December 2019

When probity is key: more on public-private partnerships

Some readers may have attended the recent Local Government Property Professionals Conference at which I spoke on public-private partnerships.

In my presentation, I outlined six matters Council must address before the project review committee in the first stage assessment of significant and high-risk projects. One involves Council confirming it will undertake a competitive process to identify preferred partners, or, if Council decides not to do this, providing reasons and an alternative process.

The purpose of this article is to provide some further information about the requirements of the Government (OLG) under its PPP guidelines for dealing with this matter.

Guidelines published by the Independent Commission Against Corruption (ICAC) in 2018 provide direction on how to do that and also manage associated risks.

The guidelines state that direct negotiations can be justified if a joint venture is for property development where the developer owns property on or near the proposed project. In such cases, the developer’s land is necessary to the project. This land might also include the airspace, long-term leases, mining rights, easements, options and other rights over land.

If the proposed public-private partnership involves direct negotiations with the developer of an adjoining property, then based on ICAC’s guidelines, Council should adopt a principles-based approach to avoid potential for corrupt conduct. Principles of fairness, impartiality, accountability, transparency and value for money must guide the negotiations.

The Office of Local Government’s PPP guidelines require Council to prepare a probity plan for the project. The plan should acknowledge that the project proposal will establish that direct negotiations are required because Council will be dealing with the owner of the adjoining property. It should also provide a framework for conducting the negotiations using a principles-based approach.

Engaging a probity adviser early and preparing a project-specific probity plan will ensure that the direct negotiation process is documented thoroughly, all conflicts of interest are disclosed and managed, and proper due diligence checks are undertaken.

The probity plan should state how negotiations will be conducted, require the developer to demonstrate the merits of its contribution, and apportion risks between the developer and Council. Typically, this means obtaining appropriate security (such as a bank guarantee or bond or mortgage) and proof of necessary insurances.

Establishing a clear process for direct negotiations will satisfy the project review committee’s requirement for a clear market testing process to identify preferred partners.

These are only some of the matters that Council should consider when undertaking a joint venture with a developer of adjoining land. Further guidance can be found in Direct Negotiations: Guidelines for Managing Risks published by ICAC in August 2018.

Author: Peter Barakate

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