On 2 May 2013, the Victorian Treasurer Michael O'Brien
announced significant reforms to the Victorian Government's PPP
guidelines, the Partnerships Victoria Requirements (May
2013) (2013 Requirements). The 2013 Requirements,
together with the National PPP Policy and Guidelines, will apply to
the next phase of Victoria PPP projects, including the upcoming
Ravenhall Men's Prison Project.
The 2013 Requirements follow the Government's public
discussion paper "Future direction for Victorian public
private partnerships" dated November 2012 (Discussion Paper).
Norton Rose was a key contributor in the response to the Discussion
Paper by the Asia Pacific Loan Market Association.
Key issues and changes
Below are some of the key issues and changes outlined in the
Projects >$50m – PPP procurement must
be considered for projects valued over $50m. Projects may be
bundled to reach that threshold.
Projects <$50m – Projects valued at
less than $50m may be delivered using a streamlined PPP approach.
The Department of Treasury and Finance (DTF) is currently
considering pilot projects and developing commercial principles for
Core services – Future PPPs may include
more services, including "core" services previously
delivered by the public sector. The Government will assess this
during the business case stage.
Public Sector Comparator (PSC) – The
Government will no longer automatically revert to traditional
design and construction delivery if the PSC cost expectations are
not met through a competitive PPP procurement process. Further, the
Government will now consider disclosing the full risk adjusted PSC
to short listed bidders.
Scope ladder – Procuring agencies will
now develop a scope ladder alongside the PSC. It will identify any
scope items bidders can remove or add should bids be over or under
the PSC. Usually, the scope ladder will not be disclosed to bidders
and will only be used to inform negotiations, but it may be
disclosed in some instances.
Modified financing structures – The
Government will consider modified financing structures for some
projects, such as where there are financial market capacity
constraints. For example, the Government may consider a partial
capital contribution (by milestone payments during construction or
a lump sum payment after construction). The 2013 Requirements set
out the high-level criteria to assess modified structures against a
standard PPP approach.
Tender process improvements – The
Government will continue to improve tender processes, including by
minimising information requirements for bidders, short listing only
two bidders where appropriate and minimising the use of best and
final offers processes where possible.
Reimbursement of bid costs – Victoria
will trial payment of partial bid costs for PPP projects. The
amount of reimbursement will depend on the project, but this will
be communicated to bidders up front.
Marked up contracts – Bidders will be
required to submit a fully marked up contract and schedules. There
is no longer any requirement for bidders to submit departures
schedules. Terms sheets will be sufficient for some
Victorian Code of Practice – PPP
projects must include the tender submission requirements in
accordance with the Implementation Guidelines to the Victorian Code
of Practice for the Building and Construction Industry.
The 2013 Requirements remains a high-level guidance document and
does not address or detail the Government's approach to all of
the issues raised in the Discussion Paper and other issues
currently being considered by the PPP industry. For example, some
further issues include:
What is the Government's approach to the other modified
financing options raised in the Discussion Paper?
How will the Government determine whether to include
"core" services in future PPPs and the scope of those
How will tender processes will be streamlined and
What (if any) stronger contractual protections for
subcontractor payments will be introduced?
Will the Project Company be liable to pay liquidated damages to
Will the Government require a pre-emptive right to purchase
project debt in the secondary market or replace a bank in defined
We anticipate that in due course the Government will release
further PPP policy and guidance materials to address these and
other issues, including by updating the Annexures to the
Partnerships Victoria Requirements. We also expect to see
further announcements from DTF about the pilot projects and
commercial principles for streamlined PPPs valued at less than
We will report on any further Victorian PPP policy and guidance
developments as they occur.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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