Market-led Proposals and the second wave of economic recovery

Market-led Proposals and the second wave of economic recovery

By Daniel Smith

While the priority of the State Government remains to keep West Australians safe during the health crisis, it is clear that more and more resources are being put into planning and executing our economic recovery.

Private sector investment will be critical to driving WA’s recovery, particularly as the infrastructure projects and smaller ‘shovel-ready’ initiatives the government is funding in its first wave of economic recovery reach completion.

Recent reforms to planning and environmental approvals are encouraging private sector proponents, who rightly interpret this as the government seeking to encourage investment and job creation.

Changes made to the State Government’s Market-led Proposals (MLP) framework over the past six months are also seen as highly encouraging, having the potential to drive innovation, as well as a second wave of investment and jobs throughout our economic recovery.

But industry believes there are opportunities to make the MLP policy even more effective.

More on that later.

To bring you up to speed, the McGowan Government introduced its MLP policy in March 2019, delivering on an election commitment designed to “create a clear, consistent and transparent process to manage unsolicited proposals from the private sector that fall outside of the normal competitive process”.

As the COVID-19 crisis took hold in March 2020, the government announced changes to the policy to align it with the recovery focus areas of health, economic and infrastructure, social, industry and regional WA.

The changes also included the introduction of a first-mover advantage, which would provide a pathway for proponents to retain a right of last refusal in the event that the government determined that a proposal didn’t meet the strict IP, ownership or single supplier criteria for exclusive negotiation.

In this event, the government would likely test the market, with the original proponent provided the first-mover advantage of being able to match a more competitive bid or receive a bid premium of between 10 and 20 per cent.

In August, the Premier and Treasurer announced the introduction of problem and opportunity statements, which are designed to “provide focused opportunities for industry to respond with innovative solutions that stimulate the economy and create jobs for Western Australians”.

A small number of problem and opportunity statements have been released since, focusing on areas as diverse as carbon farming, prison industries and PPE manufacturing.

The State Government’s evolving MLP policy has been welcomed by industry as a significant improvement on the ineffective unsolicited bid process that existed previously.

However, as indicated above, industry sees opportunities for further enhancements.

Two potential changes have been floated, with a view to driving private sector investment and job creation during the COVID recovery period.

In May, an idea was put forward (read here) to relax the requirement for a proponent to demonstrate that its proposal is “unique’” or “not market standard” – a requirement that some proponents struggled with, and one which they were required to meet to gain access to the MLP process and the exclusive negotiation and first-mover pathways it offered.

It was suggested that the uniqueness test be relaxed, so that proponents who could demonstrate that their proposal was in the long-term interest of the WA economy, or could provide a short-term employment benefit, could access the MLP pathways.

More recently, a second, and potentially more contentious, change floated involves the suspension of the requirements to qualify for exclusive negotiation.  Advocates argue that it would drive innovation and investment by encourage more IP-protective proponents to engage with government.  Critics argue it could deliver sub-optimal outcomes, with fewer projects subject to market testing, and be potentially more difficult to manage from a probity perspective.

It is in the interests of the State Government, industry and the broader WA community for the MLP policy to deliver to its potential.  This is why we will likely see ongoing engagement and collaboration between government and industry on how the framework functions, with further changes a real possibility.

In the meantime, proponents will position themselves for success in accessing the MLP pathways by ensuring their proposals meet the priorities of government and the needs of the community, as well as demonstrating that their proposal is unique and developing an effective narrative and evidence base to support these elements.

As with the Global Financial Crisis, the period of economic recovery is likely to be long and bumpy.  The potential for Market-led Proposals to generate a second wave of investment and job creation, as the stimulatory capacity of the State Government reaches its limits, cannot be overstated.

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