A very current issue for the Australian PPP market is the constrained competition amongst consortia due to current restrictions on the availability of finance, including the current lack of activity within the capital markets, due to the aftermath of the Global Financial Crisis. One resulting impact is the current importance of Australia's "Big 4" banks to providing financial certainty within RFP proposals, as international debt financiers generally have demonstrated an unwillingness to participate without them, requiring the presence of at least one of the domestic "Big 4" to obtain credit committee approval. There have been some instances of short-listed bidders withdrawing from RFP processes at least partly due to their inability to obtain "Big 4" support.
As a result, market participants have used the current anomaly strategically to reduce competition within the Australian PPP market. This reduced competition currently evidences itself in both:
• the ability of sponsors to lock up two or more of the domestic "Big 4" on an exclusive basis, sometimes resulting in a strategic bidding position that reduces the practical bidding field to no more than two Participants (even where the Government has short listed three)
• the domestic banks (having demonstrated a preference to work in pairs) effectively having the ability to create a secondary shortlist based on criteria that may not coincide with the Government's preferred selection approach, by selecting the consortia that they wish to support (in particular, where that support is based on corporate relationships).
Although this is a temporary issue that will begin to rectify itself following the return of capital markets and increased liquidity amongst international financiers, it is proving a key barrier to competition within the current Australian market place.