Striking a balance: financing PPPs with government contributions

The use of government capital contributions to partly finance PPPs requires a careful balancing act. How can governments maximise cost savings while retaining the risk transfer and performance incentives associated with private finance?

In May 2013, the Victorian Government released new 'Partnerships Victoria Requirements', signalling a shift in the way the State will procure PPP projects.

Among the reforms is a requirement for procuring agencies to consider using government capital contributions in two circumstances – where there is insufficient private finance available or where the 'value for money' outcome for the State can be improved (by leveraging the lower cost of government borrowing to reduce the level of more costly private finance).