Value Decisions and SFG Consulting are jointly undertaking corporate finance work on the financial analysis of government procurement decisions, in particular Public Private Partnerships (PPPs). The aim is to significantly improve the policy and financial management decision-making process of governments worldwide. This is a serious issue especially post GFC.
Our joint workings are located at : www.business.uq.edu.au/staff/ppp
- At the request of Queensland Treasury Corporation, presented our work to the CEOs of all central borrowing authorities in Australia
- Presented our work at several universities
- Obtained positive feedback from leading professional corporate leaders and academics in Australia
- Sought publication of our work in a leading international finance journal
Governments principally undertake Net Cost (Cash Outflow) Projects:
- The procurement of infrastructure or the delivery of services require net cash outlays by the public sector
- This is quite different to financial investments
Determining an appropriate discount rate for Net Cost Projects has for many years been a significant and important issue of contention for governments worldwide (not just Australia), particularly in the assessment of procurement options involving PPPs.
Our objective is to ensure that the methodology is consistent with standard valuation theory, is a simple extension of the National Guidelines, and can be understood and practically applied.
The aim is to ensure Infrastructure Australia and governments worldwide adopt our approach.
In Australia :
- December 2008, Infrastructure Australia released, the ‘National Public Private Partnership Guidelines: Discount Rate Methodology Guidance’ (“National Guidelines”)
- The National Guidelines set out an approach for evaluating PPPs, which is designed to overcome the perceived limitations of traditional valuation approaches in this setting
- The National Guidelines are based on the framework previously proposed by the Victoria and New South Wales state governments . It is clear the National Guidelines require modification.
- The main concern with the National Guidelines is the practice of using a modified form of CAPM
- The modification is not required as CAPM values the liabilities correctly
18 March 2010 – 4th Annual Queensland Infrastructure Summit
A Framework for Assessing Discount Rates for Public Private Partnerships
- Review of Infrastructure Australia’s methodology for determining the discount rate for net cost and net revenue projects
- Issues observed with the current Infrastructure Australia National PPP Guidelines’ approach
- Proposed modifications to the current methodology
- Alignment with accepted valuation theory and practice
Involvement: Jointly presented with Professor Stephen Gray
28 October 2010 – FTA 2010 Congress
Future options for PPPs and other procurement methods
- Evolving PPP models to lower financing costs whilst retaining private sector benefits
- Latest procurement methods
- Relative merits of alternative models measuring the value to the community of government supported infrastructure
- Is there value in existing PPP marketplace?
Involvement: One of the speakers