In a society of disruption and innovative new markets, businesses can no longer be reactive to opportunities or rely on traditional approaches in order to pursue opportunities. Looking to the future, successful procurement will require innovative forward thinking by proactive and entrepreneurial industry professionals.
As part of this innovation, unsolicited, or market-led proposals can be utilised to ensure that unique and innovative ideas from industry can be considered by Governments. To facilitate this process, all Australian state governments (with the exception of Western Australia) have adopted market-led proposal guidelines to ensure transparency and fairness in the receipt and assessment of unsolicited proposals from industry.
The first NSW project undertaken as a result of an unsolicited proposal was the Sydney Harbour Tunnel in 1986. However, the first modern policy concerning market-led approaches was not introduced until 2012, with a revised policy implemented in 2014. Recently completed projects that arose from unsolicited proposals include the Crown Sydney Resort Project at Barangaroo, the sale of the Queen Mary Building in Camperdown (to enhance affordable student housing) and the NorthConnex proposal to construct a tunnel link between the M1 and M2 Motorways.
What is a market-led/unsolicited proposal?
Market led proposals allow private organisations to propose new projects (most commonly to government) without any formal request or tender for information being issued. A successful market-led proposal removes the public consultation and tender processes involved in procurement, as individuals or organisations directly negotiate with the relevant government or independent entity to reach agreement about their proposed project. Such initiatives can enhance innovation and improve service delivery by utilising methods outside the traditional approaches to procurement. There are however risks inherent in this process. The expenditure of public money must satisfy 'value for money' requirements. In addition, there are probity risks where the promulgator of the project is also the potential recipient of its benefits through the awarding of contracts. It is also important that the impetus for public policy is vested in the government of the day. Perceptions that such policy is being driven by the private sector can create reputational risk to the government.
Market-led/unsolicited proposal process in NSW
The NSW Guide for Submission and Assessment of Unsolicited Proposals (August 2012) (NSW Guide) contains a three stage assessment process to ensure transparent and streamlined evaluations of unsolicited proposals. Proponents are strongly advised to arrange a pre-submission concept review meeting with the Department of Premier and Cabinet before any proposal is made. After submission of a project proposal, the Department of Premier and Cabinet undertakes a Preliminary and Strategic Assessment of the initial proposal. If a project is deemed to be of sufficient interest to warrant further development, the proponent and the NSW Government will work co-operatively to develop a more detailed proposal. If a proposal is successfully developed and favourably assessed during the second stage, parties will negotiate a binding offer during the final stage.
The NSW Guide sets the following criteria to evaluate all proposals:
- Uniqueness – Submissions will need to demonstrate unique benefits and the unique ability of the proponent to deliver the proposal. A great deal of proposals submitted since 2012 have failed as they were not considered unique enough to warrant a direct dealing1;
- Value for money – The quality, benefits, risks and costs of a project will be considered;
- Whole of government impact;
- Return on investment;
- Capability and capacity;
- Affordability; and
- Risk allocation.
Market-led/unsolicited proposal processes other jurisdictions
On an international level, there are a range of other approaches that can be adopted to ensure fairness and transparency in the process of assessing unsolicited proposals. For example, the following processes may take place after receipt of an unsolicited proposal:
- Bonus system – An open tender process is conducted. However, the original proponent's offer is selected if it is within a certain percentage of the best offer;
- Swiss Challenge – An open tender process is conducted. However, the original proponent has the right to counter-match the best offer; and
- Best and Final Offer - An open tender process is conducted. However, the original proponent automatically qualifies to participate in the final tender.
Although perceived as a relatively new phenomena, unsolicited proposals have been utilised by governments, including in Australia for almost 30 years. Relying on the market to generate ideas can be an innovative and effective mechanism which assists in the design and implementation of jointly beneficial projects. Although critics may argue that unsolicited proposals do not necessarily ensure that the most cost-effective approach is adopted, they have become internationally utilised over the past 30 years. Provided that an appropriate framework is established and that probity and 'value for money' concerns are addressed, market led approaches have an important role to play.
In a world of disruption where markets are becoming a true 'survival of the fittest', it is important that all entities realise the potential for entrepreneurialism and innovation in procurement. Proactive thinking and actively promoting a proposal or project should be regarded as essential in an increasingly competitive business environment.
1NSW Government, Supplementary Information for proponents, February 2014 p.1
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.