Assessing Unsolicited Proposals

An unsolicited proposal is an approach to the Australian Government outside of a formal process of engagement with the market. It seeks to enter a procurement or commercial arrangement that the Commonwealth has not requested or otherwise suggested. Commercial arrangements include requests for the Commonwealth to invest (as defined in the Commonwealth Investment Framework) – such as providing equity, loans and other financial instruments (for example, guarantees). This guidance does not cover proposals only seeking grant funding and these must be considered in accordance with the Commonwealth Grants Rules and Principles, or redirected to an appropriate grants program.

This toolkit guides non-corporate Commonwealth entities (Assessing Entities) that have received an unsolicited proposal, by providing a structured and consistent approach to assessing the proposal.

Assessing Entities are encouraged to follow the assessment criteria below.

Prior to assessment, Assessing Entities should identify whether they are best placed to assess the proposal. Some proposals may require the Assessing Entity to engage across multiple entities. And some proposals may not be credible or feasible, or otherwise inappropriately divert departmental resources.

Initial Assessment Criteria

An Assessing Entity should only consider proceeding with an unsolicited proposal where it satisfies all the following screening criteria:

aligns with one or more of the Australian Government’s policy objectives
demonstrates an absence of competition (or an absence of willing and active participants) in the market capable of achieving the proposed objective(s) within Government’s preferred timeframes
is unsolicited
can achieve value for money.

Before initially assessing a proposal, the Assessing Entity should confirm the assessment team has the appropriate skills and capacity to properly screen and assess the proposal. It should also ensure appropriate budget authority to fund any external advisers required to conduct due diligence.

Unsolicited proposals present unique risks to the Commonwealth. Assessors should only seriously engage on exceptional proposals that demonstrate significant, durable advantages in achieving policy objectives of the Australian Government, which could not otherwise be achieved by engaging with other participants including through competitive processes.

The proposal should initially be assessed through each screening criterion above. An Assessing Entity should not progress a proposal past the initial screening process if it determines that the proposal meets one or more of the following:

does not fully satisfy one or more of the required screening criteria above
provides insufficient information (after any appropriate requests for further information) for the Assessing Entity or government to assess whether the proposal is credible and feasible to implement or otherwise worthwhile
would be more appropriately considered under an alternative program (for example, under an existing or proposed grant program, by approaching a market via a competitive process, or a state or territory unsolicited proposals program)
primarily modifies, replicates or extends an existing contract
is a proposal for a known requirement for which a competitive process is planned.

Assessing Entities should use the below staged assessment process to formally evaluate proposals that meet the Initial Assessment Criteria.

Assessment process:

Initial assessment criteria, scoping and decision to engage
Preliminary due diligence
Initial approval by the Commonwealth
Detailed due diligence
Negotiation and government consideration

For further information on each stage, Assessing Entities should contact InvestmentFramework@finance.gov.au.

The Assessing Entity can decline a proposal at any stage in the assessment process if the proposal is assessed to not meet a criterion, or is otherwise found not suitable for further consideration. Assessing Entities are under no obligation to assess proposals and may reject proposals without any assessment, as appropriate.

For proposals that do not meet the criteria, Assessing Entities may consider referring proponents to an alternative program, where appropriate (for example, a state or territory unsolicited proposal framework, an existing grants program, a Commonwealth Specialist Investment Vehicle, the Investor Front Door or to register with AusTender to be notified of future planned procurements). The decision maker should clearly document the rationale for decisions. The Assessing Entity should communicate the rationale for the decision with the proponent, if appropriate. Proponents should not be encouraged to submit a revised proposal, and Assessing Entities should avoid negotiating with a proponent before obtaining explicit policy authority.

Proponents can spend considerable time and money when engaging on unsolicited proposals. Assessing Entities should strive to communicate declines of proposals on a timely basis to minimise potential cost impost on proponents. Assessing Entities should also be mindful of the costs that requests for further information may impose.

Where the Assessing Entity assesses a proposal as not meeting the criteria the Government reserves its usual right to go to market. The proponent should be provided with the opportunity to participate in the procurement process should the concept be offered to the market but should have no additional rights beyond those afforded to other market participants. If the Government elects to go to market in such circumstances it must respect any Intellectual Property (IP) owned by the proponent.

For any proposals requesting Commonwealth funding or financing greater than $100 million as part of a commercial arrangement under the Commonwealth Investment Framework, Assessing Entities should contact InvestmentFramework@finance.gov.au for guidance in assessing the proposal. Assessing Entities can also contact the Investment Framework team for any queries and for access to more detailed guidance.

Criterion A: Alignment with government objectives

The proposal must align with Australian Government policy objectives and be capable of delivering net benefits to the Commonwealth, or the wider Australian economy.

Assessing Entities need to consider the government’s strategic and Budget priorities; for example, timing and appetite for additional funding commitments. Assessing Entities need to be cognisant that there is an opportunity cost associated with committing resources to assessing a proposal, as well as ongoing costs related to implementing any proposal. Any proposal, especially where the proposal would require a commitment of additional government funding, should be considered against other funding priorities.

The government’s policy objectives are identified through publicly documented sources. Assessing Entities should assess whether a proposal aligns with the government’s documented objectives.

Examples of sources that indicate government policy objectives include:

Budget publications
policy documents
corporate plans and annual reports of Commonwealth Entities
statements of expectations for Commonwealth Entities
media releases from Australian Government Ministers or departments.

Government policies and objectives are not classified as soliciting for proposals.

Criterion B: Absence of competition

The proposal must be capable of achieving one or more Australian Government objective that cannot be delivered by any other proponents, or combination of proponents, in the market. This criterion is critical to the Commonwealth proceeding with the proposal without adopting a competitive market process. Assessing Entities need to determine if another potential supplier(s) (for example, a competitor of the proponent) would be capable of delivering a similar outcome or could be unfairly disadvantaged. The requirement to confirm the absence of competition applies to all unsolicited proposals, including proposals resulting in commercial arrangements.

There may be more than one way to achieve the policy objective, meaning that the precise goods or services (or government support) could vary and still deliver the desired policy outcome. Assessing this criterion should focus on the policy objectives and outcomes to be achieved, rather than the characteristics of the goods or services (or other outputs) that will be provided.

Examples of circumstances that may indicate an absence of competition include, but are not limited to:

the proponent is the only supplier with the commercial, production, or technical abilities to deliver the policy objective(s) described in the proposal
where the Commonwealth has recently undertaken market testing (including but not limited to a procurement) to test if there are other suppliers willing and able to deliver the objective/s, but no suitable suppliers were identified
the proponent has intellectual property rights that mean it is the only supplier that can deliver the policy objective(s) described in the proposal – and there is no similar intellectual property rights that could deliver a similar outcome
the proponent owns real property that means it is the only supplier that can deliver the policy objective(s) described in the proposal.

Assessing Entities should be aware of their obligations and ensure that the assessment in relation to absence of competition has regard for:

maintaining both public and proponent confidence in government assessments
ensuring the defensibility of decisions to potential legal challenge or other forms of external scrutiny
treating all participants in the market equitably and acting with integrity.

Assessing Entities should contact InvestmentFramework@finance.gov.au if unsure about whether a proposal sufficiently demonstrates an absence of competition.

Criterion C: Unsolicited

The proposal must not be solicited or initiated by the Commonwealth. To be unsolicited, the proposal must:

originate from a person or organisation outside Commonwealth, state or territory governments, including contractors/consultants currently engaged by the Commonwealth or state or territory governments within the policy orbit of the proposal
not have been requested, or encouraged, by the Commonwealth (for example, through industry specific engagement and stakeholder consultation, or direct contact with the proponent(s) of the proposal)
not be substantially similar to, or related to any approaches to market that have been formally advertised on AusTender within the last 12 months (unless, after an approach to market, no tenders or no suitable tenders were submitted)
not originate as a result of information a proponent may have about a solution which has been discussed, or considered, within a previous contract or as part of a previous consultancy of the proponent with government.

Publishing Commonwealth policies and objectives is not soliciting. Unsolicited proposals must not be used as an opportunity to attempt to get around the specific requirements that would be applicable to the proposal, as set out in the Commonwealth Procurement Rules and Commonwealth Investment Framework.

An example of an unsolicited proposal would be a proposal submitted by a company seeking government investment in a technology protected by intellectual property that aligns with Commonwealth policies and objectives. There are no related approaches to market on AusTender, or related requests through market/industry engagement. No government department or government representative has requested, or suggested, the proponent submit the proposal. The proponent was not engaged in any previous contracts, or discussions, with the Commonwealth in which the proponent could have gained information that is not publicly available and that led to the proposal. A proposal fitting this example would be considered unsolicited.

Criterion D: Value for Money

The proposal must be capable of achieving value for money and represent a proper use of Commonwealth resources. Price is not the only factor when assessing value for money. The CPRs provide guidance for assessing value for money for procurements.

Assessing Entities should also consider using one or more of the following tools when assessing value for money of an investment proposal:

evaluating the whole-of-life costs associated with the proposal
determining what is the best alternative(s) to reaching a negotiated outcome with the proponent (for example, if the proposal did not proceed, how could the government achieve its policy objective(s) and are there possible alternative approaches including different packaging or risk sharing)
engaging independent experts or valuers for due diligence
seeking independent legal advice on the proposed contractual terms (for example, evaluating the terms proposed and the appropriateness of resulting risk allocations)
seeking independent commercial and financial advice, as well as evaluating the proponent’s financial models to assess the reasonableness and accuracy of any costs and risk estimates and, if relevant, revenue estimates (including any fee or pricing structures as applicable)
obtaining an independent review or benchmarking of the proposal
having the financial advisers prepare a financial model, or review the proponent’s financial model, to assess break even points, lending coverage ratios, the likely return on the government’s investment and return period. Such analysis should include sensitivity analysis on key variables and where appropriate scenario analysis on alternate future states
conducting a cost-benefit/cost-effectiveness/break-even analysis (or any other type of economic analysis deemed appropriate) of the proposal:
- cost-benefit analysis involves measuring the benefits of the proposal less the costs associated with the proposal
- cost-effectiveness analysis involves comparing the relative costs and outcomes of different courses of action
undertaking detailed commercial, financial and legal due diligence.

The Commonwealth Investment Framework provides guidance on additional factors that should be considered when assessing value for money for commercial arrangements.

Proposals requesting procurements – Commonwealth Procurement Rules

If a proposal involves a procurement, as defined in the Commonwealth Procurement Rules (CPRs) and is within scope of the CPRs, the proposal and any consequential procurements are subject to the CPRs.

Decisions under the CPRs are a matter for the Accountable Authority of the relevant Commonwealth entity. In addition to meeting the criteria in this toolkit, proposals subject to meeting CPR requirements can only be considered through an unsolicited proposals process if they also meet the CPR conditions for limited tender (paragraph 10.3 of the CPRs), or if the CPRs grant them a specific exemption.

The reference to unsolicited innovative proposals within paragraph 10.3(c) of the CPRs does not of itself explicitly justify a limited tender procurement. Assessing Entities must also be able to justify, and demonstrate, that the proposal has exceptionally advantageous conditions that arise only in the very short term.

Where a proposal involves a procurement, but fails to meet a condition for limited tender, it cannot be considered through an unsolicited proposal process. If a proposal subject to CPRs fails to meet the conditions for limited tender and the Assessing Entity wishes to pursue the proposal’s objectives, they must be considered through an open tender process in accordance with the CPRs.

The CPRs provide further information on conditions for limited tender.

Proposals requesting investments – Commonwealth Investment Framework

The Assessing Entity should consider whether a proposal would result in an investment for the purposes of the Commonwealth Investment Framework (for example a loan, equity investment or guarantee). If so, the Assessing Entity should follow the requirements set out in Commonwealth Investments RMG 308.

Governance and Assurance

Assessing Entities should consider appropriate governance mechanisms to assist with assessing an unsolicited proposal and managing potential risks. These mechanisms could include establishing a cross department steering committee or working group, engaging specialised expertise in the review of proposals and, where appropriate/required, appointing commercial/financial, technical, legal and probity advisers.

Assessing Entities should ensure that all decisions relating to assessing the proposal are appropriately justified and documented.

Assessing Entities must seek relevant government approvals to undertake intensive assessment prior to committing significant resources to the assessment. Assessing Entities should avoid detailed negotiations with a proponent before establishing the government’s (or delegate’s) authority to consider the proposal in further detail.

For non-procurement commercial arrangements, Assessing Entities must comply with the decision-making process for major projects as set out in the Commonwealth Investment Framework.

The Governance toolkit provides further guidance on establishing governance mechanisms.

Risk management

Assessing Entities should consider the appropriate risk management processes in accordance with the Public Governance, Performance and Accountability Act 2013. Additionally, Assessing Entities should conduct a risk management assessment for the proposal in line with their entity’s risk management processes.

Proper use and management of resources and probity

Assessing Entities must promote proper use and management of public resources and act ethically when making decisions in connection with proposals. Assessing Entities must have regard to their duties under the PGPA Act, the CPRs (if a procurement) and the Commonwealth Investment Framework (if an investment/commercial arrangement) through the entire assessment process.

Assessing Entities must identify and manage actual, potential or perceived conflicts of interest in relation to any unsolicited proposals. A register of conflicts of interest (COI) should be maintained as part of the probity process. Officials must act ethically, in accordance with the APS Values (set out in section 10 of the Public Service Act 1999) and APS Code of Conduct (set out in section 13 of the Public Service Act 1999). Assessing Entities should refer to Managing conflicts of interest and confidentiality with the non-government sector (RMG 208) for guidance on managing COI and confidentiality.

Accountable authorities and officials must ensure an appropriate system of risk oversight and management is in place when committing public resources.

Proponents should be advised to not contact government ministers, advisers or officials, regarding the submitted proposal, outside of the formal assessment process. This includes organisations authorised to act on the proponent’s behalf (such as lobbyists). Australian Government representatives should be aware of their obligations under the Australian Government Lobbying Code of Conduct.

Confidentiality

Commonwealth entities and relevant officials should have regard to legislation and policies relevant to confidentiality, including the Privacy Act 1988, the Freedom of Information Act 1982 and the Australian Government Protective Security Policy Framework.

The Assessing Entity may decide to enter into a confidentiality agreement, or non-disclosure agreement, with the proponent. The obligations of confidentiality agreements should not extend to information that (whether before or after the proposal is submitted):

is in the public domain
is required to be disclosed by the Commonwealth, a Minister or the Parliament in accordance with statutory or portfolio duties or functions or may be required to be disclosed for public accountability reasons, including if required by the Parliament or a parliamentary committee, or a Minister
is authorised, or required by, law to be disclosed, including the procurement reporting obligations specified in the CPRs, which may require information to be published on AusTender by the Assessing Entity.

When considering whether to enter into a confidentiality agreement, or non-disclosure agreement, the Assessing Entity should consider:

if the proponent has requested a confidentiality agreement, and whether the proponent has a genuine need to keep the proposal confidential
if there are existing intellectual property protections in relation to the proposal (for example, patent protection) and how a confidentiality agreement would interact with those protections
if the Commonwealth, or the Assessing Entity, would benefit from keeping the proposal confidential and whether there is a genuine need to do so
if it is appropriate to seek specialist advice on entering into a confidentiality agreement.

At any stage, if the proponent will be disclosing additional sensitive information that it wishes to be kept confidential, Assessing Entities should be aware that proponents may seek to submit a new (or amend an existing) non-disclosure agreement. The Assessing Entity should consider requests for confidentiality, considering the public accountability and transparency requirements of the Australian Government.

If the proposal is a procurement, the Assessing Entity should take into account the Department of Finance guidance on Confidentiality throughout the Procurement Cycle.