Allens

Infrastructure & Transport

Focus: New PPP guidelines for NSW

27 August 2012

In brief: The New South Wales Government has issued new guidelines to govern the private public partnership procurement process in that state. Partner Nigel Papi (view CV) and Lawyer Tom Levi report on the new guidelines, which are intended to supplement the national PPP guidelines.

How does it affect you?

  • A public private partnership (PPP) model must be considered for all NSW Government projects worth more than $100 million.
  • Participants bidding for PPP projects in NSW must consider both the NSW PPP guidelines and the 2008 National PPP Guidelines (the national guidelines) together. For unsolicited proposals and direct negotiations, the NSW Guide for Submission and Assessment of Unsolicited Proposals also applies.
  • The NSW Department of Premier and Cabinet and Treasury continue to have a significant role to play in PPPs. In particular, the Treasurer must approve all PPP arrangements and Government guarantees under the Public Authorities (Financial Arrangements) Act 1987 (NSW) (the PAFA Act). 

Background

The NSW Treasury's newly released NSW Public Private Partnerships Guidelines (the guidelines) came into effect on 15 August 2012. The guidelines apply to all NSW Government agencies and State-owned corporations proposing to enter into a PPP. They are an update to the 2006 Working with Government Guidelines for Privately Financed Projects (the 2006 guidelines).

The guidelines have been revised principally to take account of the national guidelines. Accordingly, the guidelines are silent on many of the prescriptive requirements, including the standard risk allocation, which are contained in the national guidelines. PPP participants should also note that the 2012 NSW Guide for Submission and Assessment of Unsolicited Proposals will apply to any unsolicited proposals or direct negotiations.

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Summary of the new guidelines

Government commitment to PPPs

A positive outcome for the private sector under the guidelines is that a PPP model must be considered and assessed against value for money drivers for every NSW public infrastructure project that has a total estimated capital value of more than $100 million.

Government approvals and controls

The Cabinet Infrastructure Committee and Cabinet Expenditure Review Committee must approve the investment and procurement decision before entering into a PPP.

The Department of Premier and Cabinet (the DPC) plays a significant role in many PPPs. For any multi-agency projects, the DPC is responsible for appointing a lead agency and may authorise Infrastructure NSW to deliver the project. The Major Projects Coordination Unit of DPC may also be involved.

The Treasury – and in particular, the Infrastructure Financing Unit of NSW Treasury (formerly the Office of Infrastructure Management) – is responsible for overseeing compliance with the guidelines. The Treasurer must approve all PPP arrangements under the PAFA Act. Any guarantee provided by the NSW Government should ordinarily be provided for by the Treasurer, by way of declaration under the PAFA Act.

Additionally, for State-owned corporations, the approval of the shareholding ministers may be required.

Public sector comparators

As under the 2006 guidelines, the main quantitative tool for determining whether a PPP bid is value for money is the public sector comparator (PSC). The framework under which a PSC is established for any given project remains unchanged.

The PSC for an economic infrastructure projects is calculated on the basis of using a special purpose vehicle operating as a State-owned corporation.

The PSC for a social infrastructure projects is calculated as the estimated net present value of a project's cash flows based on traditional infrastructure procurement and whole-of-life operational and maintenance costs.

The NSW Government will consider providing a summary of the relevant PSC determination in the tender documents.

Debt refinancing

All debt refinancings, other than those contemplated at financial close, will require Cabinet consent and, unless included in the original base case financial model, approval by the Treasurer under the PAFA Act. Unless the contract provides otherwise, refinancing gains are to be shared on a 50:50 basis where projected equity returns are being met.

Unsolicited proposals

The Director-General of the DPC remains the first port of call for any unsolicited proposals, which will be assessed having regard to issues including the unique benefits of the proposal and the proponent's capability and capacity to deliver. A steering committee has been established comprising the DPC, NSW Treasury and Infrastructure NSW to assess proposals, together with the relevant Government agency.

Planning approval and other environmental consents

The Minister for Planning and Infrastructure will still provide consent for all State Significant Developments or Infrastructure (which will cover most PPPs) under Parts 4 and 5.1 of the Environmental Planning & Assessment Act 1979 (NSW).

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Conclusion

The guidelines affirm the NSW Government's support of the PPP model and the clear application of the national guidelines. The national guidelines were drafted based on best-practice PPP material in Australia, primarily from NSW and Victoria at the time. Through this support of the national guidelines, we can expect to see further PPP projects develop in NSW in a manner consistent with the other Australian jurisdictions.

For further information, please contact:

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