The scope of service and breadth of risk to be considered by the Proponents in developing their project solution and TOC can be significantly greater than traditional contracts. This means that the Proponents are likely to incur higher internal and external costs. Also, alliance contracts require a much greater input from Proponents' senior management due to the need for more active participation in the selection process.
Where jurisdictional policies allow, it is recommended that a substantial proportion of each Proponent's project development costs (for both Full Price Selection and Non-price Selection) be reimbursed to the Proponents because:
the tendering costs incurred and senior management effort required by Proponents are significantly beyond the costs and effort required for traditional contracts;
the unsuccessful Proponents will likely have developed innovative solutions that can reasonably be claimed by the Owner as intellectual property (IP); and
contestability policy objectives of government will be enhanced by reducing barriers to entry to the alliance market.
On balance, a 'starting point' suggestion is that a fair 'proportion' of tendering costs to be reimbursed is 50% of the Proponents' likely costs during alliance development. These costs could be estimated by the Owner (with assistance from its Commercial Adviser) and noted in the EOI/RFP documents as a lump sum payment. However, any reimbursement should be conditional on the Proponents satisfactorily submitting a Project Proposal, and on the transfer of all IP rights to the Owner relating to the project design and delivery solution that was created during the alliance development phase.
It should be noted that in the non-price selection process, the preferred Proponents have been historically fully reimbursed for their costs.
| Ownership of intellectual property |
| It is likely that an unsuccessful Proponent may develop innovative ideas during the Alliance Development Phase that may be valuable to the Owner. The Owner should secure Intellectual Property rights in ideas developed during the alliance development phase, and provide access to these to the preferred Proponent prior to executing the PAA. This will allow more considered assessment by the preferred Proponent (and Owner) of any commercial advantages the ideas may offer and will also ensure the Owner receives 100% of any benefit (i.e. not 50% under the gainshare regime post execution of the PAA). |