Operating water infrastructure using public private partnerships

Water Australia Victoria

From the late 1990s, water corporations used public private partnerships (PPP) to deliver a number of water and wastewater treatment infrastructure projects. PPPs provide an opportunity to achieve value for money by contracting the private sector to deliver and operate facilities over an agreed period, while managing contractually allocated risks.

This audit assessed the operational effectiveness of four PPPs:

  • AQUA 2000 project—managed by Coliban Water
  • Campaspe Water Reclamation Scheme—managed by Coliban Water
  • Ballarat North Water Reclamation Plant—managed by Central Highlands Water
  • Wodonga Wastewater Treatment Plant—managed by North East Water.

There are gaps in governance and contract management in all four audited projects. The effectiveness of the water corporations’ contract management varied, however, none could demonstrate a fully effective approach. Shortcomings in the water corporations' risk management, combined with a lack of board oversight, limits the board's assurance and visibility of the operational effectiveness of each project.

Of the four audited projects, only Central Highlands Water's contract administration for the Ballarat North Water Reclamation Project substantially complied with Partnerships Victoria requirements. However, there is scope for all water corporations to improve monitoring of service providers' financial health and broader project risks.

The failure to identify risks associated with the voluntary administration of the Wodonga Wastewater Treatment Plant service provider in 2012 demonstrated shortcomings in the contract management of the PPP, and in board and Department of Treasury and Finance (DTF) oversight.

The Ballarat North Water Reclamation Plant and the Wodonga Wastewater Treatment Plant projects have been effective in providing a standard of service that matches the costs incurred. Coliban Water's decision not to reduce service payments for performance failures under its two PPP contracts undermines its ability to derive the services at the contracted standards and price. This, combined with a lack of reliable project benchmarking during the procurement phase and increased costs for its customers due to contract changes, means that Coliban Water is unable to demonstrate that its PPP projects have delivered value for money.

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