Output‐based specifications for PPP projects: lessons for facilities management from Australia

Purpose – The purpose of this paper is to focus on the challenges faced by the public and private sectors in developing output specifications for Australian public private partnership (PPP) projects. In particular, this study aims to examine how the stakeholders (including facilities managers) should cater for future changes in output specifications and make them flexible enough to meet the evolving project objectives. Design/methodology/approach – The research is based on 19 semi‐structured interviews with key stakeholders from the public and private sectors in three States of Australia where PPP procurement has been used, including New South Wales (NSW), Queensland and Victoria. The results are triangulated with relevant literature for supports and contrasts. Findings – For PPP projects, a good set of output specifications is conducive to the achievement of value for money, innovation, risk transfer, whole life asset performance through a clear abatement regime and an effective linkage of performance criteria to the payment mechanism. For existing specifications, it was found that too many and complex KPIs were specified, which were difficult to monitor, measure and implement by the client. Very prescriptive specifications hindered innovations and did not allow appropriate risk allocation. Further, the research study suggests that after the global financial crises, the private sector had less appetite to take the patronage risks in road and rail PPP projects. To mitigate these pitfalls, it is imperative that output specifications need to be aligned with the type of PPP projects they represent; in particular foreseeable changes should be addressed by some pre‐agreed framework to facilitate negotiation. Originality/value – The significant contribution of this research is the identification of the common issues faced in drafting output specifications for Australian PPP projects. Stakeholders of future PPP projects should find the lessons useful for achieving value for money and appropriate risk transfer, stating the user requirements through clear and concise output specifications rather than input or prescriptive specifications in procuring social and economical PPP projects. Their relationships with facilities management are highlighted.