Finance Minister Bill English announced yesterday that any public sector decision-making on infrastructure projects with a whole-of-life cost of more than $25 million would have to consider and evaluate alternative procurement options.
That included the public private partnerships (PPPs), he said in a speech.
The partnerships would only be appropriate for some projects but the Government believed putting that to the test would increase price competition and ensure that taxpayers received the best possible value for money.
"Agencies will have to take a more consistent approach to the development of their business case with a focus on clearly displaying the economic and financial rationale for any investment," he said.
"In addition, they will be required to explicitly report back to Cabinet on the results of major investments so the Government can ensure it is getting the expected benefits," Mr English said.
Business New Zealand chief executive Phil O'Reilly said having private enterprise integrated into public developments brought a win for everyone.
Private expertise, in partnership with public expertise, could bring more creative outcomes in the types of developments that were possible to the benefit of local communities.
"PPPs can unlock value so that more investment can be made in valuable public services. In a small country it makes sense for the public and private sectors to be working in partnership."
A greater ability for the private sector to contribute would also help prospects for enhanced economic growth, he said.
In his speech, Mr English indicated there would be plenty of opportunities for PPPs.
The Government wanted to see as much private sector expertise and discipline used as possible.
It believed there were big gains to be made by exposing the public sector to private sector skills and techniques, especially in the areas of risk management and better assessment of whole-of-life costs.
Already, the Government had announced its intention to build a PPP prison at Wiri, in south Auckland, subject to consents and a successful tender process.
It was proceeding with a PPP for new school property and had developed the ultra-fast broadband project with a commercial structure that partnered public and private investment, he said.
Initial investigations showed those projects would provide savings for taxpayers, and other benefits.
The Government would enter into PPPs only if they worked and delivered value for taxpayers.
In Australia, where about 50 PPP projects worth about $30 billion had been completed since 2000, PPPs still only made up about 20% of projects.
However, Mr English acknowledged that New Zealand was smaller and that meant there would be more small and medium-sized projects, and there was unlikely to be the same constant pipeline of PPP projects there was in Australia.
"These projects are more likely to be both more varied and of a more one-off nature than the Australian market."
That would mean good entry-level PPP opportunities for smaller or emerging firms, allowing them to move up the value chain and extend into Australia, he said.
Mr English also announced it was his intention to release a Government investment statement, which would set out the Crown's assets and liabilities, identify any emerging issues and state how the Government planned to manage its large and growing investment in taxpayers' assets.
The first investment statement would be released before the end of the year, bringing that aspect of the Government's financial management into line with other regular fiscal reporting.
