On 23 November 2016, the Queensland Government announced that Transurban Queensland’s $512 million Logan Motorway Enhancement Project would be the first Market-Led Proposal (MLP) to progress to final binding contract stage. The announcement comes nearly 17 months after the MLP framework’s introduction and is an encouraging milestone for proponents considering the MLP process. There are currently three MLPs undergoing stage 2 detailed assessment and more than 30 MLPs at stage 1 initial assessment. Below we explain the respective stages of the MLP process drawing on our experience in this space.
The core advantage of the MLP framework is the ability to bypass the traditional expression of interest and tendering process for major infrastructure projects if the Queensland Government is satisfied that a better outcome would not be achieved via a competitive process. In the case of the Logan Motorway Enhancement Project, Transurban Queensland has a strong competitive advantage to deliver the project as the existing operator of the Logan and Gateway motorways. Moreover, Transurban Queensland will finance 100% of the project at no cost to the Queensland Government. The project is expected to commence in mid-2017 upon completion of the final binding contract stage.
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The MLP framework aims to facilitate major infrastructure and service projects in Queensland by harnessing private sector funding and entrepreneurship. The criteria for assessing whether a proposal is suitable for the MLP framework includes:
- government priority/community need: whether the proposal satisfies existing or future community needs and assists to achieve government priorities;
- value for money: whether the proposal is fairly and sustainably priced, including relative to comparable domestic and international ventures;
- unique competitive advantage: whether the proposal is unable to be replicated by a competitor to the same standard and quality;
- risk/cost allocation: whether the allocation of project costs and risks is acceptable; and
- capacity and capability: whether the proponent can demonstrate sufficient financial and technical ability to deliver the project to completion.
Pre-submission and Stage 1 Preliminary Assessment
Proponents contemplating an MLP are advised to liaise with Queensland Treasury to sound out their proposal in an informal way and receive tailored feedback before submitting their proposals. To proceed with an MLP following the pre-submission stage, an initial outline of the proposal is submitted to Queensland Treasury explaining how the proposal meets the MLP criteria. Representatives from relevant government departments will undertake an initial assessment of the proposal and decide whether it is suitable to progress under the MLP framework.
In our experience, many proposals stall (or even fail) at this stage due to an inability to demonstrate the requisite uniqueness demanded of MLPs. This critical element of the MLP process demands that proponents should carefully consider the unique qualities of their proposal from a range of different perspectives before engaging with government.
Stage 2 Detailed Proposal
The object of the detailed proposal stage is to demonstrate conclusively how a proponent’s MLP satisfies the relevant criteria. In our experience, this stage is broadly equivalent to preparing a detailed bid for a competitive tender process, and as a result, an exclusive mandate is granted to enable the proponent to invest the time and money necessary to substantiate their proposal. During this stage a government team will work with the proponent to guide and facilitate the development of the proposal before it is submitted for recommendation.
Stage 3 Final Binding Contract
If an MLP progresses to stage 3, a final binding contract will be negotiated for the delivery of the project. This involves negotiating the legal and commercial terms; contract management arrangements; and performance monitoring implementation. The Logan Motorway Enhancement Project is the first MLP to progress to this stage and will commence upon execution of a final binding contract. Following completion of the MLP assessment process, the project will be transferred to the relevant line agency for implementation.
The MLP framework provides suitable proponents with a confidential and exclusive dialogue with the Queensland Government to develop and deliver their projects. In light of the Queensland Government’s strong endorsement of the framework, proponents contemplating projects with substantial community or government benefit are advised to consider the MLP pathway and the advantages it may offer.