Annex B
THE PUBLIC
SECTOR COMPARATOR
(PSC)
1. The PFI guidance extant at the time the
1996 bidding process was taking place stated it was not necessary
to produce a Public Sector Comparator for projects which involved
no public money, or which would not have gone ahead other than
as PFI projects. For this reason, despite having undertaken a
good deal of work on the construction of a comparator for the
Treasury project, we dispensed with it, with Minister's approval,
before bids were tendered in the summer of 1996. However, when
Exchequer Partnership (EP) became the sole bidder, it was clear
we required a PSC to help us assess the value for money of the
project and to act as a tool in negotiating the price and we completed
our earlier work. (The presumption enshrined in current guidance
is that, whatever the circumstances, some form of comparator is
necessary for PFI projects.)
2. The preparation of the PSC was overseen,
independently of EP's bid and the Treasury's project team, by
a senior Treasury economist. It represented an estimate of refurbishing
the western end of the main Treasury building, assuming that the
Treasury procured the construction and service contracts separately,
continued to manage the services themselves and that the project
was funded by the Government. It could not represent a true alternative
to a PFI option, since it could not be developed in the same degree
of detail without a detailed design but it was a like for like
estimate. It was risk adjusted to ensure that, as far as possible,
it was comparable with EP's bid. However, only those risks which
could be reasonably quantified were added to the base costs of
the PSC.
3. The PSC's construction costs were calculated
independently of the procurement process, although not in as much
detail as EP's. They were inevitably based on a design solution
broadly similar to that provided in the EP bid. However, they
did not include removal of the four stair cores, negotiated with
EP at a comparatively late stage in the process. (This was costed
separately because the removal represents a once and for all opportunity
to improve the accommodation.) The comparator also did not include
a number of other design features present in the EP bid, or a
latent defects risk (which was included in EP's construction costs
but priced separately in the PSC). Moreover, since the largest
risks lie with the construction company which forms part of the
EP consortium, we would expect some allowance to have been made
for this too in the construction costs of the project, but no
such allowance was made in the PSC.
4. The Net Present Value of the EP bid amounted
to £169.348 million, compared with £189.810 million
for the PSC.
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