Output‐based specifications for PPP projects: lessons for facilities management from Australia

Abstract

PurposeThe purpose of this paper is to focus on the challenges faced by the public and private sectors in developing output specifications for Australian public private partnership (PPP) projects. In particular, this study aims to examine how the stakeholders (including facilities managers) should cater for future changes in output specifications and make them flexible enough to meet the evolving project objectives.Design/methodology/approachThe research is based on 19 semi‐structured interviews with key stakeholders from the public and private sectors in three States of Australia where PPP procurement has been used, including New South Wales (NSW), Queensland and Victoria. The results are triangulated with relevant literature for supports and contrasts.FindingsFor PPP projects, a good set of output specifications is conducive to the achievement of value for money, innovation, risk transfer, whole life asset performance through a clear abatement regime and an effective linkage of performance criteria to the payment mechanism. For existing specifications, it was found that too many and complex KPIs were specified, which were difficult to monitor, measure and implement by the client. Very prescriptive specifications hindered innovations and did not allow appropriate risk allocation. Further, the research study suggests that after the global financial crises, the private sector had less appetite to take the patronage risks in road and rail PPP projects. To mitigate these pitfalls, it is imperative that output specifications need to be aligned with the type of PPP projects they represent; in particular foreseeable changes should be addressed by some pre‐agreed framework to facilitate negotiation.Originality/valueThe significant contribution of this research is the identification of the common issues faced in drafting output specifications for Australian PPP projects. Stakeholders of future PPP projects should find the lessons useful for achieving value for money and appropriate risk transfer, stating the user requirements through clear and concise output specifications rather than input or prescriptive specifications in procuring social and economical PPP projects. Their relationships with facilities management are highlighted.

The Implementation of Key Performance Indicators in the Malaysian Private Finance Initiative Projects

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Approaches to Risk Identification in Public–Private Partnership Projects: Malaysian Private Partners’ Overview

“…Public-private partnership (PPP) in developing countries has become increasingly popular as a way of involving the private sector in the development of public infrastructures (Javed et al 2013). The special characteristics of PPP are competitive bidding processes, private sector innovation and expertise, and risk sharing between public and private sectors (Adams et al 2006;Cheung and Chan 2011).…”

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“…'PPP designers cannot ignore new technologies since they can either significantly improve the profitability of a project or adversely affect any project that uses obsolete technology' (Estache et al, 2007, p. 12). Javed et al (2013) while reviewing PPP projects in Australia, a mature PPP market (Royal Institution of Chartered Surveyors, 2011), identified that output specifications (or design freedom) provided scope for the private sector to innovate in the design, construction and operational phases of PPP projects. They refer to innovations with respect to the rational use of energy and water supported by innovative building design, commercial use of available land and space, inclusion of flexibility in the use of space, automation and other ICT applications.…”