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M A R K E T L E D P R O P O SA LS A submission or request initiated and submitted by a private sector proponent to government, where the specific proposal has not been requested by the government: All state and territory governments have a formal process and guide for the submission of unsolicited or market-led proposals It sets out how market-led proposals for public-private partnerships are handled and assessed Some variety in definitions across the states Federally there is an unsolicited innovative proposals scheme for Defence ideas We are now also seeing large local governments, such as Brisbane City Council, introducing an innovative proposals scheme 2
MARKET LED PROPOSALS Benefits to government may include: Delivery of new or improved services or products Improved use of existing infrastructure Delivery of new infrastructure Demand management or avoidance for certain services Improved delivery time and quality Identification and application of new revenue streams Improved amenity and liveability for the community Positive outcomes: Accelerating key infrastructure Encourage private sector initiative and investment 3
MARKET LED PROPOSALS UNIQUENESS RISK ALLOCATION VALUE FOR MONEY AFFORDABILITY ASSESSMENT CRITERIA WHOLE OF GOVERNMENT IMPACT CAPABILITY & CAPACITY RETURN ON INVESTMENT Source: NSW Government website 4
Why is this important? Recognises that competitive processes traditionally increase value for money, however exclusivity may be warranted in only unique circumstances Gives the government confidence that another proposal could not deliver the same outcome Sole source provider is unnatural for government to accept UNIQUENESS TEST 5
UNIQUE? Unique proposal should demonstrate the following: Can the proposal be readily delivered by competitors? Does the Proponent own something that would limit the Government from contracting with other parties if the Government went to tender? Are there other attributes which may not necessarily stand alone as unique but, when combined, create a 'unique' proposal? 6
UNIQUENESS TEST Attributes for a MLP to be considered unique: Value capture and other new revenue streams Co-investment and /or existing infrastructure Incumbency Regional focus Low cost and risk profile to the government Priorities not already funded by government Genuine intellectual property Emerging technologies 7
UNIQUE Uniqueness should also more broadly consider: Idea / technology generation Innovative funding solution that provides nil / low cost to government Ability to deliver in an accelerated timeframe Ability and commitment to gather the right talent within a company or JV 8
A strong MLP Meet a community need or government priority Represent value for money Be unique in its ability to deliver a specific outcome Unable to be replicated by a competitor Have a capable proponent with capacity to successfully complete the project Be feasible on a technical, commercial and practical basis MARKET LED PROPOSALS 9
UNIQUENESS TEST Attributes of unsuccessful MLPs tend to feature the following: Lack of direct benefits to the government Delivering a unique option, but not a unique outcome Limited evidence of capability or feasibility Requests to access land or infrastructure where no incumbency exists Readily replicated by the market 10
MARKET LED PROPOSALS 11
SUCCESS? In NSW since 2012, 118 proposals have been submitted. Four(4) have successfully completed the process. Three(3) for billion dollar + projects: Crown Sydney Resort $2b NorthConnex motorway project $3b Wynyard Station $1b 12
KEY ISSUES How is innovation assessed and measured in uniqueness test criteria? Concern how intellectual property is protected Disconnection with adjoining agencies and Treasury around the value capture message Feeling that some agencies see MLPs as queue jumping Timing uncertainty Significant investment at unnecessary risk Feelings of monopoly threat Unclear government priorities Decisions lost in the political cycle 13
KEY OPPORTUNITIES The key opportunities for private enterprise with successful MLPs: Encourage innovation and investment Enable long term business planning Move on from the market boom or bust cycle for business sustainability Enable efficient resource balancing Traditional competitive tender model doesn t necessarily deliver value for money in a heated market 14
There is no international standard for managing MLP s Encouragement of Private sector to propose beneficial MLP s a clear government strategy What works best in one country may differ elsewhere INTERNATIONAL PRACTICE 15
INTERNATIONAL PRACTICE Stage 1: from presentation of the project to government until all internal assessments and approvals are finished and the project is ready to be publicly tendered. Stage 2: Generally involves a competitive tender process. It s here that the approach tends to differ: The Bonus system an additional theoretical value is applied to the original proponent s offer (Chile, Republic of Korea) The Swiss Challenge the original proponent has the right to counter-match any superior offers (South Africa, Philippines, India) The Best and Final Offer system the original proponent is generally given the advantage of automatically participating in the final round of bidding (Canada). 16
REPUBLIC OF KOREA 17
MLP PROCESS REVIEW In 2016 NSW acting Auditor General performance audit of the MLP process. Governance arrangements were adequate Some key recommendations for improvement:- Revise the MLP Guide Increase Government understanding Increase public reporting 18
MLP PROCESS REVIEW In 2016, QLD released their updated Unsolicited Proposals Guide that featured: New streamlined framework to encourage and assess proposals Ideas from more than 40 potential proponents since the framework s release No limit to what proposals should be however they should be aligned with Government priorities Innovative market led proposals may address the opportunities and challenges outlined in the State Infrastructure Plan 19
GOVERNANCE Transparency from our government Encouragement of innovative MLP s Various government guidelines are being improved to provide clear direction and frameworks to enable us to: a) Develop ideas; and b) Know that proposals are being scrutinised to ensure that only proposals which genuinely demonstrate uniqueness and align with Government objectives for good planning can be accepted 20
SUGGESTIONS What are suggestions to unlock this? Revise the MLP guides for clearer rules of engagement Increase government MLP education and understanding across the agencies Increase public reporting to assist proponent development Early government engagement / transparency to achieve better alignment with State infrastructure plans Early engagement with Treasury to enable early strategic assessment 21
SOLUTIONS Definition of uniqueness to be given broader context Innovation/intellectual property protection measures, management and compensation rights Better collaboration between government agencies and private sector on specific MLP s 22
Option Value Capture focus: Particular application for property development/transport oriented projects Provides a more level playing field competition is ok, however rules must be more clearly defined Risks must be addressed and mitigated Improved community amenity and liveability is a key element and differentiator VALUE CAPTURE 23
Encourage MLP process as delivering benefit Importance of good governance, agency alignment, transparency and early engagement Despite judging difficulties recognise that uniqueness has broad form We want private sector to keep innovating and investing in those ideas KEY MESSAGES 24
JOHN HOLLAND 25
Questions? 26