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The PlaceToBe

Foreword

Local government has an important role in continuously improving the services it provides to ensure they remain relevant and accessible to the communities that rely upon them. The National Competition Policy and Local Government statement sets out the Bracks Government's new approach to the implementation of competitive neutrality in local government within the Best Value Principles context. Through a simple but robust public interest test, local government can balance competitive neutrality with key local priorities and public policy objectives and a public consultative process. With our emphasis on local community consultation under the Best Value Principles and the public interest test in the National Competition Policy and Local Government statement, local government can efficiently and effectively deliver important public services to its communities.

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Bob Cameron MP Minister for Local Government

ThePlace ToBe

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Local Government Division Department of Infrastructure www.doi.vic.gov.au Published January 2002
ISBN 0 7311 84262

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Contents

Introduction
Best Value context National reform objectives

5 5

NCP and Victorian local government
Application of NCP to local government Competition code/trade practices Local laws Competitive neutrality Policy sources Significantbusinesses Competitive neutrality measures Benefits greater than costs Public interest

7 7 8
8 8 8 9 10 10

Best Value competitive neutrality
Policy integration: serving the public interest Process integration Implementing competitive neutrality in a Best Value Victoria context 12 12
14

Best Value NCP compliance
NCP statement Competitive neutrality complaints

15 15

Appendixes
Appendix A. National Competition Policy Reform Framework Appendix B. NCP documentation Appendix C. CN pricing model Appendix D. Best Value Victoria - a new context Appendix E. Best Value Competitive Neutrality service review Appendix F. Listof useful references

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Introduction

Best Value context
This document is a revision of the 1996 National Competition Policy

National reform objectives
Nationally, NCP principles require reform of government monopolies, separation of a government's regulatory and business functions, removal of legislative restrictions on competition and the adoption of pricing reforms to recognise and offset the public ownership advantages enjoyed by government businesses.

These two statements, madeseven years apart, affirm the balance required if NCP is to be applied in the public sector and achieve its potential for reducing the costs of regulation, infrastructure and government services. These costs ultimatelyaffect the whole community.

and Local Government - A Statement of Victorian Government Policy. The
revised statement reflects the changes that have occurred in Victorian policy in the five years since National Competition Policy (NCP) was first applied to local government. Compulsory competitive tendering (CeT) was abolished in December 1999, Best Value Principles introduced at the same time and Competitive Neutrality Policy Victoria 2000 launched in October 2000. These changes have recast the operating environment for local government. A policy revision is necessary to clarifythe present status of all NCP requirements and, in particular, assist Victorian councils to apply competitive neutrality in a Best Value Victoria context.

Competitive neutrality and local government business activities
Thecompetitive neutrality principle has been particularly relevant in local government. Competitive neutrality (CN) was explained in the Victorian Government's 1996 Competitive Neutrality Policy (CN Policy) and local government policy statement. The CN Policy provided three CN measures - corporatisation, commercialisation and full costreflective pricing - each of which involved a set of structural and accounting reform measures. Local government's initial response was mediated by the nature of its tendering obligations underca and by the scale of its business activities. Corporatisation was relevant only to the few councils that owned and operated major trading businesses. These councils effected a structural separation between business and parent council by creating corporations that were distinct entities under Corporations Law Some councils . adopted a form of commercialisation that involved undertaking structural reform by administratively separating regulatory and business functions and creating internal business units. A few councils set up business unit 'boards', often with external members to provide commercial expertise.

Government business activities
At the outset, it is worthwhile restating the objectives of NCP and noting that it does not automatically demand greater exposure to competition, although it does require a reassessment of how government conducts business activities that compete, or potentially compete, with the market.

'Competition policy is not about the pursuit of competition for its own sake. Rather; it seeks to facilitate effective competition in the interests of economic efficiency while accommodating situations where competition does not achieve economic efficiency or conflicts with othersocial objectives.'
National Competition Policy Report of Independent Committee of Inquiry1993 p.6. .

'The Victorian Government iscommitted to the ongoing implementation of National Competition Policy in a considered andresponsible manner. This means thatpublic interest considerations should be taken into account explicitly inanygovernment decisions on the implementation of National Competition Policy.'
Competitive Neutrality Policy Victoria 2000

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Hon. John Brumby MP Treasurer.

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Most councils applied full costreflective pricing to their business activities (assuming they were not already fully costed) as they were tendered in accordance with crr schedules. In time, councils also applied competitively neutral pricing to significant businesses that they had not tendered, but which impacted directly or potentially on the market.

Competitive neutrality and tendering

It is useful to note that CN and competitive tendering are distinct mechanisms. CN does not necessarily lead on to tendering; tendering does not inevitably result in outsourcing. However, where councils use in-house tenders or tender externally to provide services, they will continue to apply CN to those tenders as a matter of good tendering practice. They will ensure that staff bids are fully costed, include overheads and a rate of return and are adjusted for taxes comparable with those incurred by private-sector tenderers. Cost adjustments, both positive and negative are made to ensure full cost-reflective pricing is applied to offsetany net competitive advantages that a government business may enjoy as a result of its public-sector status. The adjustments are necessary to ensure that all tenderers are assessed on an equitable basis.

A key objective of NCP remains the fostering of better informed public resource allocation decisions by all levels

of government.

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NCP and Victorian local government

Application of NCP to local government
The 1996 National Competition
Policy and Local Government - A Statement

Competition code/trade practices
Councils undertook initial trade practices audits in 1995-96 and subsequently developed compliance strategies. It is expected that councils are, by now, fully awareof their obligations undertrade practices legislation and the severe corporate and individual penalties that can be imposed where breach is proven. However, they may still find it useful to managetheir risk byconducting audits of the whole or parts of their organisation from time to time. Areas where councils could be at risk of engaging in conductthat breaches the Competition Code or consumer protection provisions of the Trade Practices Act 1974 include: arrangements with other councils to charge agreed fees for a particular service or use of a facility that operatesin competition with the market use of profits from monopoly activities to subsidise activities with the purpose or intent of damaging a competitor (predatory pricing) misuse of regulatory power to damage a competitor in a market where the council is both a regulator and a supplier

of Victorian Government

procedures for procurement, tendering and contracting in relation to the potential for collusion and misleading or deceptive conduct. An awareness program is an accepted compliance strategy. The local government sector hasdeveloped trade practices compliance programs to raise awareness within council organisations of the conduct that is prohibited as anticompetitive under the Competition Code and to promote behaviour that complies with the Code. Councils could consider having compliance programs that encompass both councillors and staff. Some councils may encounter specific trade practices issues from time to time as theirservice businesses develop. For example, where a council has concerns that a partnership proposal to develop a service business could be construed as an anti-competitive agreement. it may want to approach the Australian Competition and Consumer Commission (ACCC) for authorisation. The ACCC has powerto authorise conduct, save for misuse of market power, which would otherwise offend Part IV provisions. Authorisation is subject to the public interest test provisions of the Trade Practices Act 1974.

Policy provided for NCP reform to

be implemented bycouncils in four areas: Competition Code/trade practices

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CN local laws. Under this NationalCompetition Policy and Local Government policy statementcouncils are to apply NCP reforms in three areas: Competition Code/trade practices local laws CN - in a Best Value Victoria context. Further information on the NCP reform framework and the hierarchy of documentation through which its application to local government can be traced, is set out in Appendixes A and B .

In most cases, to demonstrate NCP compliance for trade practices, a council is required: to have an ongoing trade practices awareness program in place to have a process for dealing with any trade practices complaints to report on the outcome of any independent investigation of a complaint by the ACCC.

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Local laws
Similarly, for loca/laws, councils have satisfied the primary NCP obligation to review existing legislation and remove or justify any restrictions on competition. Theongoing obligation for councils is to ensure that their local laws, and the policies and guidelines that inform their application (for example, in determining whether to issue a permit undera local/aw) do not restrict competition unless: a council can demonstrate that the benefits of the restriction to the community clearly outweigh the costs, and the objectives of the local law can only be achieved by restricting competition.

Competitive neutrality
'The objective of competitive neutrality policyis the elimination of resource allocaton distortions arising out of the i public ownership of entities engaged in significant business eaivities: Government businesses shouldnot enjoynet competitive advantage simplyasa result of their public sectorownership .'
Compet ition Principles Agreement 1995, clause 3(1).

Policy sources
In October 2000, the Treasurer of Victoria relea sed the Government's revised CN Policy, Competitive

Neutrality Policy Victoria 2000
and the Department of Treasury and Finance (DTF produced the )

Competitive Neutrality Guide to Implementation. From 1 January 2001,
CN Policy for local government is as stated in Competitive Neutralit y Policy Victoria 2000 and Competitive Neutrality Guide to Implementation Victoria 2000. Both documents are available on DTF's competition policy web site (www.vic.gov .au/ncp/default.html). The two policydocuments areprimary sources for both State and local government policy and emphasise the importance of the public interest in the application of CN to significant government businesses.

To demonstrate NCP compliance for local laws, a council is required: to maintain an ongoing awareness of the need to ensure that existing local laws, and the policies and guidelines that inform their application, do not restrict competition to apply the competition test to any new or amended local laws.

Significant businesses
CN applies only to significant government businesses. However, there is no comprehensiveand objective definition of 'significant business'. A council must make its

This 'competition test' is enshrined in Schedule 8 of the Local Government

own two-part assessment to determine whether, in each case, an activity is: a business, and, if so a significant business . The first part of the assessment clarifies whether an activity is a business, rather than regulatory or governance activity. In making this distinction, councils may be assisted by an understanding of trading (business) activities gained in conducting trade practices audits. eN does not apply to non-business, nonprofit activities.

Act 1989 and must be included in the process of making any new local law. However, because a non-restrictive
local law can become restrictive through the manner in which it is applied, councils should continue to review their local laws, policies and guidelines from time to time.

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A business activity is characterised by: sale or provision of goods, services or works by a council in competition, actual or potential, with other providers of the same goods or services. A council may not, for example, claim that there is no competition where it has set artificially low prices and so deterred potential competitors from entering the market, and/or activity undertaken primarilyfor commercial purposes or profit and involving a degree of financial risk; for example, a municipal enterprise, and/or stems, application of commercial sy accounting and marketing to production, and tendering to supply external contracts. If the activity is a business, the second issue is whether it is a significant business. Significance is indicated by market impact:

Influence in the market What is the competitive impact of the council service in the relevant market? Is the council service a market leader or a minor player? Isthe council service growing? If the council's service performance were to decline, how readily could other providers take over its market share? If it improved, would it draw new customers? Consider also, particularly where the council business is the only local or regional provider of the service, would competitors emerge if the council were to call for tenders? Sometimes a government business will be a local monopoly. It is still the expectation that while there is no private competitor - CN pricing should be considered to ensure resource allocation decisions reflect a true estimate of the implicit subsidy to the activity by rate payers or the community . The assessment of 'significance'

Competitive neutrality measures CN requires councils to remove or offset any net competitive advantages arising from government ownership. Some potential competitive advantages include: immunity from various taxes and charges immunity from various regulatory regimes explicit or implicit government guarantees on debts concessional interest rates on loans not being required to achieve a commercial rate of return on assets effective immunity from bankruptcy. TheCN measures available to offset competitive advantage include corporatisation, commercialisation and full cost reflective pricing . Further information on corporatisation and commercialisation isgiven in Competitive Neutralty Guide to Implementation i Victoria 2000, p. 2. Councils rarely employ these measures. Councils should be aware that section 193 of the Local Government Act 1989 may be invoked by a corporatisation proposal and that they may require prior approval(s) before proceeding. Full cost reflective pricing ('CN pricing ') is the most commonly used competitively neutral measure. It is more accurately described as a process of determining the CN cost of an activity and over the medium to long term councils are expected to price to recover CN costs for the business. Appropriate, usually market-based, pricing policies are required to recover CN costs, abnormal high CN pricing (relative to market price) could be indicative of inefficient resource

the size of the business in relation to the overall market its influence or competitive impact in the market the resources it commands and the effect of poor performance. Significance is not determined by a council's expenditure or revenue on an activity relative to the council's total

inevitably requires a degree of subjectivity and this makes it critical for a council to document its reasoning so that its assessment of significance is defensible and can withstand scrutiny in the event of an investigation.

expenditure or revenue. Significance
is relative to the market in which the serviceoperates. Useful questions for 'significance' are: Size of market share How manyconsumers arethere for the council service compared with those for similar services? What is the size of the council service compared with the size ales figures of the whole market? S mayindicate the relative size of a council's market share.

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use. Appendix C is a diagrammatic presentation of CN costing. Where a council does not make CN adjustments, or does not price to fully recover costs, it is effectively subsidising an activity. A subsidy must be madetransparent and the community resources it consumes justified in public policy terms. CN Policy applies to all significant government-owned businesses which are required to calculate full cost reflective pricing. Should the use of the CN measure conflict with some other policy objective, then council maysubsidise the difference between the full cost-reflective price and actual price paid by the consumer. The council provides a subsidy of the difference. The subsidy is based on the council priority, reflected through its public policy commitment, to provide a section of the communitywith a service or access to a facility that would otherwise not be serviced . However, some public policy objectives maybe subsidised in terms of specific cost elements of the business. The CN guidelines anticipate councils will use the fully distributed cost (FDC) method for CN pricing in nearly all cases. FDC takes into account all direct and indirect costs and competitively neutral adjustments. The avoidable cost (AC) method is appropriate only where a council can demonstrate that the majorityof its activities are noncommercial and that its indirect costs (overheads) remain unaffected by the activity in question. UnderAC a council need only consider the extra (direct) costs that it could avoid if it did not
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Benefits greater than costs
NCP reforms applysubject to costs not outweighing benefits. CN does not apply where the benefits it might potentially return overthe medium to longer term areoutweighed by implementation costs overthe same period . Councils need to assess costs and benefits on the same basis and document for each significant business.

The list is not closed; nor does it imply any priority or weighting. Other matters may be relevant for local government, including: local or regional policies relating to economic or business development. employment. quality of goods and services, timeliness of supply impact on the local or regional community impact on the State and national

Public interest
The Competition Principles Agreement 7995, recognises the existence of competing public policy objectives and allows for the consideration of a range of matters to determine how best to achieve particular policy objectives. These include: government legislation and policies relating to ecologically sustainable development social welfare and equity considerations, including community service obligations government legislation and policies relating to matters such as occupational health and safety, industrial relations and access and equity economic and regional development, including employment and investment growth the interests of consumers generally or of a class of consumers the competitiveness of Australian businesses the efficient allocation of resources .
Competition Principles Agreement 1995 , clause 1(3) .

economies, if any. CN is not intended to override the public policy objectives of a council. Public policy objectives reflect the public interest of a council's community and may be social, environmental, economic or regional in nature. Each council decides its own public policy goals, bearing in mind State and Commonwealth policies. The Best Value context in which councils now operate provides an opportunity to reassess and restate public policy objectives through an open and transparent public consultation process.

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Increasingly, the Best Value Principles will be reflected in councils' vision and mission statements, in corporate planning processes, in governance, in services to the community, in facilities, in capital works and in grants made to other bodies. Key public policy objectives in the Best Value principles are: performance in accordance with quality and cost standards responsiveness to community needs accessibility to members of the community for whom intended continuous improvement in the provision of services regular consultation on services provided to the community regular reporting on achievements in relation to the Best Value Principles.

Factors informing the application of the Principles, listed in section 208C of the Local Government Act (and restated in Appendix D), further expand the potential range of councils' public policy objectives. Acouncil needs to ensure that it has identified and documented its public policy objectives, which may be specific for each significant business. Where there is a potential conflict between the application of CN and other public policy objectives the CN Policy mandates a public interest test process. The public interest test involves appropriate public consultation in relation to a rangeof costed optionsthat council may propose to the relevant stakeholders. The process is to be open and transparent to ensure that council is able to justify any anti-competitive arrangements bydemonstrating that it delivers net benefits to the community.

Under Competitive Neutrality Policy Victoria 2000, where a council believes that applying CN measures could jeopardise the achievement of its policy objectives it will need to conduct, and document, a 'public interest test'. As a result of the public interest process council will determine the best option for addressing all objectives, including eN Policy, and implement accordingly. Ifthe outcomeof the test supports the council's view, it need not apply the CN measure. This constitutes application of CN Policy regardless of the extent to which CN pricing is applied.

The first step in conducting a public interest test is for a council to confirm its policy objectives and ensure that they have official endorsement. Councils should refer to the Best Value Principles and the Competition Principles Agreement 1995 in reassessing the public interest and policy objectives for their activities.

A council will demonstrate that it is compliant with CN by: documenting its decisions identifying 'significant business activities' documenting whether the benefits of applying CN to a significant business outweigh the costs . Where there is a net benefit, but the council believes other public policy objectives would be jeopardised by applying CN, conduct a public interest test to: identify public policy objectives for the business assess alternative approaches to achieve the policy objectives conduct public consultation exploring options to determine whether the application of CN is in the public interest. Consultation should include key stakeholders, competitors and/or public as part of a public interest test to explore options. There are different opportunity costs associated with the various options document the conduct and outcomes of the public interest test make the documentation publicly available.

Best Value competitive neutrality

Policy integration: serving the public interest
Best Value Victoria and Competitive Neutrality Polcy Victoria 2000 both i redirect local government's focus to the community andserving the public interest. Economic efficiency remains vital to the proper discharge of a council 's public accountability for community assets. Both the CN Policy and Best Value Principles help shape the public policy objectives of local government and consequently provide the framework for the conduct of the public interest test. They direct a council to its relationship with the community - in setting service standards; responding to community needs; providing accessible and appropriately targeted services; consulting regularly with the community; reporting frequently to

the community. (A description of the Best Value Principles and a statement on the Government's objectives in introducing Best Value Victoria can be found in Appendix D.) Community consultation and consideration of the public interest in allocating council resources are not merely compliance requirements under the Best Value Principles legislation. Best Value will, over time, redefine the relationship between local government andthe community by creating a Best Value operating environment in which the enti rety of local government activities, including governance and services, are subject to Best Value Principles. Some services, those provided by significant council businesses, will also be subject to CN principles.

Process integration
The integration of Best Value and CN means that, when addressing the public interest test requirements, there is no need for processes to be duplicated where CN is implemented in a Best Value Victoria conte For xt. example, a council may engage in consultation with the community for Best Value review and CN public interest purposes at the same time. Wherea service is provided by a significant business, service quality and cost standards must reflect CN adjustments, unless the council has previouslydetermined that the implementation of the CN measure would not provide a net benefit. If a council believes application of a CN measure conflicts with or jeopardises a stated public policyobjective it must consult with the community(possibly in a joint Best Va lue/CN consu ltative process) in determining whether to implement a CN measure or to justify any council subsidy. Best Value service standards for services that are not provided by significant businesses may be informed by the

Local Government Compliance Statement For NCP compliance, a council will be expected to report on the application of CN to each of its significant businesses from 2000-01 . A council will need to state that: it has applied Competitive Neutrality Policy Victoria 2000 to the significant business, or it has justified non -application of CN on cost/benefit or public interest grounds, or it has applied 'Best Value Competitive Neutrality' to the significant business during the course of a Best Value review, and it has applied 'Best Value Competitive Neutrality' to all significant businesses by 31 December 2005.

application of CN costing, at the discretion of a council. Councils should note that the application of CN costing to services could enhance the accuracy of their Best Value reviews. This applies both to the comparison of council services'against the best on offer in both the public and private sectors' and in relation to the assessment of 'value for money in service delivery' (section 208C(a) and (b) Local

Government Act 1989). A council
hasa variety of mechanisms available to it in making these assessments: for example, benchmarking, process mapping, innovative management methods and market testing. If its markettesting involves public

tendering, it must applyCN pricing to an in-house tender and must make any council subsidy available equally to in-house and external tenderers. Process integration is likely to involve the following steps: the starting point for a council is to ensure that it is compliant with Competitive Neutrality Policy Victoria 2000. That is, to ensure that it has identified all its significant businesses and either applied, or justified the nonapplication of, CN to them. This is the threshold requirement for CN compliance in developing its Best Value program for service reviews - and in updating the program annually - a council should identify those of its services which are, or are provided by, significant businesses. Thepublic availability of the Best Value program then ensures that members of the community are alerted to the date when they might expect to be consulted on the quality and coststandards for services provided by the significant business and, possibly, whether CN measures or subsidies applied to the significant business are in the public interest

then, as a council progresses through its Best Value program, services that are provided by significant businesses will come up for review. In such a review, a council will reconsider afresh its application of CN to the significant business. It will ask, 'Do the costs of implementing CN outweigh the benefits?' and reconsider the impact on public policyobjectives. The review will need to consider the council's existing public policy objectives and priorities, and their relevance in a market which has changed since theywere first specified, the level of council subsidy consumed and any impact on service fees and charges CN provides an avenue for councils to effect shifts in community priorities over time. Focusing or removal of subsidies may facilitate achievement of new services and programs where a council believes that the continuation of a CN measure may conflict with a public policy objective, it will conduct a public interest test and consult with the community. At the same time, the council will consult on Best Value quality and cost standards for the service provided by the significant business. That is, the council will apply CN in a Best Value context

councils will apply 'Best Value Competitive Neutrality' to all significant businesses progressively through to 31 December 2005. In this way, by 31 December 2005, when Best Value is due to have been applied to all council services, councils will have reviewed and reconsidered the application of CN to all significant businesses. Each council will determine how best to integrate its processes for implementing the two policies. Thefollowing table provides one example of how processes might be streamlined using an integrated series of seven questions based on the key steps in each policy framework.

Implementing competitive neutrality in a Best Value Victoria context

1. What is the council service, as defined for Best Value

review purposes?

[key questions] 2. Is the service, or any part of it, operated as a business, or, is it an internal service supporting only regulatory or governance functions of the council?
3. Whatmarket does the business operatein?

[other considerations] Even ifa service is not operating as a business, consider applying CN costing to ensure 'like with like' comparison when applying the Best Value review factors (s.208C). The market may have changed since the council first started providing the service. A market previously lacking providers may now be well supplied and a council's priorities for resource allocation may need to be reconsidered. Even if a service is not operating as a significant business, consider applying CN costing to ensure 'like with like' comparison when applying the Best Value review factors (s.208C). Full cost-reflective pricing is likely to be the appropriate measure to ensure that the business isfully recovering costs. This will be useful when considering service delivery options under Best Value (s.208c). The assessment of benefits and costs should include the opportunity costs of addressing other priorities. Best Value service reviews require consultation with the community, as doesthe CN public interest test. The two consultation processes could be held together .

4. Is it a significant business in that market?

5. WhatCN measure is appropriate to the significant

business?

6.

Will the benefits of the CN measure outweigh the costs? of other policy objectives? Is it in the public interest?

7. Could the CN measure compromise the achievement

A diagram suggesting howa Best Value service review might be carried out, concurrent with the application of CN to the service, is given in Appendix E .

Best Value NCP compliance

NCP statement
Councils have been required to report on their implementation of NCP since it was first applied to local government in 1996-97. Councils are required to provide evidence of their compliance with NCP obligations in an annual NCP statement to the Minister, prepared in accordance with reporting guidelines issued by the Minister. The annual NCP statement, certified by a council's Chief Executive Officer and submitted directlyto the Minister, remains the mechanism for demonstrating NCP compliance under this revised policy statement. The Ministerwill continueto issue guidelines from time to time updating reporting requirements consistent with developments in councils' NCP obligations.

Competitive neutrality complaints
It isthe responsibility of a council to: identify the activities to which CN applies takethe necessary action to comply document the decisions it has made and make the material available to the public and the Competitive Neutrality Complaints Unit on request. Underthe Competition Principles Agreement, the Government is obliged to investigate complaints regarding councils' adherence to CN. To assist in undertaking this function, the Government created an independent Competitive Neutrality Complaints Unit (located in DTF). The Complaints Unit operates on the assumption of compliance ratherthan non-compliance in determining the extent to which a council's actions comply or do not complywith CN Policy. There area number of important procedural and administrative features of the complaints mechanism. The Complaints Unit: accepts complaints from a directly affected person or business, as well as from industry or community groups. Complaints will be assessed in accordance with Competitive Neutrality Policy Victoria 2000. When a complaint is received, the first response of the Complaints Unit is to encourage direct resolution between the council and the complainant, failing this, the Complaints Unit will seek verification from the council asto its compliance with the CN Policy

cannot initiate an investigation. A complainant must lodge a formal complaint pro forma prior to the Complaints Unit instigating an investigation will abide by principles of procedural fairness and will investigate all complaints fairly, independently and rigorously and will come to a finding on the basis of the best available information. Where the Complaints Unit recommends a course of action which a council should take to complywith the CN Policy, it will request further information to follow-up on how compliance with the CN Policy has been achieved will consult with, and seek comments from, all parties involved before finalising its investigation. Final investigation reports excluding anycommercial inconfidence information - are provided directlyto the parties and published on the Complaints Unit web site has no enforcement powers does not recommend any compensation or termination of contractual arrangements.

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The Complaints Unit does not assess anti-competitive behaviour that is already covered by the Trade Practices Act 7974 or the Competition Policy Reform (Victoria) Act 7995, nor does it deal with probity issues arising from tendering processes of councils. The protocols for the conduct of a CN investigation arefully documented on the CN web site at www.vic.gov.au/ncp/cn_overview1 .htm The contactdetails for the Complaints Unit are as follows: Director Competitive Neutrality Complaints Unit Department of Treasury and Finance 1 Treasury P lace Melbourne 3002 Tel. (03) 9651 2509 or (03) 9651 2048 Fax (03) 9651 5575 Email cncu@dtf.vic.gov.au In line with the Treasurer's role as the Minister responsible for NCP, DTF has the broader responsibility for ensuring overall compliance with the NCP and CN in particular.

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Appendix B. NCP documentation

Competition

Pr~nciples Ag reement

C::ommonwl:!a lth I States 1995 Five NCP pr inciples, including CN

NCP and Local Government Policy Statement
Victorian Government 1996 (clause 7 statement)

Competitive Neutrality Policy Statement
Victorian Government 1996 (clause 3 statement)

Competition Principles Agreements
Victorian Government 1998 Agreement to share NCP payments

Competitive Neutrality Pol icy Victoria 2000
Victorian Government 2000 (revised clause 3 'stat ement)

NCP and Local Government.
Victorian Government 2002 (revised clause 7 statement)

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CN Irnplementation Gu ide
DTF guidelines 199.7 Revised 2000

NCP reporting guidelines
091 guidel ines for councils Updated annually

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eN cost adjustments for private sector equivalent costs example: rate of return, taxes, regulatory costs

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example: labour, materials, prem ises

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example: government financing charge/interest

Appendix D. Best Value Victoria - a new context
Best Value Victoria objectives
Unlikethe system of Compulsory Competitive Tendering (Ca) that it is replacing, Best Value Victoria is focused on meeting the needs of the community. Best Value Victoria will apply to all council services, whether provided by council staff, volunteers or contractors. Councils will implement Best Value Victoria by reviewing their services and applying the Best Value Principles to them by 31 December 2005. It is this timing which makes Best Value Victoria the operating context for the application of CN to council services operating as significant businesses. In detail, the Government's objectives in introducing the Best Value Principles were:

Consultation on performance
a council's objectives and targets will be set after consultation with its community and the Council will demonstrate its accountability by measuring and reporting on its performance to its community

Best Value Principles legislation
Best Value Victoria is based on six principles: quality and coststandards for all services; responsiveness to community needs; accessible and appropriately targeted services; continuous improvement; regular community consultation; and frequent reporting to the community. The principles were introduced in a December 1999 amendment to the Local Government Act 1989: • all services must meet the quality and cost standards developed by the council (sections 208B(a) and 208(D)(1)) all services must be responsive

Best Value outcomes
Best Value is a framework to deliver enhanced services and organisational performance across local government and to enable the sector to demonstrate to the State Government that it has achieved these objectives

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Benefits not costs
The benefits of applying the Best Value framework should outweigh the costs, particularly in small, rural councils •

to the needs of its community (section 208B (b)) each service must be accessible to those members of the community for whom it is intended (section 208B (c)) • a council must achieve continuous improvement in the provision of services for its community (section 208B(d)) a council must develop a program of regular consultation with its community in relation to the services it provides (section 208 B (e)) • a council must report regularly to its community on its achievements in relation to the principles (section 208 B (f)).

Local accountability
making councils accountable to their own communities for the provision of services and the performance of the organisation

Encouraging innovation
Best Value is intended to encourage councils to adopt innovative and creative responses to service delivery, including a range of partnering relationships.

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Whole-of-organisation response
ensuring a Council's implementation of Best Value includes all its services and functions

Appendix E. . . Best Value eN service review
A. Best Value Principles B. Assess CN application C. Best Value Action

Set service standards review best on offer • assess value for money • community expectations • affordability laccessibility local employment

.........---...--Do benefits outweigh CN costs? Is CN in the public interest?

Is service a significant business?

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Compare service standards on CN basis

R esponsiveness

Set service quality and cost standards

Accessibility

Continuous improvement

Set service improvement targets

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National Competition Policy and Local Government
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