PPP/PFI Business Case Template

Appraisal should fulfil requirements of NIGEAE e.g:

Business need assessed and 'SMART' objectives detailed.

'Do nothing' or 'do minimum' and alternative options appraised, including e.g. variations in the scale and type of service provision.

Suitable calculation of NPVs, consideration of unquantified factors, sensitivity analysis etc.

Results summarised and preferred option indicated.

Level of detail should generally be similar to that in an appraisal for a traditional procurement.

Business need and objectives reviewed and confirmed. Important changes since OBC detailed.

Shadow bid model, conventional procurement model and PFI bids identified and described.

Full details provided of appraisal of the PFI bids, including calculation of NPVs, sensitivity analysis and consideration of other relevant factors.

Relevant guidance: OGC Bid Evaluation Guidance and Treasury Taskforce Technical Note 4: How to Appoint and Work with a Preferred Bidder

Results summarised and recommendations made.

Assessment of alternative forms of both conventional procurement and PPP.

Costing of these alternatives using Stage 2 HMT Nov 2006 Value for Money Assessment Guidance or suitable alternative costing models.

Comparative VFM assessment of private sector bids and CPO.

Stage 3 HMT Nov 2006 Value for Money Assessment Guidance applied, covering:

the Quality of the Competition

Market Failure

Risk Sharing

Stability of Costs

Financial Flexibility

Financial Structures

Contractor Distress

Projected PPP/PFI service payments estimated and Shadow Bid Model developed.

Capital and Revenue DEL impact for both PPP/PFI options and CPO fully quantified on a year-by-year basis over the whole life of the project.

Confirmation that a PPP/PFI solution would be affordable over the whole life of the contract, taking into account all sources of existing revenue support and additional income from capital receipts or third party income.

Confirmation that affordability analysis, and impact on budgets, is accepted by the relevant Dept or Agency.

Projected PPP/PFI service payments and Shadow Bid Model and CPO updated.

Capital and Revenue DEL impact for preferred PPP/PFI bid and CPO fully quantified on a year-by-year basis over the whole life of the project.

Confirmation that the preferred procurement solution is affordable over the whole life of the contract, taking into account all sources of existing revenue support and additional income from capital receipts or third party income.

Confirmation that affordability analysis, and impact on budgets, is accepted by the relevant Dept or Agency.

Requirement specified in terms of service outputs required, rather than particular assets or solutions.

Range of on-going services included in the requirement defined broadly, to offer scope for efficiencies and innovation.

Specification pitched at a level that is justifiable as the level at which the Dept or Agency would specify it using traditional procurement, by reference to precedent, or any enhancement in specification provides greater value for money. Output specification provided at least in outline form.

Copy of the full detailed output specification provided.

Any significant changes since the OBC highlighted.

A risk register has been prepared, identifying all the foreseeable risks associated with the scheme, and making a preliminary risk allocation.

The preliminary allocation, as a minimum, transfers the principal risks associated with design, build finance and operation of the facilities, and considers the allocation of risks associated with levels of usage, residual values, technology and obsolescence and changes in legislation or regulation.

Proposed risk allocation detailed in full.

Changes in thinking since OBC recorded.

Evidence of commercial interest.

Certainty of income stream to meet contract payments.

Willingness to consider all opportunities for generation of other revenues, either from sales of assets or third party use of assets and services.

Following a template for commercial and legal terms where one exists.

Heads of term or outline contract prepared.

Proposed payment mechanism that reflects risk allocation.

Arrangements for obtaining legal, financial and technical advisers, with appropriate experience, and demonstrating VFM from advisers.

Willingness of advisers to share lessons and approaches, without undue confidentiality and copyright constraints.

Arrangements for periodic review of performance of advisers.

Timetable prepared.

Stages of procurement process kept to a minimum consistent with achieving VFM.

Total elapsed time from OJEC to completion realistic.

Project management experience.

Appropriate range of skills and experience, whether from advisers or in house, for the deal envisaged.

Accessible to involvement of Taskforce.

The intended approach to tendering should be indicated.

The latest EU regulations should be followed. Practical help is provided on the OGC EU Procurement website.

DFP's Central Procurement Directorate (CPD) can provide specialist advice on procurement issues.

The following explained and recorded:

the EU Directives relevant to the case;

the method of invitation to tender employed;

the bids received;

the short-listing process; and

the negotiations conducted.

Report progress on determining the appropriate balance sheet treatment.

State a view on whether the project is likely to be treated as 'on or off balance sheet'

PPE arrangements need to be detailed if it is decided to pursue a traditional procurement, in which case section 2.9.12 and section 11 of NIGEAE should be followed.

If PPP/PFI is being pursued, details may be deferred to FBC.

Scheduling of Gateway Reviews should be included.

Details should be given as indicated in NIGEAE section 2.9.12 and section 11 including indication of the factors to be monitored and evaluated, the time scales involved, and who will be responsible.

Scheduling of Gateway Reviews updated.

Economic appraisal presented according to requirements of NIGEAE.

Other material presented in the order of this Table, using appendices for detailed assumptions as appropriate.