Local Government Amendment
(Public-Private Partnerships) Bill 2004

New South Wales
Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.

Overview of Bill

The object of this Bill is to amend the Local Government Act 1993 (the Principal
Act) as follows:

(a) to institute new requirements in relation to the participation by councils in
public-private partnerships, including the requirement for councils to comply
with specified procedures and processes (as set out in guidelines issued by the
Director-General of the Department of Local Government) in relation to
public-private partnerships,

(b) to establish a Local Government Project Review Committee for the purposes
of ensuring that the requirements set out in the guidelines are complied with
by councils in relation to projects carried out under public-private
partnerships,

(c) to require a council to invite tenders before it enters into a contract to form a
public-private partnership,

(d) to provide that contracts involving entities that are formed by councils will be
subject to the same tendering requirements that apply to contracts entered into
by councils,

(e) to provide that a council must not form an entity except with the Minister’s
consent (as is the case at present for corporations that are formed by councils),

(f) to make other miscellaneous or consequential amendments.

Outline of provisions

Clause 1 sets out the name (also called the short title) of the proposed Act.

Clause 2 provides for the commencement of the proposed Act on a day or days to be
appointed by proclamation.

Clause 3 is a formal provision that gives effect to the amendments to the Local
Government Act 1993 set out in Schedule 1.

Schedule 1 Amendments
Schedule 1 [1] amends section 55 of the Principal Act to provide that a council will
be required to invite tenders if it is proposing to enter into a contract to form a
public-private partnership.

Schedule 1 [2] extends the operation of section 55 of the Principal Act (which
requires a council to invite tenders before entering into certain kinds of contracts) so
that it will also apply to contracts involving any entity formed by a council. An entity
is defined as any partnership, trust, corporation, joint venture, syndicate or other
body (whether or not incorporated). If the entity is a public-private partnership, the
requirements for tendering will only apply to contracts that are not part of the project
carried out under the partnership (as assessed or reviewed in accordance with
proposed Part 6 of Chapter 12).

Schedule 1 [3] amends section 358 of the Principal Act (which currently prevents a
council from forming, or from participating in the formation of, a corporation except
with the Minister’s consent) to provide that the requirement for the Minister’s
consent will also apply to the formation of any other type of entity. Schedule 1 [4]
introduces a public interest test for obtaining the Minister’s consent under section
358 in relation to both corporations and other entities. Schedule 1 [7] is a
consequential amendment.

Schedule 1 [5] inserts proposed Part 6 into Chapter 12 of the Principal Act (proposed
sections 400B–400N) to impose restrictions on councils forming, and carrying out
projects under, public-private partnerships. The proposed Part contains the following
provisions:

Proposed section 400B defines a public-private partnership as an entity formed by
a council and a private person for the purposes of providing public infrastructure or
facilities or delivering services. Proposed section 400C enables the Director-General
to issue guidelines requiring specified procedures and processes (eg due diligence
and risk assessment) to be followed by councils in relation to public-private
partnerships. Proposed section 400D ensures that the PPP guidelines are to be made
available to councils.

Proposed section 400E prevents a council from forming a public-private partnership,
or from carrying out a project under a partnership, except in accordance with the
proposed Part. Proposed section 400F requires a council to provide the
Director-General with an assessment, prepared in accordance with the PPP
guidelines, of the project to be carried out under a public-private partnership. If the
project is a significant project (eg a project with an estimated total cost of more than
$50 million) or if it has a high risk, the project is to be referred to the Project Review
Committee. Otherwise, the council may proceed to form the partnership (subject to
obtaining the Minister’s consent under section 358) and to carry out the project in
accordance with the PPP guidelines. Proposed section 400G enables the Minister to
intervene at any stage of the process and require a project under a public-private
partnership to be reviewed by the Project Review Committee. Proposed section 400H
enables the Director-General to require a council to provide an assessment of a varied
project and, if of the opinion that the project has become a significant project or a
high risk project, to have the project referred to the Project Review Committee.

Proposed section 400I provides that if a project is required or directed to be referred
to the Project Review Committee under the proposed Part, the relevant council must
not form a public-private partnership to carry out the project, or continue to carry out
the project, unless the Committee has been provided with an assessment of the
project and is satisfied that the requirements of the PPP guidelines have been
complied with in relation to the project. If the Committee is satisfied that the PPP
guidelines have been complied with, the council may proceed to form the partnership
or to continue to carry out the project. The Committee’s decision as to whether the
PPP guidelines have been complied with is final and cannot be reviewed.

Proposed section 400J establishes the Local Government Project Review
Committee. It is to be chaired by the Director-General, who may appoint persons
with special expertise as members (including from the private sector). Proposed
section 400K exempts the State from any liability for compensation in connection
with the proposed changes to the Principal Act (including any liability arising out of
any conduct or statement in relation to public-private partnerships). A council will
also not be liable to pay compensation to a private person if the council is prevented
from forming a public-private partnership, or carrying out a project, because of the
operation of the proposed Part (unless the partnership concerned is one that the
council decided to form between 28 June 2004 and the commencement of the
proposed Part). Proposed section 400L requires decisions by councils in relation to
the formation of a public-private partnership to be made by resolution only. Proposed
section 400M prevents councils and private persons from avoiding the operation of
the proposed Part through the terms of any arrangement. Proposed section 400N
provides that the proposed Part does not apply to public-private partnerships that
councils decided to form before 28 June 2004, but it will apply to partnerships that
councils decided to form after that date.

Schedule 1 [6] requires councils to include in their annual reports a statement of all
public-private partnerships to which they were a party during the year concerned.

Schedule 1 [8] inserts provisions relating to the members and procedure of the
Project Review Committee, including the requirement for members to disclose any
pecuniary interest that they may have in a matter that is before the Committee.

Schedule 1 [9] enables the regulations to make provision for or with respect to
public-private partnerships.

Schedule 1 [10] enables regulations of a savings or transitional nature to be made as
a consequence of the enactment of the proposed Act.

Schedule 1 [11] inserts relevant definitions in the Dictionary to the Principal Act.

Note: If this Bill is not modified, these Explanatory Notes would reflect the Bill as passed in the House. If the Bill has been amended by Committee, these Explanatory Notes may not necessarily reflect the Bill as passed.

 

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