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Focus: New Victorian Market-led Proposals Guideline

19 December 2017

In brief: The Victorian Government has recently released an updated version of its Market-led Proposals Guideline (also known as 'unsolicited proposals' in other states) which affirms its continued focus on market-led infrastructure and services projects and provides increased clarity for proponents around the assessment process and areas of priority for the delivery of 'unique' market-led proposals in Victoria. Government sector leader and Partner Paul Kenny (view CV), Managing Associate Penny Alexander (view CV) and Lawyer Edward Thien report. 

 
 

How does it affect you?

  • The new Market-led Proposals Guideline (the Guideline) reflects the continued commitment of the Victorian Government to remain open to the private sector's ideas, by giving proponents clear and transparent guidance on how their proposals will be assessed.
  • The general processes and requirements for the assessment of market-led proposals are broadly the same as under the previous Guideline released in 2015. However, a number of new features have been introduced, including compulsory pre-submission meetings with proponents to facilitate the submission of proposals, an optional public sounding to confirm the 'uniqueness' of the proposal, and enhanced probity and disclosure requirements.
  • Uniqueness continues to be the key pre-requisite for a successful market-led proposal with optional public sounding being introduced under the new Guideline to help the Government determine the uniqueness of the proposals it receives. Being consistent with the public interest, aligned with Government policies and priorities, and offering value for money are the other key factors proponents need to focus on in their proposals. The release of the Government's priority areas for market-led proposals will also help proponents ensure their proposals are likely to be successful. 

Background

The Victorian Government first introduced a market-led proposals guideline in February 2015 for infrastructure projects and services from the private sector which was subsequently updated in November 2015. A revised Guideline was published in November 2017, which affirms that the Victorian Government continues to welcome market-led proposals.

Since the last edition of the Guideline was released, there have been a number of successful market-led proposals in Victoria including the new West Gate Tunnel Project and the development of the new Victorian Police Centre. The Victorian Government now provides the most extensive guidance in Australia to proponents of market-led proposals, with a six-stage process in place that establishes a clear framework for how these proposals will be considered and assessed, thereby providing certainty and transparency for both proponents and those in the broader community who may be impacted by, or otherwise interested in, the proposal.

The Five (Plus One) Stage process

The Guideline sets out the following five stage process (plus one pre-process stage) for assessing proposals:

Stage 0: Pre-submission Meeting

Optional under the previous Guideline but now compulsory, proponents must meet with Victorian Department of Treasury and Finance (DTF) officers prior to making a proposal. The meeting is intended to facilitate the submission of proposals by providing an opportunity for proponents to discuss their proposal and the Guideline with Government and receive initial feedback.

Stage 1: Preliminary Assessment

At this stage, a formal proposal is submitted and the Government undertakes a preliminary assessment against the stage one assessment criteria:

  1. sufficient and relevant information to enable assessment;
  2. within the scope of the Guideline;
  3. whether the same or similar proposals have been assessed under the Guideline; and
  4. the potential to meet Stage 2 assessment criteria.

At the end of this assessment, the Government will determine whether or not the proposal may either proceed to Stage 2, or be referred to another Government process.

Stage 2: Due Diligence and Strategic Assessment

At this stage, the Government undertakes due diligence to verify key elements of the proposal as well as a strategic assessment of the proposal according to the following criteria:

  1. meets a service or project need aligned with Government policy objectives;
  2. affordability in the context of budget priorities;
  3. value for money;
  4. significant social, environmental, economic or financial benefits for Victorians;
  5. commercially feasible and capable of being delivered; and
  6. uniqueness resulting in outcomes that are not likely to be obtained using standard competitive processes.

Where the proposal meets the Stage 2 assessment criteria but requires confirmation of uniqueness, the Government may now choose to conduct an additional 'uniqueness test' by way of a public sounding process to determine if any other parties could deliver similar outcomes, within similar timeframes and offer comparable value as to what has been proposed.

At the end of this assessment, the proposal may proceed to Stage 3, not proceed, or be referred to another Government process. High-level disclosure of all proposals on the DTF website occurs at the end of Stage 2.

Stage 3: Procurement Preparation

During this stage, the Government undertakes further due diligence, considers funding availability and puts appropriate probity, governance and other arrangements in place for the proposal to progress.

At the end of this stage, the proposal may proceed to Stage 4 through exclusive negotiations with the proponent or by way of a limited competitive process involving the proponent and other respondents identified through a Registration of Interest process, or otherwise not proceed. A detailed proposal description is publically disclosed at the end of this stage.

Stage 4: Exclusive Negotiation or Limited Competitive Process

Stage 4 involves completing an exclusive negotiation or limited competitive process in order for the proponent to present a final offer for the Government to consider. A value-for-money assessment is undertaken at this stage using both quantitative and qualitative benchmarks. At the end of this stage, the proposal either proceeds to Stage 5 contract award or does not.

Stage 5: Contract Award

The final stage involves the proponent and the Government entering into a binding contract based on the terms and conditions approved by the Government at the conclusion of Stage 4. The executed contract must be published on the Victorian Government Tenders website within 60 days after contractual or financial close.

Key changes

Importantly for those who are familiar with the 2015 Guideline, the new Guideline incorporates the following key new features:

  • Pre-submission meeting: A critical change to the process is that a pre-submission meeting with Government is now compulsory. Previously this meeting was optional and could occur informally over the phone. Under the new Guideline, proponents are required to meet with DTF officers (and other State Government department representatives as required) to discuss their proposal and how it addresses the Guideline and demonstrates uniqueness. Proponents are also expected to prepare and submit a template outlining their proposal ahead of the meeting.
  • Additional uniqueness test: At Stage 2, a public consultation may be conducted by Government in the case where uniqueness cannot be fully determined. This involves a Registration of Interest process run through the Victorian Government Tenders website. The public's responses will aid the Government in making a recommendation as to whether a proposal should progress beyond Stage 2.
  • Probity & disclosure: The Guideline also includes updated probity and disclosure requirements which seek to ensure the process is fair, equitable and transparent. Separate probity and public disclosure requirements are now called out at each stage in the process, including separate confidentiality and probity commitment deeds at the different stages.
  • Government's priority areas: The Government has published an updated one-page document that sets out its current areas of interest and priorities for market-led proposals. This list may be updated periodically so is a valuable resource for ensuring that proposals are appropriately targeted and tailored for success. Current areas of interest include medical technology, new energy, food and fibre, transport, defence, construction and international education.
  • Innovative ideas: The new Guideline incorporates a more detailed description of the process for submitting innovative ideas (compared with an innovative proposal) that the proponent does not intend to fully develop itself. For example, the proponent may have an innovative idea for an infrastructure solution that it does not wish to finance or construct. Following a separate Stage 2 process, the Government may decide to use the idea as part of a Government-led procurement process in which case an ex-gratia payment may be made to the proponent.
  • Adjustments to stages: Under the new Guideline, certain requirements from the 2015 Guideline have moved from one stage of the assessment process to another. In addition, some aspects of the 2015 Guideline have been expanded, while others have been streamlined.

Key issues for proponents


The new Guideline builds on the same fundamental requirements as the previous Guideline. To be successful, proponents will need to successfully navigate the following key issues:

  • Demonstrating uniqueness: Demonstrating the unique characteristics of a proposal and the unique ability of a proponent to deliver the project is fundamental. The proposal having merit alone will not be sufficient – proponents need to demonstrate that they have a unique idea and that the ability to implement the idea can only be delivered by the proponent itself.
  • Value for money: Proponents need to demonstrate how the proposal provides enhanced value for money compared to other approaches, their clear understanding of risks associated with the proposal and the reasonableness of costs to Government. It is also in the interests of proponents to establish the benefits to Government of pursuing exclusive negotiations with the proponent rather than opening the process to competitive tender.
  • Preparation: By requiring compulsory, formal pre-submission meetings, the Government is providing an opportunity for proponents to develop an in-depth understanding of the assessment process and what is required for a proposal to be successful. Given the early stages can be extensive and the proponent bears the cost and risk until at least Stage 3, this is beneficial to proponents and it will help to ensure that both their resources are expended in a targeted manner and that proposals are more likely to progress.
  • Protection of confidential information and intellectual property: There will usually be some level of commercial sensitivity in any unique idea put forward under the Guideline. The Guideline includes various mechanisms to ameliorate proponents' concerns about sharing their ideas with Government including clear guidance around when and what information will be made available to the community about the proposal. Further, should a proposal not progress at Stage 3 or 4, the proponent will be given the opportunity to negotiate an agreement regarding compensation for, and treatment of, intellectual property rights.
  • Timing: As the Government will be assessing whether any given proposal is consistent with its current policy objectives and priorities, proponents need to time the submission of their proposal as best they can in order to accord with the objectives and priorities of the day, bearing in mind State Government electoral cycles.

Conclusion

The latest evolution of the Victorian Market-led Proposals Guideline provides proponents with in-depth guidance about the process and requirements necessary for a successful proposal and reinforces the Victorian Government's commitment to partnering with the private sector on innovative and unique projects which provide value for Victorians.

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