Risk Insight

Victorian Government MLP Guideline – a new Strategic Development Pathway

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    What you need to know

    • A December 2024 update to the Victorian Government's Market-Led Proposals (MLP) Guideline (Guideline) introduces a new Strategic Development Pathway for major housing and strategic development proposals, which were previously not well suited to the MLP process. 
    • The update unlocks a new potential transaction pathway for the private sector to submit unsolicited major housing and development proposals and promises cross-government collaboration to support eligible proposals. 
    • Like the existing process for Infrastructure and Services MLPs, Strategic Development proposals must demonstrate a justification for exclusive dealing. However, unlike Infrastructure and Services MLPs, eligible Strategic Development proposals will be referred to a new process that seeks to enable a more interactive and collaborative approach to proposal development through cross-portfolio collaboration.
    • The MLP process for Infrastructure and Services proposals remains unchanged, as do the five core MLP assessment criteria that will be applied to all proposals and progressively assessed throughout the standard MLP and/or Strategic Development Pathway.  

    Our take on the changes

    • The development of, on or integrated with government land (Strategic Development) is often complex, requiring cross-government coordination, alignment and investment. The updated Guideline provides an opportunity to bring government agencies together with the private sector to unlock more and improved development outcomes. In the context of housing supply shortages, this is a welcome amendment.
    • Successful precinct development requires clear objectives, alignment and collaboration between public and private sector stakeholders, and a deal underpinned by fit for purpose commercial principles. The new pathway, used effectively, has the potential to unlock and catalyse development of public and private land in some of Melbourne and Victoria's key precincts to deliver economic and social benefits.
    • The MLP process can be perceived as onerous and relatively few (albeit large-scale) proposals have met its high thresholds, but used effectively and with the right support to ensure a high-quality proposal and rigorous assessment, the process presents opportunities to work in a structured and transparent way to deliver genuine innovation and outcomes that may otherwise lay dormant amongst a long list of competing government priorities.  
    • The new pathway provides an opportunity to deliver similar outcomes to equivalent MLP regimes in other States, which have resulted in several large-scale developments and unlocked billions in private investment in precincts such as Martin Place Station, Harbourside, Central Place Sydney, and Wynyard Place. 

    What you need to do

    The Ashurst team has advised on or acted for government or private sector across many MLPs nationally. Collectively our team has reviewed and shaped hundreds of market-led or unsolicited proposals and assessed and transacted some of the largest development transactions globally, including in exclusive negotiations. 

    In our experience, success factors for MLPs include: 

    • Developing a compelling proposal that demonstrates alignment with the MLP assessment criteria, including a clear justification for exclusive negotiations, and how the proposal will deliver benefits for the public in alignment with government priorities and policy objectives.
    • Early and transparent engagement with government stakeholders on a potential MLP, to understand the likelihood of the proposal meeting the assessment criteria and strength of the justification for exclusive negotiations, and to minimise costs for proposals with a low likelihood of success.
    • Noting the MLP process aims to facilitate a commercial transaction only, proponents should seek to progress other approvals (e.g. development application) in parallel and appropriate alignment with the steps of the MLP process to avoid delays to overall development timeframes. 

    What is a market led proposal? 

    While the specific definition is different and nuanced across Australian jurisdictions, a MLP can be generally defined as an unsolicited commercial proposal submitted by the non-government sector to the government, that a proponent believes will benefit the public and align with government policy objectives. 

    All Australian State and Territory Governments have released guidelines for the assessment of MLPs. Assessment processes vary across jurisdictions, but in principle seek to ensure proposals align to Government policy objectives, deliver value for money, and demonstrate a strong justification for exclusive negotiations (i.e., why the same or greater benefits could not be achieved through a standard competitive process). 

    The Victorian Government's MLP process has been in place since February 2015. It has undergone several updates to refine and improve the process, with prior updates in 2021. Previously, the guideline outlined a structured and transparent process for private sector entities to submit unsolicited proposals for Infrastructure or Services projects only. 

    Similar to other jurisdictions, the Victorian MLP process involves:

    • A three-stage assessment process, including filtering and due diligence, investment case and negotiation, and exclusive negotiations, with the proposal progressively developed as it progresses through each stage.
    • Core assessment criteria which are progressively and formally assessed at each stage, which include:
    • Does the proposal meet a service need aligned with government policy objectives? 
    • Does the proposal represent value for money?
    • Is the proposal affordable and a relative priority for budget funding? 
    • Is the proposal deliverable? 
    • Does the proposal have characteristics that justify exclusive negotiation? 
    • Oversight by the Department of Treasury and Finance and a MLP Steering Committee, and formal assessment and Government approval required to proceed between stages. 

    How will the new process work?

    Under the new Strategic Development Pathway, MLPs involving Strategic Development will be considered as part of the usual Stage 1a filtering process. However, Strategic Development proposals demonstrating alignment with MLP assessment criteria and requiring cross-government collaboration will be referred to the new MLP Strategic Development Pathway. 

    The MLP Strategic Development Pathway involves three stages prior to contract award, summarised as follows:

    • Scoping objectives – this stage includes interactive testing of threshold issues, identifying constraints and objectives, including participating in workshops, and responding to cross-government feedback and/or information requests. The scoping stage will culminate in a strategic proposal being submitted by the proponent, public sector assessment of the proposal against the MLP criteria and a recommendation to proceed or not. 
    • Proposal development – this stage includes development of a detailed proposal or business case, and completing required due diligence (including master plan if required), including participating in workshops, and responding to cross-government feedback and/or information requests. The proposal stage will culminate in a detailed proposal or business case being submitted by the proponent, public sector assessment of the proposal against MLP criteria, a recommendation to Government to proceed or not and, if required, seeking policy and/or funding endorsement as appropriate.
    • Exclusive negotiation – this stage includes negotiation of commercial terms and related documentation development. This stage will culminate in a further and final assessment of the proposal or business case, as well as the commercial proposal, against the MLP criteria, and if successful progression towards contractual close.

    Want to know more?

    If you are a proponent considering submitting an MLP or unsolicited proposal, or a public sector agency looking for the right commercial or legal advice to support your assessment or transaction, Ashurst and Ashurst Risk Advisory's combined Infrastructure, Places and Capital Projects (IPCP) capabilities are available to support your MLP. We would be pleased to discuss our experience and insights with you.

    Our IPCP advisory capability brings integrated commercial and project risk advice together with Ashurst's legal expertise to support transformational investments with outstanding community benefits.

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