The Partnership-led PPP model: Rebalancing influence in Public-Private Partnerships
Public-Private Partnerships (PPPs) have long been a cornerstone of infrastructure delivery in Australia, but the traditional model is showing its age. One of its most persistent flaws is that design and construction contractors often dominate the bidding and design process, sidelining the interests of those focused on long-term service outcomes. The Partnership-led PPP model offers an alternative that restores balance by putting service delivery and long-term partners at the centre of procurement.
How it works
Under a Partnership-led PPP, government begins by selecting its long-term partners — the operator and foundation equity investors — and establishes a jointly owned partnership entity. Government awards the service delivery contract directly to this entity, creating a guaranteed revenue stream for delivering services. Only after this step does the entity design the infrastructure, competitively tender construction works in construct-only packages, and procure the balance of debt and equity finance.
Key differences from traditional PPPs
Governance by consensus: Major decisions are made collectively by the founding shareholders, rather than being skewed by a single contractor’s priorities.
Operator involvement upfront: The operator’s influence over design is locked in early, ensuring that assets are optimised for long-term performance.
Construct-only packages: By separating design and construction, the partnership entity can maintain control over integration and reduce bid costs for contractors.
Shared risks: Service delivery, O&M and financing risks are borne jointly by government, the operator and equity investors — creating genuine alignment of interests.
Comparison with the Inverted Bid Model
While reminiscent of Industry Super Australia’s 2015 “Inverted Bid Model”, the Partnership-led PPP is more balanced. Instead of centring solely on equity investors, it embeds government and the operator as co-shareholders, avoids guaranteed IRRs, and ensures risks and rewards are shared equitably among partners.
Key risk for government — and how to manage it
The central risk for government in a Partnership-led PPP is uncertainty around final costs and risk profile at the time the founding shareholders are selected. Because design development and procurement of construction contracts occur after partner selection, the eventual service payment needed to support the agreed equity return may be higher than assumed.
Government can mitigate this risk through several mechanisms:
Pre-agreed adjustment mechanism: At the time of partner selection, require clear rules for adjusting service payments and/or equity returns if final contracted costs or risks differ from assumptions.
Front-end investment: Undertake more detailed design and risk assessment before partner selection, reducing the scope for cost surprises later.
Consensus influence: Retain a direct say in design development and procurement decisions as a shareholder in the partnership entity.
Benchmarking and competition: Benchmark proposed equity returns against market data and ensure competitive tension remains for the procurement of debt and additional equity.
Walk-away right: Maintain the ability — shared by all partners — to withdraw if consensus cannot be reached on acceptable terms before financial close.
These measures don’t eliminate the risk but provide a structured way for government to control it, while preserving the model’s advantages in transparency, alignment, and whole-of-life performance.
Why it matters
The model allows greater transparency over costs, improved whole-of-life decision-making, and real opportunities for asset recycling when government chooses to sell down its equity once projects stabilise. Most importantly, it makes PPPs more genuinely collaborative and capable of delivering long-term value for money.
The Partnership-led PPP is not just a procurement tweak — it’s a shift towards making government, operators and investors true partners in infrastructure delivery.
