1.4 This user guide serves as an instruction manual for using the accompanying PFI Quantitative Evaluation Spreadsheet (the "Spreadsheet"). The Spreadsheet has been developed as a tool to assist Procuring Authorities undertake a quantitative analysis to support the VfM decision as to whether to use PFI or conventional procurement1.
1.5 The two procurement methods are:
• The Conventional Procurement Option - ('CP' in the model). Procurement through conventional approaches that use public funding (for example, letting a design and build contract for the construction of an asset, and then letting annual operating and maintenance contracts for the ongoing maintenance of that asset);
• The PFI Option - Procurement under the Private Finance Initiative ("PFI"), which is a specific procurement methodology through which the public sector lets a design, build, finance and operate contract to the private sector for the construction and whole life maintenance of an asset and/or associated service.2
1.6 The spreadsheet has been designed specifically to aid Procuring Authorities in their choice between procurement routes, it therefore:
• does not give an affordability envelope;
• does not provide the basis for bid evaluation or reference model;
• does not provide a pass/fail point estimate for deciding between PFI or conventional procurement.
1.7 The watchword in developing this tool has been simplicity. The user will, therefore, not find many of the aspects that they would have expected to see in a conventional public sector comparator. Whilst greater complexity could be introduced, the simplicity reflects the level of inherent uncertainty to which any quantitative spreadsheet is subject when used at an early stage of project development, in this case investment and project assessment stages. Equally, it highlights the fact that quantitative analysis is only one element of the VfM assessment and should be used only in conjunction with the qualitative assessment which is completed in parallel. The pursuit of further degrees of accuracy is likely to detract from the underlying qualitative and quantitative reasons that make a given procurement route value for money.
1.8 The Guide is divided into the following two core sections:
1.9 The Spreadsheet Usage section includes an overview of how the Spreadsheet should be operated and the results from it interpreted. The spreadsheet input cells contain references to the appropriate section in this guide. The Spreadsheet Inputs section of the Guide explains the nature of the input variables and the role that each plays in the Spreadsheet. It also provides Procuring Authorities with advice on how they might test or tailor values to the particular circumstances of the project they are assessing, either through discussions with their sponsoring Departments or by reference to evidence bases maintained elsewhere. Creating and maintaining solid evidence bases is key to sound decision making in VfM appraisal.
1.10 The advice included in the main body of the Guide is deliberately not project or sector- specific. To provide further assistance, the worked example in Section B of this guide simulates how the Spreadsheet could be used, and its results fairly interpreted, for a grouped schools procurement. It does not however, place the outputs in the context of the qualitative VfM assessment, nor does it put forward suggested defaults. The Procuring Authority should use the best available evidence and appropriate judgement when deciding which values best reflect the programme or project.
1 The Spreadsheet is based on a straightforward investment project whereby an amount of capital investment is required, either up- front or over a lengthy period, and this investment then requires both ongoing maintenance and periodic life-cycle upkeep. In addition, services that are ancillary to the provision of the physical asset, such as catering and cleaning, can be modelled as part of the overall package.
2 Whilst there are many different forms of PFI, the Spreadsheet presumes a straightforward arrangement whereby a private sector partner is asked to provide a long term, fixed price, output-based service, involving single-point responsibility of delivery for a package of services. The private sector partner commits capital which it puts at risk to the quality of the performance of the services it delivers.