As interest in market-led proposals gains momentum across Australia, governments face some key challenges in ensuring their market-led proposal policies:
- Are accountable and transparent; and
- ensure successful proposals deliver clear value for money for taxpayers (despite potentially not being value tested through a competitive tender process).
However, equally challenging for governments, is balancing the need to ensure these criteria are met – including delivering quantifiable value for money for taxpayers – against encouraging innovative ideas and private sector involvement in major projects by ensuring good proposals are brought to life under the policies.
Some governments have been criticised for not bringing enough proposals to completion. Others have implemented policies which limit the types of proposals which may be submitted by the market. Across Australia, there are variations in the criteria which need to be met, and, the stages applicable, to a submitted proposal. The policies reflect the difficulties in balancing the benefits of flexibility against the need for policy certainty.
There are three key components of the process:
A market-led proposal must demonstrate uniqueness. Meeting this requirement presents a significant hurdle for many proponents. Uniqueness is assessed on a subjective, contextual basis. It is important to provide detailed guidance to proponents about how this is assessed, and to ensure that the uniqueness test does not operate as a way of excluding proposals which may otherwise have merit. For example, given that the uniqueness test can function as a legitimate and defensible justification for not testing the market, the reverse should be permitted. That is, a failure to demonstrate uniqueness could be used to trigger a market process, provided all the other requirements are met.
The right to exclusive negotiation versus the option to adopt a competitive process. Only one State has a policy framework which expressly permits a proposal to revert to a competitive process. Reversion to competition gives government more flexibility, enables a proposal to be tested and may maximise the chances of some version of the proposal achieving contract close. Many other jurisdictions have policies which support exclusivity reverting to competition in certain circumstances whilst still recognising the value provided by the original proponent.
The relationship between proposal policy alignment and project funding. A proposal will not be considered if it does not align with government policy. The relationship between this criteria and project status can create uncertainty. For example, can a government consider a market-led proposal for a project or service which has preliminary funding only? Should a business case take account of a possibility that a proposal may be submitted? It may be appropriate to more clearly delineate those projects or services in respect of which an MLP will be countenanced. For example, government could seek to drive and stimulate the market by publishing a market-led proposal strategic plan which specifically identifies project and investment opportunities in respect of which proposals will be considered.
Corrs has developed a thorough analysis of the MLP landscape in the publication "What's next for market-led proposals in Australia?". In it, we review the processes applying to market-led proposals and make some suggestions for refinements which could be adopted in relation to:
- the pre submission meeting;
- the form and content of the proposal;
- timelines for assessment; and
- the costs incurred by both parties in terms of proposal preparation, assessment and review.
We also identify some future trends in market-led proposals. A copy of the publication can be accessed via the 'Download' button above.
A number of MLP policies are under review, and we may soon see some refinement as to the substance and structure of the process in order to maximise benefits for both government and proponents.