Comparative Study on the Use of Output Specifications for Australian and U.K. PPP/PFI Projects

Abstract

An output specification is an integral part of the contract documentation for procuring and monitoring public private partnership (PPP) or private finance initiative (PFI) projects throughout their life cycles. Unlike prescriptive specifications used in the traditional project delivery, the output specifications stipulate what is required from the project rather than how they should be delivered by the private sector. Performance standards or output parameters are used for bid evaluation and operational monitoring. Failure to achieve them would lead to ongoing payment deduction and rectifications that need to be undertaken within a specified time frame. The long concession periods of PPP/PFI projects mean that changes are inevitable, and these, if foreseeable, should be managed using the output specification as a tool. This unconventional approach of specifying requires special skills and care. This paper presents the results of a questionnaire survey conducted in Australia and the U.K. with PPP/PFI practitioners. The findings highlight the common pitfalls and change management issues encountered by the two jurisdictions, which use PPP or PFI extensively in delivering public assets and services. While common pitfalls include conflicts between input and output specifications, and performance standards being compromised with affordability, small changes are often made by the public sector authorities. Changes are dealt with by anticipatory provisions in output specifications, or negotiations as and when they arise. Procedural hiccups may slow down the process of introducing necessary changes, or give rise to disputes.