Focus: Infrastructure August 2006
Changes to Queensland PPP guidelines
In brief: Partner Alan Millhouse(view CV) and Senior Associate Connie Seeto outline the recent changes to Queensland's Public Private Partnerships guidelines aimed at improving and streamlining the competitive tender process.
The Queensland Government recently made a number of changes to the processes under which it undertakes Public Private Partnerships (PPPs). The changes follow a review of the Queensland Government's Value for Money Framework under which potential PPPs are evaluated, and are aimed at improving the quality of tender submissions and streamlining the competitive tender process in order to achieve the desired project outcome.
On 11 July 2006, Deputy Premier and Treasurer Anna Bligh outlined the key improvements during a State Parliament Estimates Committee hearing. She noted that the revised Framework will:
- improve communication between the State and tenderers so that the parties better understand each other's objectives; and
- involve the State releasing to tenderers a broad indication of its estimated costings for a traditionally delivered project.
The Framework previously provided for little verbal communication between the State's project team and tenderers during the tender phase, other than:
- briefings to tenderers on specific aspects of the project; and
- presentations by tenderers of their binding bids.
Other means of communication include a written question-and-answer process in which all questions and answers (subject to commercial-in-confidence considerations) are communicated to all tenderers. This process was provided for under the previous framework and still applies.
The interactive process under the revised Framework departs from this approach. The State has acknowledged that a more comprehensive engagement with proponents should mean that proponents will gain a better understanding of the State's output requirements, the quality of tender submissions will be improved and the desired project outcome should be more readily achieved.
Access to information and feedback
The revised Framework provides:
- it is important that proponents have equal access to information and the opportunity to receive feedback on whether their bid meets the output requirements for the project. To ensure all proponents are equally informed of the State's requirements, project information (including commercial information and guidance on the conduct of the PPP process) must be made available to eligible proponents, in the same form and at the same time; and
- open interaction between the State and proponents, conducted within a framework that ensures the principles of probity are complied with, is both necessary and desirable to enable the development of relevant bids and to advance project objectives.
Before tenders are submitted, proponents will be given the opportunity to present their bids on a one-to-one basis and to receive feedback on whether their bids align with the State's output requirements. The State must maintain confidentiality of any genuine intellectual property contained in proponents' bids and discussions between the State and a proponent will not be disclosed to other proponents (unless information provided to the State results in changes to the output requirements or the project brief for which all proponents will need be aware). This is intended to assure proponents that their intellectual property will be protected and, consequently, encourage proponents to be more innovative in their designs.
The revised Framework says feedback on a proponent's bid should:
- focus on the capacity of the proposal to meet the State's output requirements. Detailed reasoning behind the feedback can be provided. Where the proposal clearly does not meet requirements, this should be brought to the proponent's attention by reference to a particular section of the project requirements;
- focus on complying with the intent, letter and spirit of the State's output requirements; and
- not offer direction or explicitly lead a proponent.
Victorian PPP Guidelines interactive tender process
The improved interaction which is now proposed between the Queensland Government and proponents under the revised Framework does not go as far as the interactive tender process expressly permitted under the Victorian Government's Partnerships Victoria guidance material (Victorian PPP Guidelines) (from which the Queensland PPP Guidelines are substantially drawn).
In October 2005, the Victorian Government issued an advisory note on the use of an interactive tender process between the Victorian Government and shortlisted proponents during the tender phase. Under the Victorian PPP Guidelines, individual proponents are provided with an opportunity to discuss the development of their concepts and designs, and to seek clarification and feedback in the context of the government's output requirements, before tenders are submitted. The interactive tender process typically involves a series of workshops involving the government project team representatives and individual proponents. Generally, a number of workshops are to be held with each proponent comprising:
- technical workshop(s), dealing primarily with design issues;
- service specification workshop(s); and
- commercial clarification session(s), which provide a proponent with an opportunity to clarify the government's position under the Project Brief.
The interactive tender process under the Victorian PPP Guidelines aims to maximise the benefit of the competitive process and to ensure that proponents have sufficient opportunity to understand the government's requirements and develop acceptable concepts and designs (as is the case under the Queensland revised Framework). Without an opportunity to discuss its interpretation of the output requirements, it is considered that a proponent may waste significant resources in developing concepts and designs that would not meet the government's needs. The meetings and workshops are intended to avoid any significant additional costs for proponents through a fundamental misunderstanding or misinterpretation of the government's requirements.
The Victorian PPP Guidelines note that undertaking an interactive process involves a number of legal risks, which will need to be addressed in the conditions of tendering. For example, a proponent may seek to claim for misleading or deceptive conduct arising from representations made during the interactive process or institute a procedural challenge alleging a breach of process contract between the government and the proponent. The Victorian Government is cognisant of these inherent risks, but considers that the benefits of the interactive tender process outweigh the risks.
The desired outcome of the competitive tender process is to establish a successful long-term contractual arrangement between the government and the successful proponent. Consequently, it is in the government's interest that all proponents have the opportunity to develop relevant tenders for consideration.
It is hoped that the Queensland Government will also introduce a more extensive interactive tender process, along the lines provided for under the Victorian PPP Guidelines.
The Framework requires that, before determining if a project should be delivered as a PPP, the State must first determine the likely cost of delivering the project itself under traditional procurement methods (the Public Sector Comparator). The Public Sector Comparator model is the estimated risk adjusted, whole-of-life cost to the State of delivering the project itself.
The Raw Public Sector Comparator provides the base costing of the project under the public procurement method, without taking into account risk adjustments and contingencies which may affect cashflows.
The revised Framework now provides that the State will release the Raw Public Sector Comparator to shortlisted proponents with the other bid documents, unless there are exceptional circumstances where the release would materially compromise the State's negotiating position.
The State anticipates that the Raw Public Sector Comparator will be released in almost all circumstances. The release of this information would result in proponents being advised of the public sector costs of completing the project under traditional procurement. Proponents will thus be in a better position to ascertain what it is they are bidding against in order to achieve value for money for the State.
- Alan MillhouseConsultant,
Ph: +61 7 3334 3149
- Emma WarrenPartner, Sector Leader - Infrastructure & Transport,
Ph: +61 3 9613 8856
- Michael HollingdalePartner,
Ph: +61 8 9488 3708
- Steve PembertonPartner,
Ph: +61 3 9613 8826
- Nigel PapiPartner,
Ph: +61 2 9230 5179