The Victorian Government published its annual Economic Growth Statement late last year. The statement provides a vision for the State and sets out immediate and practical next steps intended to promote economic growth. One of the key initiatives proposed in the statement is additional pathways for Market-led Proposals.
The Government will unlock more Market-led Proposals, with new alternative and flexible pathways. This will help unleash the creativity and capital of the private and superannuation sectors for major residential development and other projects.
Below, we highlight some key considerations which may help Market-led Proposals deliver value to society.
No competition, but higher scrutiny, for Market-led Proposals
A Market-led Proposal (MLP) involves the private sector making an unsolicited proposal to government for support to deliver new infrastructure or services.
Market-led Proposals do not result from standard government investment planning and evaluation processes and are not fully tested in a competitive market. The contract with the entity delivering the infrastructure emerges through direct negotiation with government, rather than a competitive procurement process.
Market-led Proposal's can allow governments to harness private sector innovation or expertise, and finance to deliver investments. However, because the government cannot rely on competition between providers to ensure value for money, they need to be assessed using a comprehensive and stringent process.
Uniqueness is paramount
Victoria’s Market-led Proposal Guidelines initially highlighted the need for a Market-led Proposal to offer “uniqueness.”
The meaning and importance of uniqueness was considered in the Victorian Auditor-General’s Office’s (VAGO) audit of Victoria’s Market-led Proposal process in 2019. Frontier Economics assisted VAGO in that audit. The audit highlighted that it is not sufficient for lead agencies to only demonstrate the presence of unique characteristics in a Market-led Proposal. They must also demonstrate that these characteristics provide value and other benefits to society that could not be achieved through a standard competitive process outside of the Market-led Proposal process, within acceptable timeframes.
The Department of Treasury and Finance released an updated Market-led Proposals Guideline in December 2024, possibly as a response to Audit. This guideline includes the following assessment criteria:
- Does the proposal meet a service need aligned with government policy objectives?
- Does the proposal represent value-for-money?
- Is the proposal affordable and a relative priority for budget funding?
- Does the proposal have characteristics that justify exclusive negotiation?
While the last criterion doesn’t use the term “uniqueness”, in effect this is what it means.
The guideline highlights considerations for this last criterion, including:
- could the proposal be delivered by other market participants, and
- does the proponent have significant competitive advantage (such as intellectual property)?
That is, the government must consider whether there are good reasons that it should proceed solely with the proponent of the Market-led Proposal, rather than invite competing providers to bid to deliver the project.
Where Market-led Proposals fall short
As part of its 2019 performance audit, VAGO examined how two Market-led Proposals (which ultimately resulted in awarded contracts) were assessed; the West Gate Tunnel and the Victorian Police Centre.
Frontier Economics provided advice to VAGO to inform its evaluation, focusing on Transurban's West Gate Tunnel proposal to the Department of Treasury and Finance.
The audit found that the Department of Treasury and Finance did identify uniqueness in Transurban’s proposal — which centred on Transurban’s ability to access funding through escalating and extending toll revenues through its existing CityLink Toll Road Concession.
However, the audit highlighted that:
It is not sufficient for lead agencies to only demonstrate the presence of unique characteristics in an MLP. They must demonstrate that these characteristics provide value and other benefits for government that could not be achieved through a standard competitive process outside of the guideline within acceptable time frames.
This highlights a key challenge with Market-led Proposals: there is a risk that the proponents’ uniqueness centres on leveraging its existing incumbency position rather than an innovation or expertise that it can employ to deliver value for society.
A further key finding by VAGO was that the Department of Treasury and Finance’s assessment of Transurban’s proposal did not include substantive analysis of the next best alternative. Logically this is critical to a Market-led Proposal being worth pursuing – it should provide clear additional value, compared to the next best option which is likely to result from a competitive procurement process.
Figure 1 Chronology for the assessment of the West Gate Tunnel Market-led Proposal (click to open larger image)
Source: VAGO's Market-led Proposal report 2019
New pathways, existing principles
The Department of Treasury and Finance regularly receives voluntary Market-led Proposals seeking exclusive negotiations with the State. VAGO audit findings illustrate the importance of having rigorous and transparent processes to decide if a Market-led Proposal is in the best interests of the Victorian community.
Figure 1 Department of Treasury & Finance Market-led Proposal assessment process

Undoubtably the private sector will look to take advantage of the new pathways for Market-led Proposals introduced by Victoria’s Economic Growth Statements. However, careful and detailed analysis will still be needed to assess any proposals economic worth to the Victorian community, and to avoid Market-led Proposals becoming a means for entrenching incumbency and market power.