Simon Court
Parliamentary Under-Secretary to
the Minister for Infrastructure

The Government is issuing strategic leasing guidance to agencies to ensure more efficient use of taxpayer dollars where the private sector is better placed to own and maintain infrastructure, Infrastructure Under-Secretary Simon Court says.

“On a basic level, strategic leasing is like any other government leasing arrangement, where the government takes out an exclusive lease from an asset owner in exchange for regular payments, such as for office accommodation.

“However, this new strategic leasing guidance will help government agencies tailor leasing arrangements to apply to a wider range of assets. This could include technical buildings such as health centres, or accommodation after a natural disaster.

“Strategic leasing adds to a suite of infrastructure delivery pathways, recognising that the Government doesn’t need to own every asset it uses. It offers a sweet spot between knowing we have what we need – when and where we need it – and flexibility to change as our needs do.

Mr Court says elements like private finance, and the corresponding discipline and incentives this drives, makes strategic leasing akin to ‘PPP-lite’.

“Like with PPPs, lease payments depend on the asset being delivered and available at a certain standard, which drives strong asset delivery and performance incentives.”

Strategic leasing also has distinct characteristics in terms of where it’s best used:

• Service needs are likely to be short-term or vary unpredictably – there is little reason for the government to own an asset it no longer needs.
• Assets are less complex and less specialised – more complex and specialised assets correlate with lower versatility, lower alternative demand, and a greater need for asset and service design integration, client control, and/or innovation, all of which make other models more suitable.
• Similar assets are used by the private sector – it is unlikely that private participants will want to own an asset for which there is no demand beyond a time-bound government lease.
• Public service delivery by the private sector is not required – if the private delivery of core public services is required then more sophisticated contracting models such as PPP are likely to be more appropriate.

“Health infrastructure is an especially important area of need in New Zealand, and one for which strategic leasing presents great opportunity – something recognised and prioritised in the ACT-National coalition agreement.”

“The new strategic leasing guidance is part of the Government’s infrastructure funding and financing work programme, which also includes the new Funding and Financing Framework and new guidance for Market-Led Proposals, as well as the refreshed PPP Framework released in November. Together, these initiatives will help us get more out of our assets and help us drive better value for money so we can deliver the infrastructure New Zealanders need to get ahead.”

Notes:

• The Strategic Leasing Guidance is attached.
• This guidance complements the recent releases of the refreshed PPP Framework, the new Market-led proposals guidelines, and the new Funding and Financing Framework.
• Agencies will be supported by the new National Infrastructure Funding and Financing Limited (NIFFCo) in determining whether strategic leasing is suitable for a given proposal.

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