Upcoming Mallesons seminarsIn December 2006, the NSW Government released a revised version of the “Working with Government: Guidelines for Privately Financed Projects”. The PFP Guidelines are designed to ensure greater efficiency, transparency and accountability in assessing privately financed projects (PFPs).
The NSW Government simultaneously released a draft version of the “Working with Government: Risk Allocation and Commercial Principles” (the draft Commercial Principles) for comment from industry participants. The draft Commercial Principles supplement the PFP Guidelines and set out the NSW Government’s preferred risk allocation model for PFPs.
The PFP Guidelines
The PFP Guidelines provide a framework for the NSW Government’s involvement in PFPs. They are designed to increase efficiency, transparency and accountability in the government procurement process in NSW, and to reduce the costs and uncertainty associated with tendering for PFPs.
The PFP Guidelines apply to all PFPs undertaken by NSW Government departments, agencies and authorities, including State-Owned Corporations and other public trading enterprises. They do not apply to local councils. A NSW Government entity which is subject to the PFP Guidelines may seek approval from the NSW Treasury to depart from the requirements in the PFP Guidelines.
The PFP Guidelines replace the original PFP Guidelines issued in 2001, and draw significantly from the Victorian Government’s “Partnerships Victoria” guidelines for PFPs. The revised PFP Guidelines cover (amongst other things):
- each PFP will be subject to a public interest evaluation, where the PFP will be evaluated according to certain technical, economic and social criteria to determine the project’s value for money from users’ and taxpayers’ perspectives
- public interest evaluations must be prepared periodically throughout the procurement process and disclosed to the public
- the PFP Guidelines have been updated to reflect the new Part 3A of the Environmental Planning and Assessment Act 1979 (NSW)
- the PFP Guidelines provide assistance as to how NSW Government agencies may evaluate non-conforming proposals, and how they may use bidder engagement strategies, best and final offers and pre-selection negotiations
- the PFP Guidelines provide a standard format for the preparation of contract summaries, and
- further Budget Committee of Cabinet approval or advice must be obtained where significant project factors change or an agency wishes to renegotiate a PFP contract.
The draft Commercial Principles
The draft Commercial Principles set out the risk allocation and commercial principles which the NSW Government will use for PFPs. However, the draft Commercial Principles are intended to apply specifically to social infrastructure PFPs such as schools, hospitals and prisons. As with the PFP Guidelines, the draft Commercial Principles will apply to all NSW Government departments, agencies and authorities, including State-Owned Corporations and other public trading enterprises. However they will not apply to local councils.
The draft Commercial Principles outline how the NSW Government intends to deal with the following matters in its PFP contracts:
- liquidated damages
- defects rectification
- provision of security
- relief events
- termination
- abatements
- benchmarking, and
- dispute resolution.
However, the draft Commercial Principles state that the NSW Government will continue to undertake a detailed risk analysis of each proposed PFP, as it may not be appropriate to apply the risk allocation in the draft Commercial Principles to all social infrastructure PFPs.
The draft Commercial Principles were open to public comment until 22 January 2007.
Conclusion
The PFP Guidelines, supplemented by the draft Commercial Principles, are designed to increase certainty for tenderers and reduce their bid costs, and to ensure greater consistency, transparency and efficiency in the government procurement process.
Please refer to the PFP Guidelines and the draft Commercial Principles.