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The Victorian Market-led Proposals Guideline: changes for 2017

ANALYSIS: The latest iteration of the Market-led Proposals Guideline re-confirms the willingness of the Victorian government to work collaboratively with the private sector and provides further clarity of the process for the private sector.18 Dec 2017

The latest version of the guideline was released in November 2017, updating the November 2015 version. The further enhanced collaborative approach is underlined by the government's mandatory pre-meeting, the addition of a further 'uniqueness' test and a more streamlined procurement process. There is also greater transparency to the public, with probity and disclosure considerations permeating almost every stage of the process.

The guideline provides the private sector with a process for how to approach the Victorian government with ideas for developing infrastructure projects or developing services specifications. The process consists of a compulsory pre-submission meeting with the Department of Treasury and Finance (DTF) and five separate stages.

To date, the guideline has been used to submit nine proposals, four of which have been successful. These are the Port Phillip Ferries project, the Victoria Police Centre development, the Citylink-Tulla Widening project and, most recently, the West Gate Tunnel Project. Four projects did not reach the final stage, and one project is undergoing negotiations.

The guideline continues to be an good way to develop ideas with the Victorian government, save for any proposals relating to social housing which will no longer be considered by DTF. The changes in the latest version bring further clarity to the process for the private sector, and encourage interested parties to engage with DTF. However, as was previously the case, what constitutes 'uniqueness' is still very much subjective.

Any interested party must have serious intentions to develop their proposal from the very first stage of the process. The guideline calls for serious commitment for prospective bidders in terms of both time and effort from stage one.

The main changes from the November 2015 guideline are set out below.

New 'additional uniqueness test'

The guideline has always required bidders to demonstrate uniqueness. Under the revised guideline, if DTF cannot satisfactorily determine whether a proposal meets the uniqueness criteria, the proposal may be subject to an 'additional uniqueness test'. This involves public exhibition of the proposal and responses from interested parties. Responding parties may be asked to join the proposal as part of a 'limited competitive process'.

The introduction of this additional test means that prospective bidders must be wary of submitting proposals to DTF without sufficient 'uniqueness', as this may ultimately result in the bidder having to enter a limited competitive process. However, as was previously the case, what constitutes 'uniqueness' is still very much subjective.

Exclusion of social housing

DTF will no longer consider any proposals that relate to social housing. Interested bidders should direct any such proposal to the Victorian Office of Housing.

Strict probity conditions

The revised guideline introduces strict probity conditions from the very beginning of the process. Bidders must preserve confidentiality, maintain robust communication protocols and avoid conflicts of interest. Bidders must also execute a 'Probity and Process' deed with the state in third stage, to guide subsequent negotiations.

Greater disclosure requirements

Bidders should be aware that their proposal will be publicly disclosed from the second stage, and as early as the first stage if probity requirements are not being met. As such, bidders should be mindful to redact parts of their submission before disclosure if it contains proprietary information, such as intellectual property.

Mandatory pre-submission meeting

Under the revised guideline, prospective bidders must meet with DTF before submitting a proposal or innovative idea. The purpose of the meeting is to understand how to structure the submission, and to establish whether there is an appetite for the type of project being proposed. Prospective bidders must therefore be well-prepared, and should have developed the proposal  beyond the embryonic level before the first stage.

Streamlining of the procurement options and processes

Proposals that do not conclusively satisfy the value-for-money criteria, and prospective bidders that do not have the capabilities to deliver the proposal, no longer need to enter a 'tailored competitive process'. The updated guideline only specifies a 'limited competitive process' and a 'standard competitive process'.

The five-stage process

The new version of the guideline specifies a five-stage assessment process in addition to a pre-submission meeting, as follows.

Pre-submission meeting

Prospective bidders must meet with DTF before submitting a proposal under the guideline. A template should be prepared outlining the proposal, including considerations of DTF's policy, priority areas and assessment criteria. Everything discussed during this meeting remains confidential. It is critical that prospective bidders use this meeting to get as much guidance from DTF on the necessary key elements of their proposal as possible.

Stage 1: preliminary assessment

Bidders should familiarise themselves with DTF's considerations, and directly address these in the proposal. The proposal may be considered to be high-value or high-risk, which will require the bidder to address a separate assurance framework and 'gateway review process'.

Although the bidder's submission is not typically disclosed during this stage, DTF reserves its rights to disclose if a bidder fails to meet the probity requirements or the terms and conditions of the guideline. At this stage, DTF expects to see seriously developed proposals.

Stage 2: due diligence and strategic assessment

A steering committee will oversee a detailed analysis of the proposal, including its risks and attention to the assessment criteria.

An additional uniqueness test may be recommended where uniqueness cannot be fully determined. The test involves the public exhibition of the proposal for a minimum of 30 days. It contemplates other parties responding to the proposal who could deliver similar outcomes or comparable value.

DTF will also consider the most appropriate procurement option. It may decide that it wishes to enter into exclusive negotiations with the bidder, a limited competitive process or a standard competitive process.

Stage 3: procurement preparation

The state will consider funding availability, value for money, develop a stakeholder development plan and apply the probity considerations. The developer must agree and formalise a 'probity and process' deed with the state government. A standard deed will be provided, and there will be scope to negotiate the terms. Where there is a limited competitive process, the state will prepare tender documentation.

Stage 4: exclusive negotiations or limited competitive process

The bidder is then required to submit its final offer to the Victorian government. The final offer should contain the proposed scope, cost to government, risk allocation and benefits.

The lead department will then consider the affordability, value for money, expected benefits and scope of the project.

Stage 5: contract award

The bidder enters into binding contractual arrangements with the state.

A project summary will be released on DTF website, and the executed contract will be published on the Victorian Government Tenders website.

Additionally, the guideline retains the option for bidders to submit an 'innovative idea' to the Victorian government and receive an ex-gratia payment at the treasurer's discretion.

Simela Karasavidis is a projects expert at Pinsent Masons, the law firm behind Out-Law.com.