PPP revival expected in response to construction surge for Brisbane Olympics

Infrastructure projects delivered by public–private partnerships (PPPs) in Queensland peaked in 2008 and have been in decline ever since.

However, seven years out from Brisbane hosting the 2032 Olympic and Paralympic Games, attention has shifted to how this significant infrastructure task will be financed and delivered.

The Queensland and Federal Governments have committed over $7.1 billion towards venue development, including a proposed new 63,000-seat stadium at Victoria Park and a major National Aquatics Centre in Brisbane.

While public funding will play a central role in delivering this infrastructure, there is growing interest in the role PPPs could play to manage costs, accelerate delivery, and secure long-term legacy.

Why PPPs are back on the agenda

Australia has a mixed but largely positive history with PPPs.

Projects such as the Gold Coast Light Rail and the Sunshine Coast University Hospital have shown that, when properly structured having regard to the motivations and risks that are peculiar to each infrastructure project, PPPs can deliver major infrastructure successfully and with appropriately balanced risk allocation.

For 2032, the scale and visibility of the Games introduces new challenges and amplifies those that already exist: immovable completion dates, high community expectations, and fiscal pressure on both State and Federal budgets. These factors make PPPs attractive because they can:

• share delivery and operational risks with private sector partners;
• inject private capital into projects that might otherwise strain public budgets;
• drive innovation and efficiency through whole-of-life design and maintenance responsibilities to ensure assets are sustained at a high standard; and
• support legacy planning by introducing long-term management frameworks to ensure venues remain useful and productive community assets beyond 2032.

How PPPs might be applied

The most likely candidates for PPP delivery are the major venues – the Victoria Park Stadium, the Athletes’ Village, and the Aquatics Centre. Each project involves significant capital outlay, long-term operational potential, and heightened public scrutiny.

The appropriate PPP model ultimately depends on the extent of private sector participation; with contractor involvement ranging from Design-Build-Operate models through to fully integrated Design-Build-Finance-Operate/Maintain structures.

The Design-Build-Finance-Operate/Maintain (DBFO/M) model is often viewed as the most effective for large-scale public infrastructure projects. By involving private contractors not only in project design and delivery, but also in the financing process, DBFO/M structures enhance the financial accountability of private contractors and achieve a more even distribution of risk between the private and public sectors. This model also allows public agencies to deliver projects without the pressure of significant upfront capital investment, with the private sector financing the capital cost during construction.

Considering the fixed deadlines and significant upfront investment burden of Olympic infrastructure, implementation of a DBFO/M model could provide an arrangement that reduces construction and design risks for the public sector whilst also ensuring long-term asset performance, aligning with the legacy goals of the 2032 Olympics.

We do not expect upgrades to existing venues to be suited to PPP delivery. Their lower capital value and shorter delivery timeframes mean the additional transaction and procurement costs associated with PPP structures mitigate potential benefits.

Implementation challenges for contractors

While PPPs offer advantages, several risks will need to be managed carefully:

• Procurement timing: Procurement processes for PPPs are longer and more complex than traditional contracting. With the Games fast approaching, timing is critical. Given the general lack of recent PPP experience in the State, contractors' procurement teams will need to be working harder and earlier.
• Community expectations: Proposed stadium sites, including Victoria Park, have already attracted community and cultural heritage concerns. PPPs will not remove these issues and the inclusion of private partners may add complexity if disputes arise.  Contractors will need to have these risks front of mind and ensure that contractual terms align with a contractor's ability (or inability) to control or influence these factors.
• Fiscal transparency: PPPs can attract political scrutiny if structured in a way that obscures the true cost to taxpayers. Contractors will need to be prepared for that scrutiny to flow down to them.

Summary

The critical issues will lie in the detail of risk allocation within the PPP contracts.

Construction timelines will be immovable given the fixed Games deadline, increasing the likelihood of strict completion regimes, liquidated damages and robust performance securities.

Contractors can expect greater scrutiny on whole-of-life design responsibility, while financiers will focus on quality of assets, certainty of payment streams and government support arrangements.

Participants considering involvement in Olympic PPPs should begin preparing now for complex procurement processes, strict compliance obligations and heightened political oversight.

Authors

Andrew Kelly | Partner | +61 7 3338 7550 | akelly@tglaw.com.au

Thomas McKillop | Special Counsel | +61 7 3338 7530 | tmckillop@tglaw.com.au

Francesca Barnes | Senior Associate | +61 7 3338 7989 | fbarnes@tglaw.com.au