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MELBOURNE, Nov 28 AAP

November 28 2012, 09:56AM

Smaller projects such as schools may soon be built in Victoria through public private partnerships under a review of infrastructure funding.

Treasurer Kim Wells said Victoria had some recent bad experiences with public private partnerships (PPPs) such as the Ararat prison project.

Work on the $400 million project stopped in May after St Hilliers Construction went into voluntary administration and the consortium overseeing the project went into administration.

Mr Wells will release a discussion paper on Wednesday exploring how infrastructure funding could be overhauled.

"There is a tightening liquidity in the market, construction costs are way too high and the cost of tendering is way too much," the treasurer told ABC radio on Wednesday.

"We want better protection for the sub-contractors ... to make sure that those sub-contractors are getting paid.

"The financial strength of the consortium bidding needs better scrutiny."

Mr Wells said the government was considering using the PPP model to deliver smaller projects.

"At the moment you are only talking about projects that run into the hundreds of millions of dollars," he said.

"We want to be able to look at, maybe for example, a school.

"But if you are building a school on the PPP then it needs to be a better, streamlined process than what's there at the moment."

The government reached a deal with banks in August this year to back the Ararat prison project.