PPP last week, Corrective Services Minister Christian Porter said traditional approaches for rehabilitating with young adult offenders had not worked well.

“It is for this reason that the state government has decided to engage the private sector in what will be a unique offender facility with a focus on employment, training and offence-specific programs,” he said.

Mr Porter said the treasury and corrective services departments had engaged accounting firm KPMG to undertake a detailed procurement options analysis on the Young Adults Prison.

He said the management of the Young Adults Prison would be based on the private operation at Acacia Prison.

Acacia costs about 20-30 per cent per annum less to operate than prisons in the public system, with the average prisoner costing $187 per day to accommodate compared to $295 in the public system.

“Private industry will be used for the facility management and support and custodial services at the 80-bed prison, to be located at the existing Rangeview Remand Centre site,” Mr Porter said.

He said the government would use standard public sector procurement for two construction projects, specifically the $30 million expansion of the Banksia Hill Detention Centre in Canning Vale and Acacia Prison.

The former project will enable the state government to convert the Rangeview Remand Centre in Murdoch into the specialist Young Adult Prison.

Mr Porter also said the $232 million Eastern Goldfields Regional Prison would be designed and constructed by the private sector, but a decision on the method of custodial service delivery had not yet been made.

Labor corrective services spokesman, Paul Papalia, reacted to the announcement by saying the Barnett government had broken an election promise.

Mr Papalia said a letter sent to the WA Prison Officers Union before the 2008 election from Liberal Party state director Ben Morton included a commitment to a publicly built and staffed young offender prison.

“The Liberal Party’s Young Offender Prison will be built in the public sector and staffed by publicly employed prison officers,” Mr Morton wrote to a WAPOU branch representative.

Mr Papalia said the government’s backflip on the privatisation of the prison suggested its only motivation was to find the cheapest option.

He disputed the success of the privately run Acacia prison.

“[Acacia] prison is unable to meet contractual obligations for prisoner contact time because it is holding hundreds more prisoners than its design capacity,” Mr Papalia said.

LHMU state secretary Dave Kelly went further, claiming plans for several PPPs “is actually an orgy of privatisation on a massive scale”.

“The quality of service in schools and hospitals will only be made worse for taxpayers. And workers will be paid less and treated worse by private firms who are only looking to make a fat profit from their operations.”

Labor governments in other states, particularly the Brumby government in Victoria, evidently do not share these concerns, as they proceed with numerous PPP projects.

In the corrective services sector, the major PPP project is the Ararat prison development in Victoria.

Last year, the Brumby government short-listed three private consortia for the design, construction, financing, and ongoing maintenance over a 25-year term for the 350-bed expansion.

Victorian treasurer John Lenders said the shortlist of bidders had been decided following a stringent evaluation process.

“We have successfully worked with private sector consortia through PPP arrangements on several prison projects and this new project will build on these,” he said.

The NSW government has also used PPPs for prison projects

The 220-bed Long Bay Prison and Forensic Hospitals were opened in February last year after being developed by the PPP Solutions consortium, comprising Brookfield Multiplex, Honeywell, Compass Group, and Babcock & Brown.

In other news last week, the Victorian government has adopted a new commercial arrangement for its latest PPP project. It awarded the Southern Way consortium a contract to build and deliver the $759 million toll-free Peninsula Link road project.

Southern Way, comprising Abigroup, Bilfinger Berger and the Royal Bank of Scotland, will finance and build the roadway and operate it for 25 years.

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