The revised Market-Led Proposal Guideline (Guideline) provides the private sector with additional information about assessment criteria and the process required when approaching Government with innovative proposals. It offers useful clarification on a number of aspects of the process, and interestingly, opens the way for less fully developed ideas to be brought to Government. Whether this clarification in the Guideline will result in a higher number of proposals progressing to Stage 5 remains to be seen.
In November 2017, the Victorian Government published its revised Guideline on market-led proposals. The Guideline states it will provide a valuable opportunity for Government and the private sector to work together to meet Victoria’s infrastructure and service needs. The Guideline sets out a five-stage process during which the Department of Treasury and Finance (DTF) (and where appropriate, other relevant departments) assess whether submitted proposals are in the public interest, represent value for money and are consistent with Government policy and priorities.
Two recent high-profile infrastructure projects in Victoria originated as market-led proposals - the West Gate Tunnel project and the CityLink – Tulla Widening project. The new Guideline provides more information about the process of submitting a proposal, as well as strengthening probity and disclosure requirements and the possibility of additional testing of the uniqueness of a proposal.
Summary of revised assessment process (Click the download button above for a PDF version)
Preliminary stage: Compulsory pre-submission meeting
- Meeting with DTF to understand the market-led proposal process and seek feedback on the proposal
Stage 1: Preliminary assessment
- Proponent submits a well-developed proposal to DTF
- DTF determines whether the proposal has sufficient information and is within the scope of the guideline, and conducts an assessment against criteria to determine whether the proposal will progress
Stage 2: Due diligence and strategic assessment
- Proponent to provide commitment in relation to probity requirements and option to give presentation to DTF and relevant departments
- DTF and relevant departments to undertake due diligence of the proposal
- Possibility to undertake an additional uniqueness test
- DTF conducts assessment against criteria to determine whether the proposal will progress
Stage 3: Procurement preparation
- Proponent and lead department to agree either the terms of exclusive negotiation or the approach to a limited competitive process and on a stage three probity and process deed
- Lead department may request further information, conduct further due diligence or undertake assessment (including considering funding availability)
Stage 4: Exclusive negotiation or limited competitive process
- The proponent will either undertake negotiations with the lead department or participate in a limited competitive process – a final offer will be submitted to Government
- Interdepartmental committee will recommend to the Government whether or not a proposal should proceed to contract award
Stage 5: Contract award
- Proponent and government enter into contract on agreed terms and conditions
The key changes are as follows:
1. Governance and Process
The previous guideline provided for the establishment of an interdepartmental committee and steering committee. The following elements of the process are new:
- Clarification that approval to proceed from stage 1 to stage 2 must be given by either the Treasurer or the Deputy Secretary;
- Due diligence is now conducted entirely in stage 2;
- The project specific steering committee is now established in stage 2 rather than stage 3, which will implement a governance plan outlining key roles and responsibilities;
- Decision to proceed to exclusive negotiation or limited competitive process is now made at Stage 3 not Stage 2;
- Clarification that only minor negotiation is to take place in stage 5, with the bulk of negotiation complete in stage 4.
A new set of terms and conditions have been included in the Guideline which are intended to protect the Government’s rights and limit any liability arising under the process.
2. Compulsory pre-submission meeting
The new Guideline makes the previously optional pre-submission meeting with DTF compulsory for proponents. In this meeting, the proponent can learn more about the process and seek feedback on its proposal.
Proponents are also encouraged to review the Government’s priority areas for market-led proposals, which are available on its website.
Subsequent meetings can be held at the discretion of DTF.
3. Probity and disclosure requirements
Public officials are required implement relevant probity plans in relation to the proposal, which apply at each stage. The Guidelines clarify that in stage three and four, a probity and process deed will be agreed to and a probity adviser must be appointed for these stages .
Proponents are required to declare any conflicts of interest when submitting a proposal. If a proposal progresses to stage two, proponents are required to sign a formal commitment in relation to confidentiality, communication protocols and conflicts of interest. All proposals will be publicly disclosed (albeit to a limited extent) at the end of stage two. More information will be disclosed at the end of stage three and stage four, as necessary.
4. Protection of intellectual property and reimbursement of costs
If the proposal progresses to stage three, the treatment of the proponent’s intellectual property will be formalised. If the Government decides not to progress with the proposal past this stage and wishes to use the intellectual property, the proponent is entitled to compensation from the Government, subject to agreement.
At stage three onwards, the Government may reimburse a proponent for costs of participating in the process, on a case by case basis. The Guideline provides no indication of when such reimbursement may be awarded.
5. Market sounding to test uniqueness of proposal
The Government may decide to undertake an additional uniqueness test where a proposal has met the stage two assessment criteria, but uniqueness cannot be fully determined. This involves public exhibition of the proposed outcomes or key elements that a proposal is seeking to deliver. This would take place via a Registration of Interest advertised on the Victorian Government Tenders website and would generally be open for 30 days.
6. Innovative ideas – separate process
A proponent may also submit an innovative idea which it does not necessarily wish to fully develop (the example given is a party which has an infrastructure idea but does not want to finance or construct it).
The process for submitting an innovative idea begins with a compulsory pre-submission meeting and then a preliminary assessment of the idea. If required, due diligence and strategic assessment of the idea may be carried out. The Government will then decide whether or not to use the idea as part of a Government-led process. If it does use the idea, the Treasurer has discretion to provide an ex gratia payment to compensate the proponent and an agreement must be reached in relation to use of intellectual property.
7. A new exclusion
Proposals relating to social housing will no longer be considered under the Guideline.
The revised Guideline provides greater certainty about key parts of the process - particularly those that apply to the progress of a proposal through the relevant stages. It also gives companies clarity about many key elements of the process, including payment of costs, the extent of the State’s potential liability under the process and the way in which intellectual property will be dealt with.
Finally, the revised Guideline provides useful delineation between ‘good ideas’ and more advanced proposals. It also provides an avenue for parties who may not be project developers per se (e.g. a tech business) to take ideas to the State. These clarifications are to be welcomed and should increase the number of MLPs in 2018 and beyond.