For the first time in 17 years, the Office of Local Government (OLG) has this year refreshed its guidelines for the procedures to be followed by councils for PPPs.
PPPs capture a variety of ‘arrangements’ which provide for the delivery of infrastructure and facilities in whole or in part through private sector financing, ownership or control. These arrangements can include even an understanding between parties without a written contract, so the PPP regulations are far-reaching.
The new guidelines are most welcome and outline what councils must do to comply with the Local Government Act 1993 (Act) in relation to PPPs. What follows is a list of some of the key features of the guidelines which mark a shift in focus from the previous guidelines issued in 2005.
| Is the project a PPP? | Councils should seek independent legal advice in the first instance. Only if councils remain unsure should they seek advice from OLG. However, OLG will not advise councils on how to undertake projects or interpret the legislation for councils. |
| Types of PPPs | The broad definition of PPPs has often lead to confusion as to whether a project might be a PPP, so OLG has offered guidance by recommending that councils views transactions as a whole and be aware of possible PPPs such as turnkey operations, lease purchases, temporary privatisations, lease-develop-operate arrangements, and wrap around additions. |
| Relationship with tendering | Part 6 of the Guidelines state that the PPP and tendering requirements are intended to operate as alternatives so as to enable councils to apply the most appropriate method of testing the market for a project. As a general rule, contracts which are subject to the tendering requirements under section 55 of the Local Government Act 1993 do not lend themselves to being PPPs. If a project properly constitutes a PPP, then it should be undertaken in accordance with the PPP requirements and guidelines rather than by tender. |
| Assessment of projects | The old flowchart has been replaced with a more sequentially ordered outline of the steps required to be undertaken by councils in complying with the Act and obtaining OLG's written approval of the project. The appendices contain a new self-assessment questionnaire and checklist making it much easier for councils to plan and implement projects in a step-by-step manner. |
| Council's conflicting interests | OLG will monitor how councils manage their conflicting roles as landowner/developer and consent authority. |
| Unsolicited proposals | In addition to consulting their own unsolicited proposals guidelines, councils should seek guidance from the Unsolicited Proposals Guide for Submission and Assessment (August 2017) issued by the Department of Premier and Cabinet. |
| Financing | Where councils need to borrow funds to finance projects, whether internally or externally, they must assess whether they require ministerial approval. Funding from increasing rates and charges can only be undertaken with the Minister's approval. Likewise, councils must undertake PPPs in compliance with Ministerial Investment Orders and should apply the principles of OLG's CAPEX Guidelines (December 2010) to all capital projects. |
| Subsequently contracted services | Services provided during the carrying out of the PPP form part of the PPP, but not services subsequently contracted for ongoing maintenance or operation of the infrastructure. Contracts for the provision of these services need only comply with the tendering provisions of the Act. |
Arrangements excluded from being PPPs remain the same. As a general guide, contracting services pursuant to tenders, leasing or licensing of Crown or community land, sales of operational land and voluntary planning agreements can be implemented without complying with the PPP regulations.
If your council is considering undertaking a PPP, it should obtain legal advice at an early stage to ensure that it structures the project in compliance with the Act and the Guidelines. Doing this will facilitate the project through the review by OLG and the project review committee. It will also ensure that best practice is adopted and that councils meet their statutory guiding principles for sound decision-making and sound financial management.
Peter Barakate has significant experience in advising metropolitan and regional councils on PPPs. In 2019, Peter addressed the Local Government Property Professionals Conference at Caves Beach (Lake Macquarie LGA) on the topic and frequently consults with councils to enable them to assess and plan their projects, whether as PPPs or as permitted exemptions.
This article was written by Peter Barakate, Partner.
