Could WA’s market-led proposal policy lead the way on Australia’s economic recovery from COVID-19?

In response to the COVID-19 crisis, in March 2020 the Western Australian (WA) Government introduced important changes to its Market-led Proposal (MLP) Policy that encourage the private sector to bring economy-building proposals to Government. With some refinement, we argue that WA’s model provides a strong framework that could be used to form the basis of a national approach to fast-tracking the private sector response to rebuilding the Australian economy. 

Australian governments and corporations acted swiftly and boldly in response to the health and business challenges created by COVID-19. As we emerge from pandemic-related restrictions, the success of that response must be repeated in relation to the economic challenges that we now face.

Spending on projects and infrastructure will make a significant contribution to overcoming the economic challenges. According to The Honourable Michael McCormack MP, Deputy Prime Minister of Australia, the Commonwealth’s $100 billion infrastructure fund is open for business and State governments are looking for ‘shovel-ready’ projects in which to invest.

The recovery of the WA economy will need a whole‑of‑State approach, with contributions from both the Government and the private sector.

A coordinated and streamlined approach will be vital to achieve the best outcomes in the shortest possible time, and to ensure that finite public resources are expended in the most targeted and efficient way.

Without intervention, the WA Government will follow standard public sector procurement processes, which generally include an open tender model. However, WA’s MLP Policy provides a mechanism by which unsolicited proposals from the private sector can be put to the Government.

The underlying purpose of WA’s MLP Policy

Originally released in April 2019, the MLP Policy was intended to provide a clear, consistent and transparent process for parties seeking to approach Government with unsolicited proposals to:

• build or finance infrastructure;
  
  
• provide goods and services; or
  
  
• purchase a Government-owned asset.

Successful proposals needed to demonstrate:

• alignment with the Government’s policy objectives and priorities;
  
  
• significant social, environmental, economic or financial benefits for Western Australians;
  
  
• value for money;
  
  
• that they were feasible and capable of being delivered by the proponent;
  
  
• acceptable risk allocation; and
  
  
• sufficient justification for exclusive negotiation with Government.

Since the MLP Policy was released, the Government received 27 proposals across ten different industries. Roughly half of those progressed through the pre-qualification stage.

Changes introduced in response to COVID-19

On 16 March 2020, the Government made important changes to the MLP Policy, partly in response to the COVID-19 crisis. The changes included:

• clearer articulation of Government priorities (current priorities are stimulating the economy and creating jobs);
  
  
• the publication of a list of specific exclusions that are not currently considered priorities on the MLP website;
  
  
• the introduction of a ‘First Mover Advantage’; and
  
  
• a more streamlined process.

The most significant of these changes is the introduction of the First Mover Advantage. If a proposal meets the First Mover Advantage characteristics and the Government determines that it should be market-tested, proponents will be entitled to match a more competitive bid or to receive a bid premium of 10 – 20%. The First Mover Advantage will certainly encourage the private sector to use the MLP Policy as a vehicle to bring economy-building proposals to the Government. The Government should be applauded for its efforts to respond to the COVID-19 crisis by amending the MLP Policy.

To receive the benefit of the First Mover Advantage proponents must demonstrate that their proposal is ‘unique’. This uniqueness test is one that proponents will have the most difficulty satisfying, and, in some respects, is very similar to the ‘exclusive negotiation’ test which still exists under the amended MLP Policy.

Given the unique circumstances in which we find ourselves, and the potentially dire economic effects of the COVID-19 crisis, should the WA Government consider doing more (even if on a temporary basis)?

Can the WA Government enhance its response?

We think that there is a strong case for the WA Government to do more, and the great advantage of the MLP Policy is the ease with which amendments can be implemented.

A common view expressed by the private sector in WA and in other jurisdictions is that the threshold for a successful MLP is difficult to achieve, particularly meeting the ‘exclusive negotiation’ or ‘uniqueness’ test. In Queensland, the Government acknowledged this difficulty by replacing the ‘uniqueness test’ with a test requiring proponents to provide a justification for direct negotiation with Government, rather than engaging in a competitive process.

We believe that the WA Government should amend the MLP Policy to temporarily suspend the uniqueness test for the First Mover Advantage pathway. Instead of focussing on uniqueness in these unprecedented times, the Government should consider giving a proponent the benefit of a First Mover Advantage if a proponent can demonstrate that its proposal:

• is in the long term interests of the WA economy, will stimulate the economy within a specified timeframe and create a minimum level of employment, or
  
  
• will provide a substantial short‑term benefit because it can be activated quickly and will provide significant short‑term employment in WA in sectors which have been hit hardest by the crisis (e.g hospitality).

In our view, proposals would need to align with a published list of priority economic sectors identified by the WA Government as requiring immediate investment.

The process amendments to the MLP Policy introduced in March will continue to apply, meaning a more streamlined progression of proposals through the process. However, we believe that the timeframes for dealing with MLPs should be fixed and short, to ensure that opportunities are not lost, or that proponents don’t waste time on proposals that will not progress.

In addition, we think the WA Government should give consideration to compensating reasonable costs incurred by a proponent in putting forward a proposal which follows the First Mover Advantage pathway and becomes a completed project (whether by the original proponent or another party).

These suggested changes to the MLP Policy will give the private sector the added incentive it needs to bring proposals to the WA Government and have the potential to deliver the stimulation that the economy needs when it needs it most. Better still, by adopting these changes the WA Government would be responsible for introducing an excellent model for the nation to follow.