Private companies will pay the upfront cost of $4 billion of upgrades and maintenance of a network of increasingly congested and degraded major roads in Melbourne’s outer suburban growth zones.
In exchange, they will receive a series of quarterly payments from the state over a 20-year period, during which time they will also be given the responsibility of maintaining hundreds of kilometres of arterial roads in Melbourne’s outer north, west and south-east.
The private sector will be financially penalised if the conditions of those roads falls below a certain standards, in a performance-based contract similar to those struck with Metro Trains and Yarra Trams.
Penalties will apply for a failure to reach agreed targets in eight performance measures, including road surface quality, the response to defects and emergencies on the road, and even public communications.
Although, successful bidders will also be awarded the right to explore other unspecified commercial opportunities along the roads they manage, from which the state may also take a share of net revenues.
The deal also stands to ease the immediate financial pressure on the Andrews government as it deals with a huge $30 billion list of transport infrastructure projects.
The public-private partnerships will enable the government to defer paying to fix key parts of an arterial network that Victoria’s auditor-general found last year was in such poor condition it was making roads less safe and more costly to use.
“The case for repairing and expanding the outer suburban road network is urgent,” new tender documents for the suburban roads packages state.
“The combined effects of worsening congestion and exteriorising road assets increase the risk of outer suburban growth areas and employment centres not realising their potential and being unable to contribute to the sustainable development of Melbourne.
“Although the state has not committed to making a capital contribution to the projects at this point, it is willing to consider the use of state contributions in certain circumstances based on the proposed financing solution of each respondent.”
The Andrews government’s use of a public-private partnership model for arterial roads is unprecedented in Australia, although the former Brumby government used it to construct the $759 million Peninsula Link freeway.