New WA policy facilitating market-led proposals

In brief 6 min read

The Western Australian Government recently released its Market-led Proposals Policy, which seeks to provide a single consistent and transparent process for the private sector to submit infrastructure, service provision and other proposals outside the context of a government-initiated procurement process. Implementation of the policy means that all Australian states now have formal policies to facilitate market-led (or 'initiated') proposals. Government Sector Leader and Partner Paul Kenny, Partner Penny Alexander and Lawyer Edward Thien report.

Background

In recent years, Australia has seen a dramatic rise in private-sector-initiated proposals for the development of infrastructure projects. With the release of Western Australia's policy, all states and territories have now released detailed guidelines to further encourage market-led proposals from the private sector.

The Policy replaces the various separate guidelines for evaluating specific types of market-led proposals that were in place, including for the sale or lease of state-owned land. The release of the Policy followed the release in June 2018 of a draft policy and guideline that was open for public consultation. The Policy formally took effect from 12 April 2019.

The three (plus one) stage process

• Stage 0: Pre-qualification review – This stage provides for proponents to meet with the MLP Secretariat and relevant government agencies or enterprises, to present a high-level summary of their proposal. This allows the Government to determine if the proposal is within the Policy's scope and has a reasonable chance of satisfying the evaluation criteria in the remaining stages. Following this stage, the proponent may be asked to submit further information, invited to submit a Stage 1 Proposal or have their proposal rejected.
• Stage 1: Concept evaluation – Stage 1 involves the preparation and evaluation of the proposal at a concept level, to determine whether further resources are warranted to develop the idea. Following this stage, the proponent may be invited to progress to Stage 2 and/or the Government may choose to test the market through an expression of interest (EOI) process. An EOI process is likely where there is doubt about whether an exclusive negotiation is justified. The process is designed to assist the Government in determining whether other parties could deliver similar outcomes at comparable value and within similar timeframes.
• Stage 2: Business case evaluation – At this stage, the proponent develops a detailed business case for their proposal. Some negotiations surrounding key issues may need to occur where required to form the business case. If the proposal is an infrastructure project, Infrastructure WA will become involved and the business case must be determined according to Infrastructure WA's requirements and the WA Government Strategic Asset Management Framework. At the end of this stage, the MLP Steering Committee will recommend to Cabinet whether the proposal should proceed to Stage 3.
• Stage 3: Negotiation of final binding offer – If a proponent makes it to Stage 3, it will negotiate with the Government to develop a final binding offer. This will then be considered by the MLP Steering Committee, to confirm it meets the evaluation criteria and is financially affordable. The MLP Steering Committee will then recommend to Cabinet that the final binding offer either be accepted or declined. If a proponent is unsuccessful, reasons will be provided to it where possible.

Key points

MLP Steering Committee

The MLP Steering Committee is responsible for implementing the Policy. This Committee will be made up of senior members from various government departments and agencies, including the Department of Premier and Cabinet, Department of Treasury and Department of Finance. There will also be a representative from a government agency considered to have the relevant technical expertise for the specific proposal.

Coordination of evaluation process

During the pre-qualification review, the MLP Steering Committee will nominate a lead agency, being a government agency or enterprise with relevant technical expertise. Part of the initial review stage will involve determining how the project will be coordinated if it proceeds. A centrally coordinated process will exist for proposals worth more than $50 million (or more than $10 million for information and communication technology-related proposals), high-risk proposals, complex proposals, or where otherwise agreed. If any one of those criteria are not met, the lead agency will take charge of coordinating the proposal.

Evaluation criteria

The Policy sets out the key criteria the Government will use to evaluate proposals:

• Strategic alignment: The proposal is aligned with Government policy objectives and priorities.
• Public interest: The proposal has significant social, environmental, economic or financial benefits for Western Australians.
• Value for money: The proposal represents value for money for Western Australians and is affordable in the context of budget priorities.
• Feasible and capable of being delivered: The proposal is feasible (including financially), and the proponent has the financial and technical capacity, capability and experience to deliver the outcome successfully. Detailed due diligence on the proponent (including any parent and subsidiary companies) and the proposed financial and corporate structure of the proposal will be undertaken in evaluating this criterion.
• Risk: Any financial, reputational and/or security risks to government from the proposal are acceptable, and there is an appropriate allocation of risk between the proponent and government.
• Justification for exclusive negotiation: The proposal delivers outcomes that are not likely to be obtained using standard competitive processes and within acceptable timeframes, and therefore justifies exclusive negotiations with government.

Infrastructure WA

For proposals that fall within the definition of 'major infrastructure proposals', Infrastructure WA will advise on the proposal during Stage 2, and otherwise at any time where requested by the MLP Steering Committee.

Probity and disclosure

The integrity of the decision-making process is integral to ensuring the public interest remains at the forefront of the Policy's implementation . To aid in maintaining a high degree of probity, the Government has also released Market-led Proposals Supplementary Guidelines. These are intended to be read alongside the Policy, and provide additional detail about the evaluation criteria. The Policy provides for a probity framework, the key principles of which are:

• maintaining impartiality;
• maintaining confidentiality;
• managing conflicts of interest; and
• obtaining value for money.

The Policy acknowledges the confidential nature of information that may be disclosed in a proposal. Nevertheless, at various stages of the market-led proposals process, public disclosure of aspects of a proposal may be required. Proponents need to be mindful of this in considering what information is included in their proposal at each stage of the process.