PPP’s and Probity Audits

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

2. Agenda • What is a PPP ? • PPP’s – Common Characteristics • Overview - PPP’s in Australia • PPP’s – Benefits and Challenges • PPP’s and Australian Universities • Probity Principles • PPP Core Process Overview • Likely Probity Issues to be Aware of • Why Use Probity Audits in PPP Deals?

3. 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…”

4. 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

5. Overview - PPP’s in Australia

6. 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

7. Changing Market Conditions

8. 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 PPP’s and Australian Universities

9. 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 Probity Principles

10. PPP Core Processes - Overview Provide probity advice as the need arises Initial Appraisal and Project Development Probity Plan Eval. Criteria Call Expressions of Interest EOI Close Evaluate EOI Responses and Develop shortlist Eval. Criteria Call for Detailed Proposals Tender Close Evaluation of Detailed Proposals Observe Eval. Observe Neg’s. Negotiation with Preferred Bidder Debriefs Contractual Agreement / Financial Close Probity Report

11. 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

12. 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

13. Evaluation Process • 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

14. 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

15. Fair and Impartial Process • 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) • No dealings with bidders or communication during evaluation process • Accept no gifts, lunches, possible favours or other perceived influencers

16. Confidentiality • This is also imperative • Independence • Declaration of any possible conflicts of interest or communication from possible bidders during the process. • The walls have ears

17. 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 ? Why Use Probity Audits in PPP Deals?

18. For More Information Neil Smith Partner PKF Chartered Accountants – Perth Tel : 9278 2244 Email : neil.smith@pkf.com.au 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.