The history and impetus for public private partnerships (PPP) in passenger rail and tram transport in Victoria during the period 1993–1999 is traced. The privatisation policy framework of the Kennett Government and the privatisation guidelines developed by the Office of the Auditor-General of Victoria (AGV), which formed the basis of the acclaimed “Partnerships Victoria” policy launched by the Bracks Labor Administration in June 2000 are considered. Alternative models for privatisation, the basis of bid selection and structure of the new arrangements are reviewed in detail with an emphasis on risk allocation between the state and private operators.

The continuing inability of both the public and private sectors to address satisfactorily key financial drivers of sustainable train and tram transport service delivery over the long-term, such as efficient operation of the automatic ticketing system, monitoring, and control of fare evasion, increasing patronage and containment of the rate of vandalism and the cost of its rectification, are considered.

The paper asserts that in spite of spectacularly poor risk analysis and unrealistic expectations, the failure of NEGA and the ongoing difficulties of other private operators of rail and tram services can largely be characterised as a failure of PPP policy in the Kennett era. The former Liberal Government, in the author’s opinion, failed to strike a sustainable balance between short-term economic (and even shorter term political) benefits to the state and the Government (in the form of risk transfer and diminishing annual subsidies), and the long-term need to preserve an efficient, flexible, and cost-effective rail and tram service for Victoria. Nevertheless, it should be acknowledged that in many ways, the former Administration broke new

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