Authority

Central or local government department, agency or other public sector body paying a private sector contractor to provide a long-term public service asset.

Availability

Contractually defined measure of the proportion of time for which the public service asset is available for use.

Benchmarking

Process to compare both standard and price of services with an equivalent market standard. The process does not involve any formal competitive tendering.

Construction phase

Project phase when the asset being procured is physically built.

Contractor

Private sector company or consortium receiving long-term payments from the public sector to provide a public service asset.

Design, Build, Finance and Operate (DBFO)

Contractual relationship between the public and private sector parties for the design, construction, operation and financing of a public service asset. A form of PPP.

Design, Build and Operate (DBO)

Contractual relationship between the public and private sector parties for the design, construction and operation of a public service asset, financed by the public sector.

Financial close

Stage of the procurement process when negotiations with the preferred bidder and financial modelling of the project are completed.

Hard facilities management (Hard FM)

Services, other than Soft FM services, required to support the operation of the public service asset. Hard FM services include maintenance of buildings, engineering, landscaping etc.

Key Performance Indicators (KPIs)

Quantitative and qualitative measures of service performance. KPIs are specified in the contract and are used to assess contractor performance against output specifications.

Life cycle costs

Costs associated with refurbishing the asset throughout the contract period.

Net present value (NPV)

Present value of expected project cashflow after applying a discount rate to reflect the value of alternative use of funds.

Operations phase

Project phase when the public service asset is available for use by the public sector authority and the intended beneficiaries.

Payment mechanism deductions

Form of financial penalty incurred by the private sector contractor for not fulfilling certain contractual requirements.

Private Finance Initiative (PFI)

Programme launched in 1992 by the Conservative Government to encourage private sector investment in the public sector.

Public Private Partnership (PPP)

Generic term for public sector projects involving both the public and private sectors. Involvement can be to varying degrees and the partnership can take different forms.

Preferred bidder

Single private sector bidder selected by the procuring authority to go forward to the detailed contractual and financial negotiation stage prior to award of the PPP contract.

Pre-qualification

First stage of the process for procuring a private sector entity to provide a public sector asset. Any private sector entity can submit a pre-qualification bid for consideration. Successful pre-qualification bidders are invited to submit a detailed financial and technical proposal.

Procurement phase

Project phase when the procuring authority invites bids from private sector entities, assesses bids received, selects a preferred bidder, and negotiates the financial and service specification elements of the PPP contract with the preferred bidder.

Public Sector Comparator (PSC)

Means of assessing the value for money of a particular PPP procured project in comparison to a hypothetical traditionally procured project.

Risk transfer

Passing of risk from the public to the private sector party. The specific transfer of a variety of project risks can be specified in the PPP contract.

Services specification

Contractually stated service outputs required to be delivered by the private sector service provider.

Soft facilities management (Soft FM)

Services, other than Hard FM services, required to support the operation of the public service asset. Soft FM typically includes catering, cleaning, laundry etc.

Special Purpose Vehicle (SPV)

Private sector company specifically established to carry out a particular PPP contract. The SPV is usually made up of different shareholders including a construction company and a facilities management company.

Traditional procurement

Method for procuring and operating a public service asset, where the public sector authority procures and finances and design and/or construction of an asset and separately procures its operation, or manages the completed asset itself.

Value for money

Requirement that a procurement option represents the optimum combination of whole life cost and quality (or fitness for purpose) to meet the user's requirement, that is the most economically advantageous option rather than necessarily the lowest cost option.