The QueenslandDepartmemtofTransportand MaimRoads Probity ... · This probity audit report covers the period from 19 May 2010 to the date of this report and covers the probity aspects

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The QueenslandDepartmemtofTransportand MaimRoads

Probity Audit Report

Gold Coast Rapid Transit Project- OperatorF'ranchise PPP,Request for Proposal evaluation

^ii^ino'connor marsden

5 May 2011

MrTim Poole

Project DirectorGold Coast Rapid Transit ProjectLevel 5 Southport Central Tower 39 Lawson Street

SOUTHPORT QLD 4215Locked Bags6 SOUTHPORTBC QLD 4215

5 May 2011

Dear Mr Poole

Probity Report- Gold Coast Rap, d Transit Project- Operator Franchi e PPPRequest for Propo al evaluation.

O'Connor Marsden & Associates(OCM) has been engaged to provide probity services to theQueensland Department of Transport and Main Roads (DTMR) in accordance with ourengagement letter of 19 January 2010, the scope of which was formally accepted on 27 April2010. In this capacity, OCM has set out its report below in regard to probity aspects ofDTMR's evaluation process associated with the GoldCo@SIR@pidTr@"siiPrqj'eel- OperatorFranchise Pubfic-FFivoie Farmership OPPPP). Req"esijbrProposol^FF)evu!"allo"

This probity audit report covers the period from 19 May 2010 to the date of this report andcovers the probity aspects of the RFP evaluation up to the Evaluation Panel's finalrecommendation to the Project Executive Group that, subject to approval of the QueenslandGovernment, the Project Director proceed to execute a contract with Proponent A. This reportshould be read in conjunction with our probity audit report dated 18 May 2010 covering theExpression of Interest (EOl) phase of the OF PPP procurement, and also with our Mid Termprobity audit report dated 24 September 2010 and Interim probity audit reports dated 26November 2010 and 19 February 2011

If you require any further information or wish to clarify any matters, please contact me on0416 107 627 or A1fSaid on (02) 9252 2565 or 0438 471 486

^;,,.o'connor marsden

O'Connor"."den& Aeaoci. teaABN 94 1357B3 792

Level I. I York SireelSydney Nan 2000it 61 2 9252 2565

F: 61 2 9247 7161

WWW Damnelau

Yours sincerely

Rory O'ConnorManaging DirectorO'Connor Marsden & Associates

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Contents

Executive SummaryIntroduction

Objectives

Scope

Methodology

AcknowledgmentConclusion

Work Performed

Appendix A: Key Probity Principles

Appendix B: Statement of Responsibility

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Aboutthe Services

The services described in this document are of an audit and internal risk managementnature only and are riot intended to be of a financial services nature. The informationset out in this document is provided for general infonnation purposes only and mustriot be relied on by DTMR without seeking independent advice on the relevantissuesConfidential - this document and the information contained in it are confidential and

should riot be used or disclosed in any way without our prior consent

O O'Connor Marsden & Associates. May 2011. Allrights reserved

o'connor marsdenPage45May20, I

Executive Summarytro uction

At the request of the Queensland Department of Transport and Main Roads (DTMR),O'Connor Marsden & Associates (OCM) has undertaken a probity review of the evaluationprocess in regard to Gold Coast Rapid Transit Project- Operator Frenchise PPP, Request forProposal (RFP) evaluation. The engagement was perforrned in accordance with theAustinlian Auditing Standard on Assurance Engagements AsAE 3000, AssuranceEngageme"is 01her Iho" AMdiis or Reviews of Hislone@! Fin@"ei@I Information issued bythe Australian Government Auditing and Assurance Standards Board. Further infonnationin relation to the extent of the procedures performed and the scope of our engagement isdetailed below and in the Statement of Responsibility in Appendix B

BackgroundPurpose: The DTMR wishes to select a capable and willing organisation providing the bestvalue-for-money on offer, to design, construct, finance, operate and maintain and, at the endof a 15-year franchise period, return to the State, Stage I of a light railinfrastructuredevelopment project on the Gold Coast. The State, in partnership with the AustralianGovernment and the Gold Coast City Council has established the Gold Coast Rapid TransitProject(GCRT - the Project) forthe purpose

In the first instance, DTMR issued Expression of Interest (EOl) documentation, seekingEOls from any organisation able to undertake the infrastructure development througt aPublic/Private Partnership (PPP), in order to create a short-list of those interestedorganisations DTMR considered the most capable

Following the EOl phase, in order to identify the organisation to undertake the infrastructuredevelopment, DTMR issued Request for Proposals (RFP) documentation. The RFP wasdistributed to the short listed proponents identified Ihrouglithe EOl phase and following theevaluation process described below, a recommendation as to the most suitable proponent wasto be made

Structure: The evaluation of proposals involved an assessment by a DTMR EvaluationPanel supported by sub-panels and returnable teams, as described in the Evaluation PlanSpecialised advice has been available to the Evaluation Panel through a Strategic AdvisoryGroup comprising John Walter(Corrs Chambers Westgarth), Mano Delia (PriceWaterhouseCoopers), Ben Dempsey (Coffoy Commercial Advisory) and John MCLuckie (EverythingInfrastructure). Further specialist advice was also available to the evaluation team throughspecialists from the following organisations: PriceWaterhouse Coopers, Burman Grimths,Aurecon, Drayton's Workplace Consulting, Jardine LIDyd Thornpson, Corrs ChambersWestgarth MWH Global Ranbury Manidis Roberts Scott Wilson Sturgeon ConsultingGroup, Interneet and Coffey Commercial Advisory

A Challenge Team was also been convened to provide strategic and specialist advice to theProject Director and Project Executive Group. The Challenge Team played no role ingoverning the project and has had no decision making responsibilities with respect to theRFP evaluation

The Evaluation Panel's assessment leads to recommendations to the Project Executive Group(PEG), whch consists of senior management representatives from the Queensland andCommonwealth governments and Gold Coast City Council. PEG in turn endorses the

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Executive Summary

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Evaluation Panel's recommendation and advises the Queensland Government's CabinetBudget Review Committee (CBRC) as to the recommended course of action

History: The Expression of Interest invitation was advertised in The AUSiralia" sydneyMorning Herald, Brisbane Courier Min7, The Age and AUSirolia" Financial Reviewnewspapers on Tuesday 8 December 2009. Six consortia or organisations submitted EOls bythe close on Friday 5 March 2010. An EOI Evaluation Panel evaluated the responses andmade its recommendation in a report dated May 2010 as to the shortlist to be invited to theRequest for Proposal stage

Requests for Proposals invitations were issued on I July 2010 to the three proponent goupsshortlisted through the EOl stage. The three proponent groups submitted proposals by thespecified closing time of 2:00pm on 30 November 2010. The RFP Evaluation Panelsupported by sub-panels and returnable teams, as described in the Evaluation Plan evaluatedthe responses, and on made its recommendation in a minute to the Project Executive Group(PEG), dated 21 April 2011that "Proponent A" was capable of meeting the State'srequirements and, subject to approval of the Queensland Government, the Project Directorshould proceed to make the necessary arrangements to finalise a contract with that proponentgroup. PEG members endorsed the recommendation on 3 and 4 May 2011

O jectives

Executive Summary

As detailed in our proposal dated 19 January 2010, fomally accepted by DTMR on 27 April2010, the overall objective of our engagement was to provide a conclusion based on thework perfonned on whether anything came to our attention to indicate that the evaluationprocess did riot comply with the probity principles in all material aspects. If consideredappropriate, OCM was also to provide observations and/or recommendations in relation tothe probity aspects of the evaluation process, particularly in regard to procedural fairness andequity

ScopeThe scope of our engagement covers the probity aspects of the evaluation process undertakenby DTMR for the Gold Coosi Rapid Transii. Operaior Franchise PPP. Req"esijbrProposals invii@, ion

The OCRT OF PPP is being procured in accordance with the national PPP Guidelines andthe Queensland-specific requirements set out in the Value for Money Framework publishedby the Queensland Government Department of Infrastructure and Planning

As DTMR is a Queensland Government Entity that must comply with QueenslandGovernment Purchasing Policy, we have referred to the probity principles outlined in thefollowing documentation

. Queensland Government- Department of Public Works - State Procurement Policy;

. Queensland Purchasing - Better Purchasing Guide - Ethics, Probity and Accountabilityin Procurement(Crime and Misconduct Commission); and

. Queensland Purchasing - Better Purchasing Guide - Value for Money

In accordance with the probity principles outlined in the above documentation we havefocused on DTMR's evaluation managementsystems and processes in regald to

. Fairness, impartiality and honesty in carrying outthe process;

. Accountability of the participants and transparency of the process;

o'connor marsden Pages5 May 2011

. Maintenance of confidentiality and security of documentation and information;

. Management of actual, potential and perceived conflicts of interest; and

. Attaining best possible value for money under the prevailing circumstances

A further description of these principles is included in Appendix A

Me hodologyOur methodology included attendance at selected activities and sighting certaindocumentation, as more fully described under Work Performed, in order to

. Review the link between procurement planning and the selected approach to the market,including the invitation methodology;

. Review the documented probity controls, including conflict of interest, confidentialityand security management;

. Review the evaluation procedures, including alignment with lender documentation,evaluation meetings, criteria assessment and scoring methodology;

. Review the evaluation documentation, including records, scoring and reporting; and

. Review the communications and meetings between the interested organisations andDTMR, including the provision of addenda and seeking of clarifications

In addition to the above, to assist the project team with contract close, we have providedunder separate cover to the Project Director a list of inherent key probity risks associatedwith contract close together with suggested measures to mitigate such risks arising

Executive Summary

ACknow edgmentWe wish to place on record our appreciation of the assistance and cooperation received fromthe management and staffofDTMR and the Gold Coast Rapid Transit projectteam

Based upon the work described in the Work Perfonned section nothing has come to ourattention to indicate that the evaluation procedures carried out by the QueenslandDepartment of Tmnsport and Main Roads for the Gold Coast Rapid Transit ProjectOperator Franchise PPP, Request for Proposals evaluation, between 19 May 2010 and thedate of this report, were riot compliant with the probity principles described in the Scope inall material aspects

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Work PerformedIn completing our work, we undertook the following tasks in order to form a conclusionfrom a probity perspective in regard to the evaluation process followed by DTMR

Request for Proposals Stage1.1 Three shoalisled proponents from the EOl stage were invited on I July 2010 to the

detailed Request for Proposal stage. Noted that the period allowed for submission ofproposals was one hundred and forty-nine days from the first notification, and

(i) Short listed registrants from the prior Expression of Interest stage werefomally invited to submit Proposals;

The invitation included the requirements of the relevant procurementprocedures; and

(iii) The proposal period meets the requirements of the relevant procurementprocedures

1.2 Reviewed, from a probity perspective, the DTMR documents Gold Coosi RapidTransii- Req"esijbr Proposal which was issued in four volumes, as updated and re-issued by subsequent addenda. The four volumes of the RFP comprised

co Volumel-RFPOverview;

(ii) Volume2- Proposal Form, Financial Templates and Proposal Returnables;

(iii) Volume 3 - Legal documents (various Agreements to Lease and Deeds); and

(iv) Volume4-Projectscopeand Requirements

1.3 Noted that the documents were made available to the proponents though a secureelectronic data room. The operation of the Data Room was reviewed in our Mid-TermProbity Audit Report dated 26 November 2010

1.4 Noted that proponents were advised that the information contained in the RFPvolumes was to be read in conjunction with other information documents contained inthe electronic data room and also in conjunction with the GCRT Prob^ly and ProcessDeed

1.5 Noted that: all proponents had the opportunity to access the same information thedocument and any changes did riot appear to be structured to favour any particularbidder; the document has been authorised by the delegated approval authority; and theRFP documents and Deed collectively included

(i) Adescriptionoftheprocurement;

(ii) Conditions for participation - i. e mandatory requirements describingminimum acceptable standards;

(iii) The evaluation criteriathaiwill be used to compare submissions;

(iv) Minimum content and fomatrequirements forthesubmission;

(v) An indication of the information that will be made public during and after theevaluation;

(vi) Rights to undertake negotiations andorrequire a Best And Final Offer;

(vii) Rightstoamendtheevaluationprocess;

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(ii)

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(viii) Prohibition of collusionbetweenproponents;

(ix) Requirementsforconfidentiality;

(x) Requirementsforproponentstoidentifyconsortiumpartners;

(xi) Notification of the limits to DTMR's liabilities to the proponent;

(xii) Identification ofOCM as the probity auditor including a description ofOCM'srole and contact details;

(xiii) The latest time and date for a submission to be considered on time;

(xiv) Post closing procedures, including clarifications and a description of theevaluation process;

(xv) The basis for consideration of alternative offers; and

(xvi) Management of Common Ownership I Related Entities issues

6 Ms Louise Duffy, Tmnsaction Manager, confirmed on I March 2011 that nineaddenda were issued to all proponents through the Data Room. Noted that

(i) A process was established to controlthe provision offurtherinformation;

(ii) Amendments were issued in accordance with the RFPdocument;

(iii) Addenda clearly state that they are to be incorporated in the RFPdocumentation;

(iv) Adequate time was allowed for proponents to respond to amendments;

(v) Unless commercially sensitive, answers to potential proponents' questionswere provided to all proponents; and

(vi) All proponents acimowledged receipt of the 9 addenda through their RFPsubmissions Returnable 24 and also acknowledged that " regard has been hadto these addenda in preparing their proposals"

7 Attended the individual EOl de-brief and RFP briefing sessions for the three shortlisted proponent groups on 8 June and 15 June 2010. Observed that

(i) Agenda forthe briefing sessions were provided to all proponents and werefollowed;

(ii) The proponents were informed that any verbal information provided at thebriefing was riot binding unless confirmed in writing;

(iii) Records of attendance and mattersdiscussed allhe meeting were made;

(iv) OCM provided an outline of the probity expectations, including the role andcontact details forthe probity auditor; and

(v) An opportunity was provided to the potential proponents to raise probityissues with the process to date. No issues were raised

8 Reviewed, from a probity perspective, the evaluation procedure documents GoldConsiRopid Tramsi, - Erul"@lion Plan - Req"esijbr Proposal. and Gold CodslR@pidTransii- Prohity Code of Procrice. Noted that

(i) A number of specific protocols were also issued, in addition to the EvaluationPlan, relating to the evaluation process, as follows

. Financial Evaluation protocol, 22November2010

. Legal Evaluation Protocol, 25November;

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. RFPEvaluationProtocols 25November

. General Evaluation Protocol, 30November;

. SpecificEvaluationProtocols, 30November;

. ReportWritingProtocols, 30November;and

. CorrsEvaluationPhaseDocumentSecurityProiocols undated

(ii) Mandatory evaluation process induction workshops were held for evaluationteam members, including Sub Panel and Returnable Team members andspecialist advisors on 17 and 24 November 2010. 0CM was riot in attendancebut we have sighted the program for these workshops and rioted that probitywas included as part of these workshops;

(iii) An induction was held forthe Evaluation Panel on 3 December 2010, after thereceipt of RFP submissions on 30 November though before opening of theelectronic data room and evaluation library, which contained the RFPsubmissions, on 6 December 2010. 0CM was riot in attendance but we havesighted the agenda for the induction and rioted that probity was included aspart of the induction program;

(iv) The document Evat"onom Process Indwello" was distributed to all members ofthe evaluation team, to be read in conjunction with the Evaluation Plan and

(v) All new starters to the project receive an induction including probityprinciples, the GCRT Probity Code of FFac, ice and complete confidentialityand conflict of interest declarations. We were advised that all new members of

the evaluation team were also given a separate introduction to the evaluationprocess

9 Noted that: the Evaluation Plan and Probity Code of Practice were completed andapproved before tenders were opened; procedures, criteria and risks to be evaluatedare consistent with the call documentation and that the documents included

co The identification of the purposeand objectives of the procurement;

(ii) The identification of the procurement method;

(iii) Government and DTMRs policies, guidelines and procedures to apply to theevaluation process;

(iv) Communication management procedures;

(v) The structureand authority formakingdecisions;

(vi) A description of the resources, including the roles and responsibilities of theevaluation panel, sub-panels, returnable teams, advisors, the Project ExecutiveGroup and Cabinet Budget Review Committee of Queensland Government;

(vii) Submission opening procedures, including the management of latesubmissions;

(viii) Rules for submission registration and managing security;

(ix) Protocols for handling information and maintaining confidentiality;identifying and handling conflicts of interest maintaining records of theprocess; audit, review and sign-off by the appropriate authority; handlingsubmissions including rules/disallowance of late submissions; dealing withnon-conforming submissions; the clarification process and managingqualifications and departures; identifying and integrating the assessment of

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risks posed by the proponent into the evaluation process; presentations andmeetings with proponents; and checking proponents credentials and referees;

(x) Identification ofOCM asthe probity auditor and adescription ofOCM's role;

(xi) An indicative scheduleoftasksandevaluationtimetable;

(xii) Conditions for participation and the evaluation criteria, including minimumcontent and formatrequirements; and

(xiii) The evaluation methodology for price and nori-price cineria

10 The State and shortlisted proponent groups entered into a Prohity and Process Deed(the Deed) which was designed to ensure the probity and competitiveness of the RFPprocess. The operation of the Deed was reviewed in our Mid-Term Report dated 26November, 2010

Noted that

(i) The State and individual proponent groups entered into the Deed before theformal commencement of the interactive phase of the RFP process on 12 July2010

(ii) The Deed did riot appearto be structured to favour any proponent group; and

(iii) The three proponent groups declared in submitting their bids that they havecomplied with their requirements under the Deed and, to the best of theirknowledge, the Related Party Parent, each Associate and each other personhaving obligations under the Deed have complied with their obligations

11 Noted that the Probity and Process Deed provided forthe management of related partyissues. Leighton Holdings Ply Ltd as the parent company of two subsidiaries that arepart of competing RFP proponent groups, was required to appoint a Related PartyParent Probity Auditor, while the proponent groups concerned were required toappoint Proponent Group Probity Auditors. Noted that

(i) The Related Party Parent Probity Auditor provided a reportconcurrently withthe submission of bids on 30 November 2010, wherein he provided acompliance statement that, after having made all enquiries he considersrelevant and appropriate to determining whether Leighton Holdings Ply Ltd(LHL), as the related party parent, has complied with the Deed, with theexception of certain matters subsequently resolved to the satisfaction of theState, LHL has otherwise complied with the requirements of the Deed and putin place procedures to ensure continuous compliance with the requirements ofthe Deed;

(ii) The Proponent Group Probity Auditors forthe Leighton Holding subsidiariessubmitted compliance statements, concurrently with the submission of RFPbids, in respect of the proponent group's compliance with the Deed; and

The management of related parties was reviewed in more detailin our Interim ProbityReport to the Project Director, dated 19 February 2011

13 Attended the closing of RFP submissions on 30 November 2010 at 2.00pm. Observedthat

Work Performed

The Tender Opening Committee consisting of Louise Duffy, Kathryn Bullor,Tim Poole and Peter Gill processed the RFP submissions in accordance withthe Evaluation Plan;

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(ii) Noted that, by arrangement with and agreement of the proponents, in order tomanage the volume of the bid materials, delivery of bids was staggered, withMoveGC bids delivered at 9.30am, GoldlinQ at 12.10pm and GC Connect at12.30pm on 30 November;

(iii) Noted that, upon delivery, the number of boxes or containers containing thebid materials was recorded in a Lodgement Receipt which was signed by theProject Director, Tim Poole and the Bid Director for each of the proponentgroups. A copy of the receipt was retained by the GCRT project andrespective bid director;

(iv) The bid materials were received in the GCRT Boardroom and, immediatelyafter receipt and recording of each set of bid materials, were transferred to asecure locked room (the RFP reading room), before the next proponent's bidmaterials arrived, awaiting formal opening and recording of bid materials inthe afternoon;

(v) Threeproposalswerereceived by the closing time;

(vi) Nomteproposalswerereceived;

(vii) A safo and secure environment was provided forthe receiving of submissions;

(viii) All proposals were received priorto close;

(ix) Noproposalwasopened priortoclose;

(x) Records were made of the proposals received, including date and time ofopening and apparent legal entity of the proponent;

(xi) Alleasttwo DTMR representatives were present; and

(xii) The Tender Opening Committee members have endorsed conflict of interestand confidentiality agreements

14 Attended the opening of submissions and confonnance checking from 4:00pm on 30November and also periodically on I and 2 December. The opening and conformancechecking learn consisted of Kathryn Bujtor HeIen MCKenna Louise Duffy SoniaFarrell, Amie BolafTi Peter Gill Candace Slager Andrea Voyer and Ben Dempsey atvarious times. The opening and conformance checking of bids took place in the secureRFP reading room, where bid materials had been transferred to after receiving andrecording in the GCRT boardroom. Observed that

(i) The opening committee processed the proposals in accordance with thedocumented tender opening procedures;

(ii) All members of the opening committee had completed confidentiality andconflict of interest declarations;

(iii) The opening committee systematically recorded all materials as the openingprogressed;

(iv) The proposals were checked to ensure compliance with the mandatory(submission) requirements e. g. fomat and content;

(v) Financial returnableswerekeptseparatefrom non-financial returnables;and

(vi) After bid materials were opened, checked for compliance and recorded, theywere then transferred to the secure RFP document library where they were barcoded in preparation for issue to authorised members of the evaluation teamfrom Monday 6 December

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IS Reviewed the security arrangements for confidential documentation

(i) Doc"meniSecwity. Following receipt of submissions and opening andconformance checking, which took place in secure environments, documentswere transferred to an access-controlled document library, where theyindividually were bar-coded prior to the commencement of borrowing onMonday 6 December. The library was attended at antimes during borrowinghours (nonnal or extended business hours). Issue and return of bid documentswas electronically recorded. Only authorised members of the evaluation teamand others who required access to specific bid returnables had access todocuments, and only those documents necessary for the purpose of their rolein the evaluation. Bid documents were returned to the library by the end ofeach day. Documents could only be taken to and read in prescribed securereading areas and members of the evaluation team were required to not leavedocuments unattended. A separate secure reading room was provided for thefinancial evaluations. By arrangement, one copy of the financial returnableswas also taken to and stored securely within the offices of the QueenslandTreasury for review by Treasury officials, who were also part of theevaluation team. As an additional security measure, in the event of fire orother loss of documents, an encrypted digital copy of all bid materials washeld off site at the DTMR Nerang offices

(ii) Eleciro"ic Security Computers in the GCRT omces are password protectedand access controlled. Evaluation reports could only be prepared on computersin the Reading Room and designated financial evaluation room. Computers inthese areas were locked to a local network drive. Internet and email access

were riot available on these computers. Each returnable team and sub panelhad its own folder on the evaluation drive, and all documents were saved andpassword protected, with each returnable team and sub-panel having their ownpassword. Bid documents I returnables were riot available digitally except inspecific circumstances with the approval of the Transaction Manager (egfinancial returnables were available digitally for ease of interpretation by theCommercial/ Financial team

(iii) orice security. Omces are accessed by electronic key tags. Visitors wererequired to sign in at reception and were escorted by departmental or otherproject staff when on the premises. Electronic swipe card access was furtherrestricted during the evaluation of bids such that only members of theevaluation team could access evaluation areas and further that only membersof the Commercial I Financial sub panel could access the designatedcommercial/ financial evaluation room

(iv) No breaches of the security arrangements to maintain confidentiality wereobserved by OCM or reported to OCM by employees or advisors involved inthe project

16 Attended the Evaluation Panel meetings on the 8 15 and 17 December 2010 11 and27 January 2011, 8 and 28 February, 22 March and 13 April 2011 as independentobservers. Noted that

(i) Agendawereprovidedandfollowed;

(ii) Evaluation Panelmembers were reminded of theirconfidentiality and conflictof interest obligations;

(iii) An opportunity was provided for Evaluation Panel members to raise anyprobity issues or concerns;

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(iv) Meetings were minuted including process, decisions and actionsto be taken;

(v) Association declarations in relation to Pecuniary andNon-pecuniary interestswere reviewed;

(vi) The evaluation procedures outlined in the call document and the evaluationdocumentation were followed;

(vii) The submissions were rated againstthe evaluation criteria outlined in the calldocument and/orthe evaluation documentation; and

(viii) No other meetings of the Evaluation Panel were held after the opening ofsubmissions. Other than those listed above

1.17 Observed the perfonmance of the members of the Evaluation Panel arthe meetings weattended. Nothing came to our attention to indicate that the Evaluation Panel as awhole did riot include the appropriate skills, professional qualifications and experiencerequired to undertake an evaluation of this nature, rioting that the Panel was supportedin its evaluation by a larger evaluation team including four specialist Sub-Panels,Returnable Teams and specialist advisors, in accordance with the Evaluation Plan.

1.18 Attended the meetings of the GCRT Project Executive Group (PEG), the reviewauthority forthe OF evaluation, held on 26 May, 7 and 18 June, 8 July, 6 August ISeptember, 11 October and 11 November 2010 and on 20 January and 2 and 24March 2011. Noted that PEG was briefed on progress of the RFP evaluation at each ofthese meetings

1.19 Attended the proponent presentations on 13, 14 and 15 December 2010. Noted that:

co A schedule of proponent meetings and agendaformeetings were prepared;

(ii) The agenda was provided to proponents in a reasonable time before themeeting;

(iii) No inappropriate information was provided to proponents, includinginformation concerning competitors' bids;

(iv) Each proponent was provided with similar opportunities and information toeach other proponent; and

(v) Ariaudiovisualrecordingwasmadeofeachpresentation

1.20 Attended 77 of the 1/3 interactive workshops stakeholder workshops depot site visitsand corridor inspections attended by the proponents and representatives of the OCRTproject learn during the interactive phase of the RFP process, over the period from 9July to 12 November 2010. A detailed probity overview of the interactive workshopprocess is included in our interim probity report dated 26th November 2010.

1.21 Attended 12 of the "health check" meetings with representatives of the proponentgroups and the GCRT project team that took place over the course of the interactivephase of the RFP process. These meetings were generally held following interactiveworkshops and attended by the proponent group bid manager and other key membersof the proponent group team, together with the GCRT Project Director and orTmnsaction Manager. The purpose of the meetings was to review the status of bidpreparation by the proponents and any issues emerging that may have impacted ontheir ability to submit their bids by the due date. Noted that there was generally noagenda for these meetings and no minutes or other formal record made although noteswere taken by both the proponent group representatives and project representativesForthose meetings attended by OCM, we rioted that

Work Performed

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(i) No inappropriate infonnation was provided to the proponents, includinginformation concerning competitors;

(ii) Opportunities were provided to raise any probity issues or concerns. Noprobity issues or concerns were raised;

(iii) Approximately the same number of health check meetings were held witheach of the proponent groups; and

(iv) Proponents had been advised, in the interactive workshops, that they may notrely on any verbal information unless confirmed in writing, and had also beenprovided the contact details of the Probity Advisor

Sighted the records of meetings between the GCRT Project Director and TransactionManager and the proponent group bid directors on 18 November 2010 (withMoveGq, 12 October 2010 (GoldlinQ and MoveGC), 14 October 2010 (GCConnect) and on 21 January 2011(with GC Connect Bid Director) and 23 February(phone discussion with GC Connect Bid Director). Noted from these records that noinappropriate information was provided to proponents, including informationconcerning competitors' bids

Reviewed, from a probity perspective, the clarification processes used by DTMRThe clarification process after submission of bids is described at Part 3.4 of theEvaluation Plan. Noted that

(i) The clarification procedures weredocumented;

(ii) No breaches of commercial confidentiality came to our attention;

(iii) The current status of Proposals was not implied;

(iv) Requests for clarification and replies were confirmed in writing;

(v) Adequate time was provided to each proponent to respond to clarificationrequests where relevant;

(vi) Equal opportunity to correct mistakes and/or to provide clarifications with thesame characteristics was provided to all proponents;

(vii) The clarifications I corrections did riot substantially alter the original intent ofthe submission; and

(viii) It appeared reasonable to DTMR forthe proponent to provide the informationunder the circumstances

(ix) Up to and including 17 February 2011, a total of 211 clarifications had beenissued to the three proponent groups 69 in respect of GC Connect, 47 inrespect of MoveGC and 95 in respect of GoldlinQ. Noted that the highernumber of clarifications sought from GoldlinQ proponent group is consistentwith the Evaluation Panel's decision at it's meeting of 8 February 2011 toconcentrate further evaluation on the GoldlinQ proposal

Noted the Evaluation Panel's recommendation to the Project Executive Groupapproved by all members at the Evaluation Panel meeting on 8 February 2010 tosuspend the evaluation of two proposals and continue detailed evaluation of theremaining proposal (referred to non-attributiveIy as "Proponent A"), with a view todelennining whether that proponent was capable of meeting the RFP value formoney criteria. Noted further that

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(i) The Evaluation Panel's recommended course of action was consistent with theState's discretion provisions set out at Clause 4.4 of the Evaluation Plan andClause 2.6 (a)(ix) of the Probity and Process Deed; and

(ii) Was supported by the following reports, prepared by the evaluation teams

. mienmEva!"orionRepori. dated 17 December 2010;

. Trq#IC Lighis Reporis received from each of the Evaluation Sub PanelChairs, dated 27 January 2011

. Commercial PPI"clyles DrqiiRepori. dated 27 January 2011; and

. "@JueibrMo"ey Working DrayiRepori. dated 25January2011

25 Sighted the PEG members' responses to the out of session paper dated 9 February2011, endorsing the Evaluation Panel's recommended approach described in 1.24

26 Noted that the Queensland Government's Cabinet Budget Review Committeeapproval of the Evaluation Panel's recommended and PEG endorsed position,described in 1.24 and 1.25 by Cabinet Decision 3 163 dated 19 February 2011.

27 Noted that on 22 and 23 February 2011 the three proponent groups provided revisedprice information, either in writing or verbally by phone. Although not requested,this was initiated by the Project Director's evaluation update letter dated 12 Januaryto the three Bid Directors, which indicated to each that their proposal may not meetthe governments' value for money requirements. Noted that the Evaluation Panel atIts meeting on 28 February agreed that the additional unsolicited informationprovided by the proponent group Bid Directors did riot alter the previously resolvedposition, described in 1.24

28 Noted that the three proponent groups declared, in submitting their RFP bids on 30November 2010 that

(i) They had no probity concerns in relation to the RFP process (including thatthey were aware ofno fact matter or thing required to be notified to the Stateunder the Probity and Process Deed which had riot been so notified); and

(ii) At the time of lodgement of the RFP bid, did riot intend to make a claim inrelation to the RFP process

29 Attended the proponent group meetings on Tuesday I March 2011 at which the BidDirectors of two proponent groups were notified of the State's intention to suspendconsideration of their bids and the Bid Director of the remaining proponent group(Proponent A) advised of the States intention to enter into further discussion with aview to determining whether they were capable of meeting the RFP value for moneycriteria, consistent with Evaluation Panel's recommended position endorsed byPEG, and approved by CBRC, as described in 1.24 and 1.25

No probity issues were raised at those meetings

30 Noted that, in accordance with the recommendation by the Evaluation Panel on 8February (as described at 124) and subsequent to the proponent group meetings on IMarch (as described at 1.29), the State commenced a further clarification processwith the Proponent A, including interactive meetings and written clarifications withthe intention of determining whether Proponent A was capable of meeting the State'svalue for money requirements

Attended, on a sample basis, the interactive clarification meetings between the Stateand Proponent A, commencing on 7 March 2011. Noted that

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(i) Ariagendawasprovidedatthosemeetingsweattended;

(ii) Proceedingswererecorded;

(iii) No inappropriate infonnation was disclosed, including any informationpertaining to competitors' bids; and

(iv) Opportunities were provided to raise probity issues or concerns, and nonewere raised

Noted that the Evaluation Panel, at its meeting on 28 February 2011, afterconsidering the evaluation sub-panel reports, agreed scores for the nori-financialcriteria (I to 9) for Proponent A and also rioted the whole of life cost analysis(criterion 10) for Proponent A, prepared by the Legal and Commercial Sub-PanelNoted that the decision to undertake scoring only for Proponent A follows from theEvaluation Panel's recommendation of 8 February that two proponent groups wereincapable of meeting the State's value for money criteria and should therefore be setaside

Noted the Evaluation Panel's final minute to PEG dated 21 April 2011 and endorsedby members of the Evaluation Panel overthe period 24 April to 4 May 2010, settingoutthe conclusions of the OF PPP evaluation

co That Proponent A's final oner dated 18 April 2011 was capable ofacceptance by Government and that all outstanding issues identified duringthe evaluation process had been addressed, and

(ii) Recommending that PEG, subject to approval from the QueenslandGovernment, instruct the Project Director to make the necessaryarrangements to execute a contract with Proponent A

Noted that PEG members, by out-of-session response to the minute described at1.33, on 3 to 5 May 2011 endorsed the Evaluation Panel's final recommendation

Requested on 14 April 20/11hat members of the Evaluation Panel confirm that

(i) Relying on the experience of the evaluation sub-panels and specialistadvisors, the evaluation has been conducted in accordance with thedocumented evaluation process described in the Gold Coini Rapid Transii.Ev@!"@lion PionjbrReq"errjbrP, oposols. Operaior Franchise PPP;

(ii) Sumcient enquiry was made and adequate time and resources had beenallocated to the evaluation;

(iii) They were unaware of any undue attempt to influence the Evaluation Panelmembers in order to bias the evaluation process;

(iv) They were unaware of any association that(a) a reasonably minded memberof the public would think it probable had compromised the ability of anEvaluation Panel member to bring an impartial mind to the evaluation, and(b) had riot been adequately managed;

(v) They were unaware of any unauthorised release of confidential informationthat could have affected the evaluation outcome; and

(vi) They were unaware of any other issue of a probity nature that had not beenresolved

Noted through the receipt of responses from 14 to 27 April 20/11hat members of theEvaluation Panel confirmed the above

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36 Contacted all proponent group Bid Directors periodically prior to and since thesubmission of bids in order to provide opportunities to raise any probity issues orconcerns, most recently on 3, 9 and 14 of February 2011

The Bid Directors of two proponent groups raised concerns in one case regarding afonner consultant to the Project who hadjoined a competing proponent group and inthe other concerning a former employee who had left to join a competing proponentgroup, seeking assurance that probity had riot been compromised by thesecircumstances. We obtained undertaking in both instances that there had been nobreaches of confidentiality and that the individuals concerned would have noinvolvement in respect of the Project with their new employers. We subsequentlydiscussed the action taken in respect of these matters with the Bid Directorsconcerned, who indicated that their concerns had been satisfactorily addressed

We are riot aware of any unresolved probity issues

Work Performed


App ridixAPrinciplesFairness, impartiality and honesty

Individuals and organisations involved in preparing and submitting proposals are entitled toexpect impartial treatment at every stage of the process. Ifthey do not consider the processto be fair, impartial and honest they may withhold valuable ideas or be deterred from biddingin the future. Any form of bias, whether driven by personal interests or riot couldjeopardisethe integrity of the project. Procedures that include multiple person panels independentmembers and observers mitigate this risk

Accountability of the participant and ti'ansparency of the process

Accountability and Transparency are related concepts. Accountability involves agenciesbeing able to justify the use of public resources to an appropriate authority by allocating andtaking responsibility for past and expected performance. This includes aligning the decisionmaking process with the appropriate delegated authority, and keeping adequate records thatwill leave an auditable trail. Transparency refers to the preparedness to open a project andIts processes to scrutiny and possible criticism. This also involves providing reasons for alldecisions that are taken and the provision of appropriate information to relevantstakeholders

Maintenance of confidentiality and ensuring security

Although accountability and transparency are fundamental to the work of public sectororganisations and public officials, there is some information that needs to be keptconfidential, at least for a specified period of time, in order to protect the integrity of theprocess and give proponents the confidence to do business with government. Thisinformation can include the content of proposals, intellectual properly and proponents'pricing and profit structures. Importantly, much of the information relating to the projectneeds to be kept confidential up to the point where a contractis executed with the successfulproponent. However, once this has happened, government guidelines require that certaininformation be released, consistent with the fundamental principles of public sectoraccountability and transparency, as discussed above. Procedures must be implemented toensure that no unauthorised release of confidential information occurs

Management of Conflicts of Interest

A conflict of interest is a conflict between the public duty and private interests of a publicofficial where the public official has private interests which could improperIy influence theirofficial duties and responsibilities. The community and potential proponents have a right toexpect that public officials will make decisions that are not influenced by private interestsSimilarly, when the private sector is engaged to perform public sector duties, there is anobligation to ensure that conflicts of interest are disclosed and effectiveIy managedPerceived or potential conflicts of interest can be as damaging as actual conflicts, andprocedures should be implemented to mitigate the effect


Key Probity


Attaining value for money

This is demonstrated by the use of an open competitive environment in which the market istested regularly, and proponents can make attmctive, innovative proposals with theconfidence that they will be assessed on their merits. Value-forMoney is riot necessarilyachieved by accepting the lowest available price. The process should include: the evaluationof nori-price criteria (such as the quality of the goods or services offered, the experience andpast performance of the providers, the financial strength of the companies, the differing riskfactors, the quality of the personnel, etc. ); cost-benefit analysis against a target outcome orbudget; the assessment of the total cost over the proposed life of the project; and, whereappropriate, whether the outcome is best achieved by the Private Sector, using a PublicSector Comparator. Lapses in probity may lead to one or more parties obtainingunreasonable financial gains at the expense of the public interest. Procedures should includea comparison of the nori-price and price criteria on a weiglited basis, with both the criteriaand the weighting between price and non-price criteria declared in the call documentation


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o

AppendixB Statement ofResponsibilityManagement's responsibility for. the evaluation PI. ocessThe management of DTMR are responsible for the design and implementation of theevaluation process controls in accordance with Government and DTMR's policies. Thisresponsibility includes establishing and maintaining processes relevant to the evaluationprocess to ensure that the process meets appropriate probity policies, laws and regulations;and leads to selecting the most appropriate proponent or proponents under the prevailingcircumstances


Assurance practitioner's responsibilityOur responsibility is to express a conclusion on the Evaluation Process based on our reviewWe conducted our review in accordance with the Australian Auditing Standard on AssuranceEngagements AsAE 3000, Assurance Engagements 01her than Audits or Reviews ofHistorical Financial Infonnation issued by the Australian Government Auditing andAssurance Standards Board, in order to state whether or riot on the basis of the proceduresdescribed and witnessed where appropriate, we have become aware of any matter that makesus believe that the evaluation process is riot in accordance with the principles describedabove

A review consists primarily of making enquiries, primarily of persons responsible forunderinking the evaluation process and its underlying documentation, applying analyticaland other review procedures, and examination of evidence for a small number of transactionsor events. A review is substantially less in scope than a reasonable assurance auditconducted in accordance with AsAE 3000. Accordingly we do riot express an auditopinion. Had we performed a reasonable assurance audit as defined by AsAE 3000 or anaudit as defined by the Australian Auditing Standards additional information may havecome to our attention, which would have been reported to DTMR

While conducting our review and/or in our report we may provide advice andorrecommendations in relation to the mitigation of risk of challenge to the processesundertaken by DTMR. in these cases, our responsibility is limited to providing such adviceand/or recommendations, based on our experience and knowledge of the subject matter ofthe project. For the avoidance of doubt, the procedures performed in providing adviceand/or recommendations do riot constitute an assurance engagement in accordance with theAustralian Auditing Standards for Assurance Engagements, nor do they represent any formof audit under the Australian Auditing Standards. We therefore do not express any form ofassurance in relation to the advice and/or recommendations, and none should be inferredfrom any such commentary in this report

Inherent limitation

Our Work is subject to the following limitations

. Owing to the inherent limitations of any internal control structure it is possible thaterrors or irregularities may occur and riot be detected. Our procedures were riot designedto detect all weaknesses in control procedures as they were riot performed continuouslythroughoutthe period and the tests performed are on a sample basis

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. Any projection of the evaluation of the control procedures to future periods is subject tothe risk that the systems may become inadequate because of changes in conditions, orthat the degree of compliance with them may deteriorate

The matters raised in this report are only those which came to our attention during thecourse of performing our procedures and are not necessarily a comprehensive statementof allthe weaknesses that exist or improvements that might be made. We cannot, inpractice, examine every activity and procedure, nor can we be a substitute formanagement's responsibility to maintain adequate controls over alllevels of operationsand their responsibility to prevent and detect irregularities, including fraudAccordingly, management should riot rely on our report to identify all weaknesses thatmay exist in the evaluation process, or potential instances of nori-compliance that mayexist

.


Advice and/or recommendations for improvement should be assessed by management fortheir full commercial impact before they are implemented

Limitations on use

This report is made solely to the Management of DTMR in accordance with our engagementletter dated 24 February 2010, forthe purpose of providing comfort to senior management onthe appropriateness and robustness of the evaluation process and should riot be quoted inwhole or in part without our prior written consent. We disclaim any assumption ofresponsibility for any reliance on this report to any person other than the management ofDTMR, or for any purpose other than that for which it was prepared

We disclaim alliability to any other party for all costs, loss, damages, and liability that theother party might suffer or incur arising from or relating to or in any way connected with thecontents of our report, the provision of our report to the other party, or the reliance on ourreport by the other party

Independence Competence, and ExperienceAll professional personnelinvolved in this engagement have met the independencerequirements of the Australian professional accounting bodies

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