What’s the Deal with Unsolicited Proposals?

Monday, October 26th, 2015
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Governments across Australia are encouraging unsolicited proposals as a way to flush out innovative ideas in a cash-strapped environment.

Often poorly understood and therefore derided as a way to facilitate ‘backroom’ deals, unsolicited proposal frameworks are in fact a legitimate, forward-thinking procurement approach used by modern governments.

Over the last few years, governments across the country have jumped on the unsolicited proposals bandwagon as a means to attract proposals for infrastructure or public services, delivered as public-private partnerships.

New South Wales, Victoria, Queensland, South Australia, the Northern Territory and the ACT all now have frameworks in place to evaluate unsolicited (or market-led) proposals. The Australian Government runs an unsolicited innovative proposals scheme for Defence ideas, while Australia’s largest local government, Brisbane City Council, is introducing an innovative proposals policy.

This transition from traditional (reactive) procurement toward governments seeking market-led (proactive) proposals is occurring due to dual drivers: necessity and innovation.

Necessity as a driver

By 2030, the Australian Government is expected to spend more than two-thirds of the Federal Budget on the ageing and health portfolios. This leaves little to be spent on much-needed infrastructure, or on services in other portfolio areas.

State, territory and local governments are all facing similar budgetary pressures.

Tax reform discussions are occurring. Tax changes, however, take time. Tax reforms will not be implemented fast enough to keep pace with the changing needs of governments.

Innovation as a driver

While governments are facing budgetary pressures, the private sector, universities and research institutes are developing new innovations, service delivery concepts and project ideas.

These ideas often don’t fit the mould of traditional government procurement processes.

Ideas can vary from being an engineering innovation to a unique building technique to a bundled infrastructure proposal, or even a new public-private service delivery model in an area like health, transport or corrections.

In saying this, holders of unique ideas have often been hesitant to proactively approach government. This is primarily due to a perception that the idea or intellectual property will not be respected. A classic example of this mistrust is when companies feel their ideas have been compromised through participation in collaborative government procurement processes.

Another reason private companies have hesitated is a belief that governments lack the agility to evaluate innovative proposals within a reasonable time frame. Proposals can get caught in the bureaucracy if there is no formal process in place to deal with them.

How governments have responded

Under the National Private Public Partnership Guidelines set out by Infrastructure Australia, each Australian State and Territory jurisdiction is permitted to have a bespoke policy for dealing with unsolicited proposals and exclusive mandates.

Driven by financial necessity and a need to embrace innovation, most state and territory governments have utilised this provision by developing their own frameworks to assess market-led proposals.

All frameworks have the ability to grant exclusive mandates, which essentially grants a proponent the right to present a business case outlining why they deserve a sole-source government contract to deliver their proposed project.

The result is win-win. Governments can incentivise companies to present genuinely unique proposals by providing a guarantee that if the government’s criteria are met the company or consortium will be able to negotiate exclusively. At the same time, governments can attract proposals for new infrastructure, public facilities or service delivery models that they would not have attracted (or perhaps even considered) through a usual government-led procurement process.

Truly innovative, value-for-money proposals are rewarded, to the benefit of the wider community.

More scope for use by the private sector

Unsolicited proposals are increasingly being embraced by private companies as a means of pitching ideas to governments.

Until recently, however, they have only been associated with multi-billion dollar project pitches like NorthConnex (Sydney), Barangaroo (Sydney) and the Western Distributor (Melbourne).

This is unnecessarily restrictive thinking.

Unsolicited proposal frameworks actually facilitate proactive approaches by the private sector for a huge range of government projects and services, of varying sizes, across most government portfolios.

Essentially, the scope for unsolicited proposals in limited only by the ability of the private sector to innovate, and then formulate a project that utilises these innovations in a way that meets the growing needs of governments.

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