Government space procurement options : testing the myths

The belief that the community is best served when government departments and instrumentalities lease space provided by the private sector rather than own their own real estate is tested using an Australian case study. A government department (The Department) needing a new head office in an Australian capital city presented researchers with eight options for providing commercial space to analyse using actual market data. This paper presents the results of the analysis as a test of financial efficiency for Public-Private Partnership (PPP) delivery of government commercial space.The eight options range from self managed construction on The Department’s own land, through various private/public strategies to leasing available commercial space on the open market. The analysis found that the ultimate financial cost increased with increasing private involvement and the optimum risk strategy was to retain a builder to construct on The Department’s land. The final decision of The Department was not consistent with the risk and return analysis but did reflect the bias of common opinion on appropriate policy. Social and strategic implications are reviewed in terms of financial effectiveness to provide a financial analysis of the costs of moving public services into dependence on private sector space. It is found that a more nuanced approach to public debt is appropriate that distinguishes between debt used for productive purposes and that used for the provision of services.