3.2  Ensuring effective competition and contestability

Competition and contestability are the standard requirements for selecting government suppliers. These requirements are the foundation stone of public procurement, strengthen incentives to innovate, ensure that resources are allocated efficiently, and provide the most effective way of driving, achieving and demonstrating Value-for-Money. Although alliances rely on collaboration between the Participants once the alliance is established, it is still important for competition and contestability to be applied to the procurement of alliance contracts, including to the selection of government advisers, non-agency parties in an alliance and service providers who are not part of the alliance.

Consistent with the usual approach jurisdictions take to procurement policy and the need for accountability, agencies must ensure that the process for selecting alliance parties incorporates efficient and effective competition, contestability and transparency for maximising Value-for-Money outcomes. Any departure from price competition being a key tender selection criterion for a proposed alliance project or program alliance needs to be supported in the Business Case and/ or procurement options analysis, endorsed by the Portfolio Minister and agreed by the Treasurer.12

If an alliancing strategy proposes a departure from a competitive route (e.g., to negotiate the target cost of the project after the preferred Proponent has been selected) or otherwise removes or dilutes the competitive tension present under bidding conditions for other delivery methods, it is important for this issue to be fully explored, with a thorough analysis of the benefits of such a departure. Similarly, agencies should be cautious of any truncated processes that do not (or may not) provide sufficient time for the public and private parties to negotiate the best commercial outcome for the state prior to signing the agreement. If the agency considers that circumstances require a truncated process to be adopted, the Business Case and/or procurement options analysis should provide adequate support for this approach.

Also consistent with jurisdictional procurement policies is the need to ensure contestability and promote new market entrants. This means that potential bidders should have the opportunity to participate in a tender process even if they have no prior experience with alliance contracting.

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12  Detailed guidelines on how agencies should apply price competition to the procurement of alliance contracts is discussed in the Guide to Alliance Contracting, and Guidance Note No 5, Developing the TOC in Alliance Contracting; both published by the Department of Infrastructure and Transport, Commonwealth of Australia, March 2011.