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Legislative Assembly for the ACT: 2004 Week 08 Hansard (Wednesday, 4 August 2004) . . Page.. 3407 ..

argument relates to whole of life asset management benefits, costing and budgetary certainty. Continuous monitoring over the life of the contract should ensure the ongoing provision of efficient services.

I refer, next, to the risks inherent in PPPs. Three risks come to mind—governance and quality controls, lack of accountability, and complexity. Much has been written about quality controls and a lot of concern has been expressed about the lack of accountability. Once a PPP arrangement has been signed the private sector and, to a degree, the government partner, hide behind its commercial-in-confidence clauses to prevent transparency and accountability. Auditors reflect a great deal on those aspects.

I refer to the final risk of PPPs, that is, their complexity. One of the gentlemen who spoke at the National Conference of Parliamentary Environment and Public Works Committees said that he went through a contract that was some inches thick. It looked good until he got down to about the fifth inch where he found a subclause, a sub-paragraph to that subclause and a sub-sub-paragraph to that subclause. He found that there was no risk to the private sector partner and that the risk was to be carried by the state. However, all those facts were hidden in the contract. He said that that was an example of a complex contract and that people could get burned if they were not aware of all the facts.

Professor Graeme Hodge from the Centre for the Study of Privatisation and Public Accountability at Monash University argues that while PPPs purport to transfer micro-risks from governments to private contractors, it is not those risks that are the most troublesome. What is of concern is the fact that parliaments have abdicated their responsibility of providing governance for PPPs as well as clear and honest assessments of public works provisions through that policy.

In simple terms, when a government signs up for a long-term PPP arrangement it is not future elected governments that govern; it is the long-term PPP legal contract. Professor Hodge argues that the degree to which this may fetter the discretion of future governments to make decisions in the public interest has seen little debate to date. What he is saying is that there has not been any discussion about it and that perhaps it is time we discussed it.

He goes on to argue that the notion that PPPs represent a quantum step ahead for the provision of public infrastructure must be tested. It has not been adequately tested. The first claim is that PPPs can reduce pressure on government budgets and supply new infrastructure earlier and cheaper than otherwise would have been possible. Hodge argues that this has not always proved to be the case and that the pressure on government budgets has simply changed from the short-term pressure of capital funding to the long-term pressure to pay off the government’s credit card.

The exception is when governments sign up to PPP deals that will be paid for by users, for example, toll roads. In that instance the government is not using its own credit card; effectively it is using the cards of the general public. In short, PPPs do not provide the magical source of new infrastructure funds. The second claim that PPPs can supply new infrastructure earlier and cheaper than otherwise would have been possible is still an open question. The evidence on both sides of the argument is pretty thin. There just is not enough quantitative information relating to PPPs, in particular, to risk experience and

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