Government Focus Group Probity – Risks and Benefits

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					PPP’s and Probity Audits
Australia & New Zealand Universities Internal Audit Group Perth - 2008

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What is a PPP ? PPP’s – Common Characteristics
Overview - PPP’s in Australia PPP’s – Benefits and Challenges PPP’s and Australian Universities

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Probity Principles PPP Core Process Overview
Likely Probity Issues to be Aware of Why Use Probity Audits in PPP Deals?

PPP defined

Public Private Partnerships
“….Contracts for private sector provision of public infrastructure and related services that would otherwise be provided by the public sector…”

PPP – Common Characteristics
• Infrastructure based • High $ dollar value • High level of public interest • Generally long term – more than 20 years • Complex – dealing with multiple parties • Complex - contractually • Tender process long and costly • Involves private sector intellectual property • Politically sensitive • Should provide a better solution than

Overview - PPP’s in Australia
Northern Territory
• Darwin City Waterfront Redevelopment

• Headquarters Joint Operations Command • Single LEAP 1 and 2

Western Australia
• Perth Courts Complex • Mindarie Regional Council Waste Project

• Royal Children’s Hospital • Royal Women’s Hospital • Melbourne Convention Centre • Melbourne Showgrounds • Southern Cross Station • Victorian Correctional Facilities • Barwon Water Biosoilds • Casey Community Hospital • Docklands Film and Television Studios • Country Court • Wodonga Wastewater • Campaspe Water Reclamation Scheme • EastLink (Mitcham-Frankston Freeway) • Emergency Alerting System • Metropolitan Mobile Radio • Victorian Public Transport • Monash Uni Student Accommodation • Victoria Prisons

New South Wales • Royal North Shore Hospital
• Orange and Bathurst Hospital • New schools project • NSW Rolling Stock • Bonnyrigg Social Housing • Cross City Tunnel • Westlink M7 • Eastern Creek Alternative Waste Facility • M2 Motorway • Eastern Distributor • Police Property Portfolio • Long bay Prison and Forensic Hospitals • New Schools Project 2 • Newcastle Maternity Hospital • Chastwood Interchange • Lane Cove Tunnel

• Southbank Education and Training Precinct • Brisbane Airport Rail Link • North South Bypass Tunnel • Airlink • Goldcoast Rapid Transit

South Australia
• Southern Australia Police and Courts • South Australian Prisons • School Packages

• ANU Student Accommodation

PPP’s - Benefits / Challenges
Benefits • Deliver improved services and better value for money • Private sector innovation • Optimise asset utilisation • Integrate whole of life management of public infrastructure • Allows the public sector office to focus on core business • Transfer of risk management • Reduced call on public funds / reduced financial risk • Timeframes accelerated through private sector
Challenges • Significant lead time to define requirements • Loss of Operational Control of the asset • Long life projects • Competitive bidding environment • Considerable debate whether they achieve value for money • Current economic environment • Special purpose entities

Changing Market Conditions

PPP’s and Australian Universities
• Student Accommodation Projects PPP integrated model Typically long term Innovation Transfer of Risk to private sector (Demand disk) Service focus (KPI’s) Pastoral care Maintenance Uni’s can focus on core educational services Hand back of assets

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Probity Principles
Maintain integrity of the procurement process in: • Accountability – account for the way the process is handled – pre bid communication – comprehensive records
Transparency – all bidders equally informed – internal processes / protocols for controlling information flow – consistent and equitable bid evaluation – opportunity for debriefing



Confidentiality – protect the competitive position of bidders / IP – security procedures for handling / storing bid information Management of Conflicts of Interest – fair and unbiased – declarations of interest – gifts, gratuities etc.
Procedural Fairness



PPP Core Processes - Overview
Initial Appraisal and Project Development
Probity Plan Eval. Criteria

Provide probity advice as the need arises

Call Expressions of Interest
EOI Close

Evaluate EOI Responses and Develop shortlist
Eval. Criteria

Call for Detailed Proposals
Tender Close

Evaluation of Detailed Proposals
Negotiation with Preferred Bidder Contractual Agreement / Financial Close

Observe Eval.

Observe Neg’s.
Debriefs Probity Report

Probity Issues to be Aware of
• • • • • • • • • • • Conflicts of Interest (including consultants) Cast the net wide first up Equal Opportunity to all bidders Consistent Communication Tender closing / bid deadlines Storage and Distribution of Bid Documents Agree Evaluation Criteria Up Front Bid clarification – clarification only. Not new information. Confidentiality Establish clear documentation trails Request questions in writing – consider addenda responses • Probity auditor – document the process all the way

Equal Opportunity to Bid
• Ensure sufficient notice is given in appropriate media for all relevant prospective bidders to be given the opportunity to tender
• Selective approaches to specific bidders introduces possible bias. • Set the same response times and deadlines for all prospective bidders • Make sure all information and requests for additional information are made at the same time to ensure no bias is given to particular bidders

Evaluation Process

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Make sure that the selection criteria are pre-set, including weightings and pre-approved by key management personnel Split between essential performance criteria and relative criteria. Some elements may eliminate bidders, others may be value adds. Changing mid-stream leaves you open to criticism from unsuccessful bidders Ensure that personnel conducting the evaluation are technically competent and independent Allocate evaluation tasks according to abilities Review outliers in the scoring process to ensure ratings are valid and not biased by any one individual Ensure that reason for overall decision/ recommended bidder is documented and agreed by the evaluation team

Communications and Documentation
• Retain documentation at all relevant stages of the process. • Advertisements • Tender specifications and documents • Evaluation criteria and weightings • Tender opening documentation • Evaluation scores and notes re review of documents • Any communications to bidders ( faxes etc) • Telephone calls • Independence declarations • Overall evaluations • Feedback sessions • Formal decision sign offs

Fair and Impartial Process
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This is the key to the whole process Must not only be impartial but be seen to be impartial
Treat all bidders equally with respect to timing, provision of information


Act honestly , consistently and objectively
Ensure independence maintained ( you or any family / related parties)

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No dealings with bidders or communication during evaluation process Accept no gifts, lunches, possible favours or other perceived influencers

• This is also imperative
• Independence

• Declaration of any possible conflicts of interest or communication from possible bidders during the process.
• The walls have ears

Why Use Probity Audits in PPP Deals?
 Transactions are of high value  Highly complex, unusual or contentious  May be a small number of suitable bidders  Bidder grievances  Bidders commit significant $ resources to their bid  Protection of bidder intellectual property and propriety information
 Politically sensitive  Avoid / Manage Conflicts of interest  Be seen as a good corporate citizen / high standards  Internal or external to the university ?

For More Information

Neil Smith Partner PKF Chartered Accountants – Perth Tel : 9278 2244 Email :
Disclaimer The information contained in this presentation is of a general nature and is not intended to address the circumstances of any particular individual or entity. No one should act on such information without appropriate professional advice after a thorough examination of the particular circumstances. The views and opinions expressed in this presentation are those of the author and not necessarily PKF Western Australian Partnership.