Identifying critical factors affecting the effectiveness and efficiency of tendering processes in Public–Private Partnerships (PPPs): A comparative analysis of Australia and China

Highlights

• We identified 14 critical factors affecting PPP tendering processes.

• We conducted 15 interviews and received 57 questionnaires in Australia and China.

• Clarity and responsiveness of governance structures ranked top 3 in both countries.

• Availability of sufficient project pipelines is most important in Australia.

• Involvement of public officials and leadership is most critical in China.

Abstract

The success of Public–Private Partnerships (PPPs) largely depends on the performance of tendering processes. This research aims to conduct a comparative analysis of critical factors affecting the effectiveness and efficiency of PPP tendering in Australia and China. A triangulation of literature review, semi-structured interviews and questionnaire survey was used. The research identified 14 critical factors underpinning the implementation of PPP tendering, under 7 dimensions: (1) Robustness of business case development; (2) Quality of project brief; (3) Public sector capacity; (4) Governance structures; (5) Effectiveness of communication; (6) Balance between streamlining and competition; and (7) Level of transparency of tendering processes. The following analysis suggested that there are statistically significant differences in eight factors between the two countries. By adopting the recommended strategies, both public and private entities engaging in PPP projects will be at a better position to structure and manage the tendering processes.

Introduction

Public–Private Partnerships (PPPs) have been widely applied in infrastructure sectors, such as transport, education, healthcare, and water and wastewater treatment. Despite the worldwide PPP application, PPP practices have not always yielded satisfactory outcomes, with a number of failed cases, such as the Sydney Cross City Tunnel Project and the Hangzhou Bay Cross-sea Bridge Project. One significant obstacle for using PPPs is concerned with inefficiencies and ineffectiveness in tendering processes, characterized by lengthy durations, high transaction costs and a lack of competition and transparency (Dixon, T., et al., 2005, Chan, A. P. C., et al., 2010b). International practices suggested that if this concern is not addressed properly, PPPs may lead to sub-optimal value for money outcomes.

Considerable studies have been conducted to identify critical factors affecting the PPP implementation in general, providing reference on the development and management of PPP projects (Li et al., 2005; Zhang, X., 2005, Qiao, L., et al., 2001). Researchers have also explored key factors impacting on specific processes of PPP procurement, such as the feasibility phase (Ng et al., 2012), the briefing stage (Tang and Shen, 2013), contract negotiation (Ahadzi and Bowles, 2004) and contract administration and performance monitoring (Robinson and Scott, 2009). However, the critical factors extracted in literature may not apply to the tendering stage. For example, the private sector's capability is deemed vital for achieving satisfactory cost and time performance, along with high-quality services. But it is of less concern for PPP tendering because in the trend of internationalisation, both overseas and domestic investors will tender for a PPP as long as the government has a consistent approach to PPPs and the project fundamentals are justified. Although a few studies have examined the main issues encountered in PPP tendering (KPMG,, 2010, Carbonara, N., et al., 2012), such studies, nonetheless, did not offer specific guidance on how to improve the effectiveness and efficiency of tendering processes through procedural and organizational arrangements, as well as management interventions.

The research presented in this paper therefore addresses this gap in knowledge. It aims to undertake a comparative analysis of critical factors affecting the effectiveness and efficiency of PPP tendering processes in a free market and a centrally planned economy represented by Australia and China respectively. The specific objectives are to: identify the critical factors affecting the effectiveness and efficiency of PPP tendering processes; investigate if there is significant difference in the critical factors in both countries; and propose useful and operational policy and management interventions to enhance PPP tendering processes. Australia and China were selected for the comparative analysis due to the intention to understand the variations arising from different social and economic contexts for PPP use, along with varied PPP development stages. Australia represents a typical free economy and it is a leading country in terms of PPP use, with established market and structured and consistent PPP policies. China is a centrally planned economy, in which the government plays a significant role in directing construction activities, including the promotion and implementation of PPP programmes. Also, China is an emerging market, remaining at an early stage in PPP development under fragmented and inconsistent legal and regulatory frameworks. Comparing the PPP tendering practices between the two countries provides an opportunity to understand how different contextual elements would shape varied PPP tendering processes, and to map the PPP development in terms of improving the “best practice framework” at the tendering stage.

According to Bryman (2008) and Amaratunga et al. (2002), the choice of research methods depends on the research objectives and the scope and depth needed for the research topic. A triangulation of literature review, semi-structured interviews and empirical questionnaire survey was used in this study. A comprehensive literature review was first conducted to identify the critical factors affecting the successful implementation of PPP projects. Based on the opinions and insights obtained from subsequent interviews, this research refined the list of critical factors to reflect their relevance to PPP tendering processes. A structured questionnaire survey was then administered in Australia and China to assess the relative importance of identified critical factors and compare them between the two jurisdictions. Based on the interview participants' views, as well as the results of the questionnaire survey, this research proposed policy and management interventions for improved tendering practices of PPPs.