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Adopting innovative procurement techniques: Obstacles and drivers for adopting public private partnerships in New Zealand

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Purpose ‐ Although public-private partnerships (PPPs) have been used internationally, the New Zealand Government has only recently started to consider using PPPs to deliver public assets and services. However, there is uncertainty about whether the New Zealand Government should actively enter into PPP arrangements. The government lacks a robust decision-making tool for assisting with choosing alternative procurement methods. PPPs are seen as risky, but innovative procurement options, with obstacles to overcome before they use can become common place. Nervousness about the use of PPPs requires the New Zealand Government to have a thorough understanding of the drivers and obstacles, and also to understand the applicability of international PPP experience to New Zealand. The purpose of this paper is to investigate the drivers and obstacles for adopting PPPs in New Zealand and provide details on how these obstacles might be overcome by using innovative country-specific solutions. Design/methodology/approach ‐ Semi-structured interviews with senior industry players and round table discussions are the research methods used. Findings ‐ The research found that the drivers for PPP adoption include acceleration of infrastructure provision, better risk allocation, whole of life cost savings, improved quality of services, access additional revenue sources, benefits for local economic and social development, and improved project scrutiny. The results show that the drivers appear to be more than securing private financing for public infrastructure. Greater efficiency in the use of resources has been emphasised by New Zealand practitioners. With regard to the apparent obstacles, research showed these to be: political, social and legal risks, unfavourable economic and commercial conditions, high transaction costs and lengthy lead time, problems related to the public sector and problems with the private sector. Possible solutions to these obstacles are derived from national and international research and assessed for their applicability to New Zealand. Research limitations/implications ‐ The paper presents discussion on the concerns expressed by the New Zealand industry about PPPs at strategic, institutional, and industry level. The identified obstacles and suggested solutions provide some initial guidance on how to proceed with PPP implementation in New Zealand. More research needs to be done to understand the various key facets identified here (e.g. tendering process, contractual arrangement, and risk allocation) and their wider effects. The research is based on interviews with a limited number of senior industry respondents, along with the general results of three industry round table discussions. Therefore, follow-on interviews need to be conducted with private sector partners, sponsors and funding bodies, in order to gain a wider view of the issues under investigation. Originality/value ‐ The findings of the research are of assistance to decision makers in both the public and private sectors in New Zealand. By understanding the drivers and obstacles for PPP adoption, and posing solutions to these obstacles, the New Zealand construction industry might be in a better position to adopt PPP schemes.
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Keywords: Construction industry; Government policy; Infrastructure; New Zealand; Partnerships; Private sector organizations; Project delivery

Document Type: Research Article

Publication date: 11 October 2011

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