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Market Potential for PPPs in New Zealand

 While PPPs are well established internationally, to date traditional procurement models20 have been favoured in New Zealand. There have, however, been a number of examples of partnerships between the public and private sectors to finance the delivery of infrastructure projects in New Zealand, including:

 • Auckland Harbour Bridge, completed in 1959, financed privately by user tolls.

• Lyttelton Tunnel, completed in 1964, financed privately by user tolls.

• Tauranga Harbour Bridge, completed in 1988, financed privately by user tolls.

 • Route K expressway in Tauranga, completed in 2003, a two lane expressway linking SH29 directly with downtown Tauranga, funded by Tauranga District Council as a toll road.

• ALPURT B2 Northern Gateway Toll Road, completed in 2009, a realigned extended expressway between Orewa and Puhoi, funded by the New Zealand Transport Agency as a toll road.

• Tauranga Eastern Motorway, a proposed motorway from Te Maunga junction to Paengaroa, for which design is currently being finalised, is expected to be a toll road.

• Various university student accommodation projects, including the Massey University ‘10-years scheme’.


 In addition, recent developments in New Zealand indicate a greater willingness and need for Social Infrastructure PPPs:

• In November 2003, the Land Transport Management Act was passed, empowering public road controlling authorities to enter into concession agreements between a third party and a public road controlling authority relating to the construction or operation of roads.

• In a September 2007 speech, National Party Leader John Key emphasised that PPPs could play an effective role in building more infrastructure assets, especially in the property sector and involving areas such as prisons, schools and hospitals21.

• In December 2007, Kaipara District Council awarded a $53 million Design Build Finance and Operate (DFBO) contract for delivery of wastewater services to the town of Mangawhai22.

• In June 2008, the Waterview Connection Procurement Steering Group concluded that PPPs can offer value for money through disciplines around costing, defining objectives and risk allocation together with the performance incentives that arise from having private finance at stake23.

• In March 2009, the Treasury established a National Infrastructure Unit (NIU) to formulate a long-term infrastructure plan for New Zealand24.

• In August 2009, in a speech to the New Zealand Council of Infrastructure Development conference, Hon. Bill English confirmed that the Government will consider a PPP as a mechanism to procure the next prison25.

• In October 2009, the NIU released ‘Guidance for Public-Private Partnerships (PPPs) in New Zealand’, a paper that outlines the Government’s approach to procuring infrastructure via PPPs26.

• In October 2009, Local Government Minister Rodney Hide announced intended reforms of the Local Government Act. A part of the reform is aimed at providing greater flexibility for the use of PPPs for the provision of water services thereby allowing the private sector to design, build, finance and operate water treatment facilities for councils up to a 35-year period27.

• In October 2009, Transport Minister Steven Joyce requested a review of the Land Transport Management Act. As part of the review, measures for reducing the barriers to PPPs to fund transport projects are to be examined28.

• In December 2009, Education Minister Anne Tolley announced that the Ministry of Education and Treasury are assessing the suitability of PPP models for building and maintaining school properties29.

• In March 2010, the NIU released the National Infrastructure Plan, which confirms that the Government intends to use PPPs where they represent value for money for tax-payers30.

In addition to the above, there is compelling rationale for the public sector to consider the use of PPPs to fund infrastructure investment in New Zealand:

• The New Zealand Government considers investment in infrastructure to be a key pillar in lifting New Zealand’s productivity31. The National Infrastructure Plan outlines a “step change in the level of infrastructure investment” with $7.5 billion allocated for new capital projects over five years32.

• The New Zealand Council of Infrastructure Development has estimated the Government and local authorities will spend about $70 billion on infrastructure development and maintenance in the next 10 years33.

• PPPs allow Government to meet the cost of infrastructure development from future incomes, rather than current taxation and direct borrowing34.

• Given other pressures on the Government’s operating account, it is focused on delivering services more cost-effectively and with less capital. It has acknowledged that PPPs can provide stronger incentives to minimise whole-of-life costs and improve service quality than is possible within the public sector35. This conclusion is supported by international studies which have shown that PPPs can lead to cost efficiencies versus traditional procurement models36.



20 Such as design & construct, alliance, fixed price/turnkey

21 Simcox C, “Key to Infrastructure Assets: Public-Private Partnerships”, Dominion Post, 02 September 2007

22 Sourced from http://www.kaipara.govt.nz/kaipara/notices.htm#waste_scheme

23 Report of the Waterview Connection Procurement Steering Group, “Progressing the Waterview Connection as a Public-private Partnership”, 26 June 2008

24 See http://www.treasury.govt.nz/releases/2009-03-02i

25 Hon Bill English’s speech to the New Zealand Council of Infrastructure Development, note 2

26 See http://www.infrastructure.govt.nz/publications/pppguidance

27 NZPA, “Hide announces proposed changes to local government act”, 28 October 2009, available at http://www.stuff .co.nz/national/politics/3007715/Hide-announces-proposedchanges- to-local-government-act and http://www.voxy.co.nz/national/potential-better-water-services-changes-local-government-act/5/28732

28 Steven Joyce, “Land Transport Management Act to be Reviewed”

29 See http://beehive.govt.nz/release/ppps+being+considered+new+school+property

30 National Infrastructure Plan, March 2010, p.67, available at http://www.infrastructure.govt.nz/plan

31 Minister’s Executive Summary, Budget 2009, pg. 1, available at http://www.treasury.govt.nz/budget/2009/execsumm

32 National Infrastructure Plan, March 2010, p.11, available at http://www.infrastructure.govt.nz/plan

33 Venter, N., “Rich Pickings in Infrastructure”, Dominion Post, 18 August 2009, available at http://www.stuff .co.nz/business/industries/2762082/Rich-pickings-in-infrastructure

34 National Infrastructure Plan, March 2010, p.67, available at http://www.infrastructure.govt.nz/plan

35 Ibid

36 Allen Consulting Group, “Performance of PPPs and traditional procurement in Australia”, 30 November 2007

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