Posted on April 25, 2022 by Liam Mulligan and Lindsay Taylor

Revised Public-Private Partnership Guidelines Published by NSW OLG

On 7 March 2022, the Office of Local Government (‘OLG‘) released a new circular to councils regarding two new guidelines: the Public-Private Partnerships Guidelines (‘PPP Guidelines‘) and the Formation of Corporations and Entities (Section 358) Guideline. Although some interrelationship between two guidelines exists, this blog focuses on the PPP Guidelines.

The new PPP Guidelines are intended to provide councils with clear guidance regarding the notoriously complex, costly and time consuming process of planning and implementing public-private partnerships (‘PPPs‘). The OLG’s website indicates that that the PPP Guidelines are intended to replicate some of the principles regarding PPPs, which are established in the National Public-Private Partnerships Guidelines and the NSW Treasury’s 2017 NSW Public-Private Partnerships Guidelines (currently under review).

To that end, the PPP Guidelines deal with:

  • the relationship between the tendering provisions in the LG Act and the PPP provisions in Part 6 of Chapter 12 of the Local Government Act 1993 (‘LG Act‘),
  • the circumstances in which a particular project is properly considered a PPP,
  • the projects which will be categorised as ‘significant or high risk projects‘ and which will therefore need to be the subject of approval by the Project Review Committee (‘PRC‘),
  • the proper consideration of unsolicited PPP proposals, and
  • specific scenarios, such as multi-Council projects, staged projects, and projects for which the Council is both proponent and consent authority.

There is a need for such guidance, given the complexity of the PPP provisions in the LG Act. However, the PPP Guidelines are themselves lengthy and relatively complex, and impose significant requirements on councils considering into PPPs. In order to manage this complexity, and identify the information required to support a PPP application, the PPP Guidelines provide a new ‘self-assessment questionnaire’, and a list of required documents, for councils to use when preparing PPPs for review by the OLG (and, if necessary, the PRC).

Despite the PPP Guidelines being expressed to provide ‘guidance’ to councils when considering PPPs, compliance with the Guidelines is mandatory due to s 400C of the LG Act. It is therefore important that councils comply with the PPP Guidelines, as there are potentially serious consequences for failure to comply. These consequences include the imposition of a surcharge, under s.435 of the LG Act, if a council has entered into a contract in contravention of the requirements for PPPs. Individual councillors and staff may, in some circumstances, also have personal liability. Breaches of the rules can also lead to an investigation of a council under s.430 of the LG Act or a public inquiry into a council under s.438U of the LG Act.

The PPP Guidelines have an expansive scope. Under the definitions in s 400B of the LG Act, a PPP extends to any ‘arrangement’:

  1. between a council and a private person to provide public infrastructure or facilities (being infrastructure or facilities in respect of which the council has an interest, liability or responsibility under the arrangement), and
  2. in which the public infrastructure or facilities are provided in part or in whole through private sector financing, ownership or control.

In turn, the word ‘arrangement’ is defined broadly, and includes not only contracts but any ‘understanding’ between the council and the relevant private person. Therefore, it is important that a council does not commit itself to any “understanding” with the proposed PPP partner unless and until it has complied with the PPP Guidelines. However, there are some exclusions to the PPP provisions, such that they do not extend, among other things to:

  • a contract which would, but for a resolution by the council to enter into a public-private partnership, be subject to the tendering requirements under section 55 of the Act, or
  • a contract involving a voluntary planning agreement or works-in-kind agreement under the EP&A Act, or
  • a contract with a developer to construct water management works in lieu of paying developer charges under the Water Management Act 2000 (NSW)

(see cl. 408 of the Local Government (General) Regulation 2021).

Compliance with the PPP provisions of the LG Act and the PPP Guidelines requires a significant number of steps and it is beyond the scope of this blog to attempt to summarise all of those requirements. However, at a high level, any council considering a PPP should be aware that:

  • The LG Act and the PPP Guidelines provide a differential review process, depending on whether a projects is ‘significant’ or ‘high risk’ as defined in the LG Act and PPP Guidelines respectively. A ‘significant project‘ is a project with a value of over $50m, or ‘in respect of which the relevant council’s financial contribution, or its equity position, amounts to 25% or more of the council’s annual revenue that is lawfully available for spending on facilities or services of the kind to which the project relates‘.
  • Projects which are not ‘significant‘ or ‘high risk‘, in the opinion of the Chief Executive of OLG, require a review by the OLG only. A review by the PRC is required for significant or high risk projects.
  • The role of the PRC is not to ‘approve’ projects but to review a council’s compliance with its obligations under the LG Act and the Guidelines. However, a council must not proceed with a project that requires a PRC review unless the PRC ‘is satisfied that the requirements of the PPP guidelines have been complied with in relation to the project‘ (s 400I LG Act).
  • A council must submit the self-assessment questionnaire in the Guidelines to the OLG prior to calling an expression of interest for a PPP or entering into any arrangement with a private party.

Ultimately, councils considering the provision of public infrastructure or facilities by way of a PPP will need to carefully scrutinize the PPP Guidelines, and be fully aware of their obligations under Part 6 of Chapter 12 of the LG Act. These requirements are complex and it will be important that councils have regard to them from the inception and planning stage of any potential PPP.

You can find the PPP Guidelines here. You can read the Circular (22-02) which explains the new Guidelines here.

If you wish to discuss the issues raised in this post, please contact Liam Mulligan on 8235 9715 or Lindsay Taylor on 8235 9701.

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