Policy and guidelines on exporting public sector skills (see below) have been reviewed and updated. This Memorandum and the new guidelines replace Memorandum No 93-31.
Specialised public sector skills and expertise may be sought for overseas projects to improve governance, support business ventures, and assist economic, institutional and social development. By allowing access to public sector skills and expertise, NSW may create opportunities for reciprocal benefits with project host countries, and contribute to economic improvement and social stability. Accordingly, public sector agencies may apply their skills and expertise to overseas projects, subject to statutory or legal limitations, State priorities and Commonwealth foreign policy.
The role of public sector agencies is to deliver State services, and overseas project proposals should demonstrate a tangible and worthwhile contribution to the State's interests. The Minister responsible for the agency, or the CEO acting with authority from the Minister, must be satisfied that projects are in accordance with State priorities and shall be cost neutral to NSW, or raise revenue for the State. Projects that do not meet these tests, and large scale and/or sensitive projects, must be cleared with the Director-General, Premier's Department, before commitments are given. The guidelines provide advice on clearance arrangements. Agencies authorised to engage in commercial activities overseas are entitled to undertake overseas projects in accordance with their charters.
Overseas projects should not expose the State and public officials to unacceptable risks. As the State may be liable for the actions of agencies, the level of risk and the agency's capacity to meet the cost of possible damages, arising for example from contractual breach or negligence, should be factored into project assessments. Agencies must ensure that employees planning to work overseas are informed about work and living conditions and safety precautions. Project assessments and briefings for employees should include advice from the Department of Foreign Affairs and Trade where personal safety overseas is an issue.
Many opportunities arise for a public sector role in overseas projects and there are diverse reasons for agencies to be involved. All project proposals should be judged on their merits. Preferred models involve funding by international aid agencies, such as AusAID, licensing the use of intellectual property and contracting as a consultant to a project in preference to taking the lead role. Enquires should be referred to the Premier's Department contact.
This Memorandum has superseded Memorandum No 93-31
GUIDELINES ON OVERSEAS PROJECTS
The purpose of these guidelines is to provide advice for NSW public sector agencies regarding the application of public sector skills and expertise to overseas projects. These guidelines are based on the “Guidelines for the export of the skills and expertise of NSW public sector agencies” issued with Memorandum 93-31. The 1993 guidelines have been updated and there are some changes in emphasis.
The expression “overseas projects” includes any activity whereby the skills and expertise of NSW public sector agencies are applied for purposes outside Australia.
Applying public sector skills and expertise to overseas projects may:
Factors to consider include:
There are, however, risks and disadvantages associated with the pursuit of overseas opportunities by NSW public sector agencies. They include:
The primary function of public sector agencies is to provide services to the people of New South Wales. Nevertheless, in accordance with the policy, agencies may apply their skill and expertise to overseas projects provided that these activities:
Questions and answers
1. Which skills and expertise is it appropriate for NSW public sector agencies to apply to overseas projects?
Prospective overseas projects must be approved in accordance with these Guidelines.
The Minister responsible for the agency, or the CEO acting with authority from the Minister, must be satisfied that a prospective overseas project will not result in the agency giving priority to the overseas project at the expense of its domestic obligations.
Where a prospective overseas project warrants clearance by the Director-General, Premier's Department, an important consideration is that the agency would not be giving priority to the overseas project at the expense of its domestic obligations.
Selling services and expertise embodied in off-the-shelf products (for example, existing computer software or technology) or other products which require minimal additional resources probably involve the lowest risk of unacceptable priority being given to activities because selling those products will not require substantial additional resources.
Other than in exceptional circumstances, an agency should only apply its skills or expertise in areas within its core function(s). The risk is too great that an agency attempting to apply skills and expertise in non-core functions will allocate disproportionate resources to activities outside its core functions.
An example of an exception may be where an agency has invested substantial resources already in a non-core function and it is proposed to apply the product to an overseas project, eg, writing computer software, and the sale or licensing of the fruit of that investment will not of itself require disproportionate resources.
If an agency has sufficient resources to enable it to proceed with a prospective overseas project, it should consider whether those resources could be used to enhance its capacity to perform its core function(s).
2. Which NSW public sector agencies can apply their skills and expertise to overseas projects?
All NSW public sector agencies are authorised by the statement of policy and these guidelines to apply their skills and expertise to overseas projects, subject to any statutory or legal limitations. Agencies authorised to engage in commercial activities overseas are entitled to undertake overseas projects in accordance with their charters.
An agency must be satisfied that it has the power to participate in overseas projects.
If the agency is a statutory corporation, the agency must be satisfied that its Act specifically empowers it to apply the relevant skills or expertise in the way proposed. If the agency is a department, it will not be regarded as a legal entity separate from the State. While the State's capacity to engage in activities is the same as that of a natural person, the authority of an officer or officers from a department to engage in activities on behalf of the State must be made clear.
Advice from the Solicitor General indicates that a department may operate outside the State's boundaries in respect of its mandated operations, but for projects that are outside the well-recognised or ordinary functions of government, the giving of authority to an officer or officers of a department to act on behalf of the State requires Cabinet or Executive Council approval. If this issue arises, Crown law advice should be obtained.
3. Can a NSW public sector agency invest equity in a foreign project?
An agency may structure its involvement in an overseas project in a number of ways. Unless an agency has explicit authority, the agency must not invest equity in a foreign project unless the Treasurer has approved the prospective investment in foreign assets or assets in Australia for a foreign project.
4. How does a NSW public sector agency assess whether it should pursue a possible overseas project opportunity?
The first step is for the agency to identify the skills or expertise that the prospective overseas project will require. The agency should only proceed with assessment of the project if it considers that the application of relevant skills or expertise will comply with these Guidelines. If the project will require skills or expertise in addition to those possessed by the agency, then the agency should consider making its skills or expertise available to a partner(s) that has the additional skills or expertise. The agency should not try to develop the other skills or expertise itself.
The agency should develop a preliminary work plan for its role in the prospective project. The agency can then consider whether it has available resources required to carry out the work plan. If it does, the agency should consider whether the resources are surplus to its requirements.
The next step in an agency assessing an overseas project opportunity will be the preparation of a budget for the project. In preparing a budget for any project, the relevant agency must identify and incorporate the full direct and indirect costs of providing the relevant skills and expertise, including imputed Commonwealth and State taxes and charges where these do not otherwise apply.
Costings for overseas projects must also include the full direct and indirect costs of replacing/redeploying staff, of changes to work programs, and of dedicating marketing/management resources. The agency must assess the contractual terms of the prospective project so that it can correctly identify all costs and risks as well as rewards. The agency will then have to assess and, where possible, quantify all commercial risks of the project.
It may be possible to quantify some risks by obtaining estimates of the premiums and fees which would be payable for all appropriate insurance and other risk minimisation (such as hedging any foreign currency exposure). Examples of the types of risks involved in international project work, and some mechanisms available to offset these, include:
When considering insurance arrangements, agencies should first assess the applicability and adequacy of cover provided through the Treasury Managed Fund.
To enable it to assess all relevant risks, the agency may have to undertake some due diligence checks on the party offering the overseas project opportunity (although this would not be required for projects financed by AusAID or by multilateral funding institutions such as the World Bank, the Asian Development Bank and UN agencies) and on potential partners. The agency must then do a financial analysis of its participation in the project. This analysis must be made on the basis of financial criteria only, and must demonstrate the expected commercial return from the project.
An example of a way in which any risk in respect of the project sponsor could be eliminated is to forward sell the asset before providing the relevant skills or expertise and to receive, for the sale, cash or a promise to pay cash, backed by a bank guarantee from a reputable bank.
An agency should only consider proceeding with a project where a clear commercial return can be demonstrated or where the project has demonstrable and significant non-financial benefits. Projects in the latter category must be cleared with the Director-General, Premier's Department, before commitments are given.
As with any sound business, all care should be taken in applying good management and professional judgement in selecting and managing projects and staff, and in ensuring that exposure to commercial risks is minimised. A strategic business plan should provide a framework for this approach.
5. How does a public sector agency structure its involvement in overseas projects?
One of the most important considerations in structuring a bid is to minimise the risk that the State of NSW may be liable for breach by an agency of a contract to provide skills or expertise, or for the negligent provision of the skills or expertise. Written legal advice should be obtained regarding the risks to the State of an overseas project.
One way to limit liability to the entity involved in an overseas project may be for the agency to establish a (subsidiary) company to undertake the project. The company could enter into contractual arrangements with private or public sector entities or companies, and could provide marketing advantages and greater operational flexibility for entering into such arrangements.
While this option may offer advantages in minimising the risk of State liability, any proposal for the use of a subsidiary company would need to present a persuasive case for this course of action, and address the issues of the role of the Minister and senior officials in the oversight and control of the company and the precise activities proposed to be undertaken by the company.
An agency which is a Department or statutory authority and which proposes to use a company for an overseas project must also comply with Premier's Memorandum No. 91-2, Guidelines for the Formation and Operation of Subsidiary Companies by Departments and Statutory Authorities, in addition to these Guidelines.
If an agency uses a company for a project:
Proposals to establish or use a company to undertake an overseas project need to demonstrate compliance with these requirements in respect of company arrangements and address the issue of the involvement of the Minister and senior officials in the oversight and control of the company.
The State will not guarantee performance of agencies' obligations, unless the agency has negotiated the provision of an express guarantee with The Treasury and has paid an agreed fee. Agencies should be aware, in any case, of the limitations on the State's capacity to give guarantees.
Agencies should ensure that their promotional material and documents such as letters of engagement or other contractual documents under which they are retained to provide skills or expertise are in accordance with legal advice in respect of State liability or implied guarantee or assurance.
An agency which is an entity distinct from the State, but which has a name or some other feature that implies or may imply a connection with the State, should include an appropriate disclaimer on its letterhead and other promotional material.
Agencies must consult The Treasury regarding any proposal to enter into a joint venture agreement. The Treasurer's approval pursuant to the Public Authorities (Financial Arrangements) Act 1987 may be required for joint activities with private sector organisations. Subject to advice from The Treasury, where a public sector agency proposes to provide the relevant skills or expertise in conjunction with one or more other private (or public) sector agencies, the agency must negotiate fully and document exactly what each participant will contribute to the project, how risks and rewards will be shared, how consortium decisions will be made, and other matters relevant to the relationship of the participants with one another.
The structure of the bid will also have to address all identified commercial risks and any relevant aspects of the law in the relevant foreign jurisdiction(s). For example, it might provide for payment in instalments during the course of the project as a way of reducing the risk of non-payment or the credit risk of the party to whom the relevant skills or expertise will be provided. Payment in Australian dollars (or stronger currencies) will reduce the currency risk.
Where possible, it may be desirable to provide that the governing law of the contract under which the skills or expertise will be provided is the law of New South Wales.
It may be necessary for an agency to obtain advice from private sector advisers experienced in structuring arrangements for the provision of skills or expertise. The costs of such advice should be included in the project budget.
This will largely be a function of the type, scale and complexity of the prospective project. The structure must ensure that the agency does not offer to provide skills or expertise that the agency does not have. Licensing the use of intellectual property or making a consultant available to a project bidder will usually be preferable to taking the lead role in the project.
6. How should a NSW public sector agency select a private sector partner?
Subject to the outcome from consultations with The Treasury regarding any proposal to enter into a joint venture agreement, it is the responsibility of the agency involved to ensure that an appropriate process is followed in selecting a private sector partner or responding to an invitation to provide skills or expertise in conjunction with a private sector partner. Partners should be selected through competitive processes unless there is good reason (to be recorded) for a different process.
If approached by a private sector company with a proposal to provide skills or expertise for an overseas project, an agency should take care to establish, within the bounds of commercial confidentiality, that its own and the State's best interests would be served by an association with that particular company.
It may be appropriate for the agency to provide its skills and expertise on a non-exclusive basis, which would enable it to participate in other consortia bidding for the same project.
7. How does a NSW public sector agency prepare an offer or tender?
The details of how an agency prepares an offer or tender are a matter for the agency's judgement and will be influenced by a number of factors including:
A large part of most offers or tenders will deal with commercial matters such as identifying and addressing the prospective client's needs, describing the agency's capability and experience, setting out the price and terms of payment, specifying how and on what timetable the relevant skills or expertise will be provided, and specifying how contract variations will be made.
However, some disciplines must be observed in all offers or tenders. An agency must not submit a proposal to accept an offer or respond to an invitation, for approval as required by these Guidelines, unless:
If an agency proposes to:
and the agency has not obtained approval for its participation in the prospective project as required by these Guidelines, the agency's response or offer must clearly state that it is made subject to that approval being obtained.
8. How does a NSW public sector agency protect its intellectual property used in, or the subject of, an overseas project?
For the purposes of this paragraph, "intellectual property" includes confidential information, know-how, software programs, formulae, designs or any other material in respect of which an agency may have a valuable interest, copyright and/or any patent or trademark rights.
If a prospective project will result in an agency giving another party or parties access to, or allowing it or them to use an item of the agency's intellectual property, the agency must ensure that its intellectual property is protected adequately. For example, if the agency has developed computer software for the purpose of performing a certain function and the agency agrees to provide its skills or expertise to a NSW private sector firm in the course of which the software will be used, the agency will need to:
It is not possible to prescribe a form of protection that will be adequate for all purposes. An agency may need to obtain specialised legal advice in relation to any prospective project in which its intellectual property would be used. The agency may also need to include in the documentation of a project a clause or clauses that will have the effect of protecting its intellectual property.
9. How does a NSW public sector agency deal with staff/industrial relations issues with respect to a prospective overseas project?
The agency must ensure that all officers are aware of the agency's position and their own obligations as to the ownership and protection of any existing intellectual property, or any developed as a result of the agency's or officer's involvement in an overseas project.
If services will be provided in the course of a project by an entity (such as a subsidiary company) other than the agency that employs the staff, it may be necessary to put in place a consultancy or service agreement between:
In some cases it may be necessary for the staff to take leave from their usual employer so that they can be employed by the entity that will provide the relevant services.
These staffing and industrial relations issues must be dealt with in all project proposals. If it is proposed that the terms of employment, function or designation of any staff will be changed for the purposes of the project, the appropriate approvals are needed.
10. What is an agency's duty of care to employees undertaking an overseas project?
While there is no statutory obligation for agencies to provide safe workplaces for employees undertaking overseas projects, agencies must ensure that employees planning to work overseas are informed about work, transport and living conditions and safety precautions during travel to/from and at the project location in the host country. Failure to provide adequately for employees' safety may breach agencies' common law duty of care to their employees. Advice from the Department of Foreign Affairs and Trade (DFAT) on personal safety overseas should be included in project assessments and briefings for employees in situations where personal safety of employees planning to work overseas is an issue. The DFAT website at www.dfat.gov.au/consular/advice/index provides travel advice and alerts about security matters overseas.
11.How should a NSW public sector agency account for overseas projects?
Accounting practices in respect of overseas projects should provide for the collection of the information necessary for full disclosure of the financial arrangements for such projects. Relevant reporting guidelines and requirements should be observed.
12. When should agencies consult The Treasury?
Agencies must consult The Treasury regarding any proposal to enter into a joint venture agreement. The Treasurer's approval may be required pursuant to the Public Authorities (Financial Arrangements) Act 1987 for joint activities with private sector organisations. Agencies must comply with relevant Treasury guidelines and are encouraged to consult The Treasury about financial issues in respect of project proposals, including costs, commercial risks, mechanisms for offsetting risks, calculating rates of return and techniques for assessing non-financial benefits of overseas projects. The Treasury's role in clearing projects is explained in the next section.
13. How should overseas projects be approved?
Approvals by Ministers or CEOs
Overseas projects must be approved by the Minister responsible for the agency, or the CEO acting with authority from the Minister. Approvals by Ministers or CEOs are subject to the following conditions.
Agencies authorised to engage in commercial activities overseas are entitled to undertake overseas projects in accordance with their charters.
Consultation with The Treasury
Agencies should consult with The Treasury as necessary about financial issues in respect of project proposals.
Consultation with The Treasury is not required in the case of:
Consultation with The Treasury is required in the case of:
Advice to Ministers or CEOs
Advice from the Director-General, Premier's Department and The Treasury, and action necessary to comply with The Treasury's requirements, should be included in agencies' submissions to Ministers or CEOs seeking approval for overseas projects.
14. What reporting of overseas projects is required?
Submissions seeking approval for overseas projects must include, as a minimum, a commitment to provide a brief report to the Minister by 30 June each year in respect of each overseas project. These reports should provide (at least) the following information:
A copy of each report should be forwarded to:
Governor Macquarie Tower
1 Farrer Place
SYDNEY NSW 2000
Agencies authorised to engage in commercial activities overseas are requested to forward project reports to assist Premier's Department prepare a comprehensive annual report to the Government on overseas project activities of NSW public sector agencies.
Enquiries regarding the policy and guidelines on overseas projects should be referred to Brad Fitzmaurice, Premier's Department, telephone 9228 4443, email: firstname.lastname@example.org.
For information on Treasury matters in relation to overseas projects contact should be made in the first instance with Roger Sayers, NSW Treasury, telephone 9228 4641, email: email@example.com .
Agencies planning or undertaking overseas projects are to contact David Morris, Director, International Business Relations Unit, Department of State and Regional Development, telephone (02) 9338 6686, email: firstname.lastname@example.org.