• Guy Callender Curtin University of Technology


The popularity of outsourcing has remained undiminished in Australia as governments seek to achieve the goals of economic efficiency, debt minimisation and service delivery. The emergence of Public-Private Partnerships (PPPs) or Private Finance Initiatives (PFIs) has resulted in a more complex phase of the outsourcing process and has coincided with the increased opportunities for private equity funds to successfully bid for PPP/PFI contracts. Private equity capital is a fundamental feature of a capitalist economy; however, the aggregation of large amounts of private funds to participate in PPPs/PFIs represents a new trend that should be evaluated by public managers when negotiating PPPs at the contract formation and contract management stages of such arrangements.

While the process of creating a PPP or PFI may be transparent, the financial progress of the project over a 20-30 year period may not be adequately disclosed, so that the expectations of both government and civil society cannot be fully assessed. This paper will draw on certain recent PPP experiences, focusing on some features of private equity that have created unexpected risk to the state and to taxpayers. The research suggests that the financial and operating structures of PPPs must meet the needs of the state to solve its financial and service delivery dilemmas without creating additional risk by uncritical acceptance of complex, highly leveraged contracting arrangements with private equity groups.


$1bn Sydney Tunnel sold for $700m‘ (2008) Adelaide Now[On-line]. Available:,22606,21940954-913,00.html.

Anon (2007) Press Release,ABN AMRO[On-line]. Available:

Audit Office of New South Wales (1994) A Private Participation in the Provision of Public Infrastructure: The Roads and Traffic Industry. NSW Government, Sydney.

Audit Office of New South Wales (2005) Auditor-General’s Report to Parliament 2005 (Volume 4). NSW Government, Sydney.

Audit Office of New South Wales (2006)Performance Audit: The Cross City Tunnel Project.NSW Government, Sydney.

Audit Office of New South Wales (2007)Auditor-General’s Report to Parliament 2007 (Volume 6).NSW Government, Sydney.

Baird, K. (2007) Adoption of activity management practices in public sector organizations.Accountingand Finance, 47 (4) pp551-69.

Bannock, G., Baxter, R. andDavis, E. (1998) Dictionary of Economics.Penguin Books, London.

Beyond the subprime debate‘ (2007) Washington Post, 28 MarchA15.

Callender, G. (2008) Efficiency and Management. Routledge, London.

Chevallier, F-X. (2000) Greenspan’s Taming of the Wave or the Golden Age Revisited. Kogan Page, London.

Chong, S. andCallender, G. (2007) One more time ... How to measure alliance success in conditions of public-private partnering.In K.Thai and G. Pigo(Eds)Advancing Public Procurement: Practices, Innovation and Knowledge Sharing. PrAcademics Press, Boca Raton, FL.97-115.

CrossCity Motorways Pty Ltd (2006a) The Tunnel: About Us [On-line]. Available: =18&navid=19.

CrossCity Motorways Pty Ltd (2006b) The Tunnel: Project History [On-line]. Available: .asp?cid=65&navid=19.

Cross City Tunnel toll to rise to $3.96‘ (2008) The Sydney Morning Herald, 16 February p1.

Davis, K. (2005)PPPS and infrastructure investment.The Australian Economic Review, 38 (4)pp439-44.

Disaster Averted?‘ (2008) Australian Aviation, 247 (March) p98.

Domberger, S.andHall, C. (1995) The Contracting Casebook: Competitive Tendering in Action. Australian Government Publishing Service, Canberra.

Evans and Peck(2006) Welcome to Evans and Peck. Available:

Farazmand, A. (2001) Privatization and Public Enterprise Reform: Implications for Public Management. Greenwood Publishing Group, Westport, CT.

Friedman, T. (2005) The World is Flat: A Brief History of the 21stCentury. Farrar, Straus & Giroux, New York, NY.

Government of Western Australia (2006) Auditor General Act 2006 (No 75 0f 2006). Government of Western Australia, Perth.

Greener, I. (2006) Nick Leeson and the collapse of barings bank: Socio-technical networks and the ̳Rogue Trader‘.Organization, 13 (3)pp421-42.

Grimsey, D. andLewis, M. (2005) Are public private partnerships value for money? Evaluating alternative approaches and comparing academic and practitioner views. Accounting Forum, 29 (4)pp345-78.

Gwartney, J., Lawson, R. andSamida (2002) Economic Freedom of the World 2002. Fraser Institute, Vancouver, BC.

Gwartney, J., Lawson, R. andEasterly,W. (2006) Economic Freedom of the World 2006. Fraser Institute, Vancouver, BC.

Henry, N. (2001)The contracting outconundrum in the United States: Or, Do we really understand privatization.In A. Farazmand (Ed.) Privatization and Public Enterprise Reform: Implications for Public Management.Greenwood, Westport, CT.95-126.

Hodge, G. (1996) Contracting our Government Services: A Review of International Evidence.Montech, Melbourne.

Investor unease sees Allco shares lose 63%‘ (2008, February 25) Financial Times[On-line].Available:

Jeffries, M. (2006) Critical success factors of public private sector partnerships.Engineering, Construction and Architectural Management, 13 (5)pp451-62.

K D Morris & Sons Pty Ltd (in liquidation) v. Bank of Queensland Ltd(1980) 146 Commonwealth Law Reports, p 165 [On-line].Available:

Korten, D. (1995) When Corporations Rule the World. Earthscan,London.




How to Cite

Callender, G. . (2008). PUBLIC-PRIVATE PARTNERSHIPS AND LEVERAGED PRIVATE EQUITY FINANCING. The Journal of Contemporary Issues in Business and Government, 14(2), 54–77. Retrieved from