1.28 The "Indicative PFI VfM" figure in the Output sheet shows the extent to which, based on the chosen Pre Tax Target IRR, the net present value of the PFI Option is better (if the figure is positive) or worse (if the figure is negative) than the net present value of the Conventional Procurement Option. However, this provides just a single estimate under a particular set of assumptions. Conclusions drawn from the quantitative VfM analysis must be supported by examining the results of the Spreadsheet when run using different assumptions, and must be placed in context of the confidence the user has in the underlying inputs.
1.29 The net present value of the Conventional Procurement Option (the "CP Cost") is defined as the discounted sum of the Whole Life Costs, of Third Party Income, of the Transaction Costs, the tax adjustment value, of the costs of any assumed scope change and any Indirect VfM factors. The net present value of the PFI Option (the "PFI Cost") is defined as the discounted sum of the Unitary Charge, Public Sector Transaction Costs, of the costs of any assumed scope change and any Indirect VfM factors.
1.30 If the Indicative PFI VfM value in the Output sheet is greater than zero then, based on the assumptions used and in the absence of either sensitivity analysis or the qualitative analysis, Procuring Authorities might conclude that the PFI Option is more likely to provide VfM than conventional procurement. However, this would be premature and would not constitute justification for choosing (or rejecting) the PFI Option. Given the uncertainty associated with the values ascribed to different inputs at this stage, the Spreadsheet seeks to test further the results of the analysis so far completed.
1.31 The Unadjusted Annual Unitary Charge is also shown in the Output Box. This differs from the unitary charge to the extent that it does not take into account the public sector transaction costs, indirect VfM factors and the flexibility factor premium. Whilst these are relevant to the VfM decision they would not typically feature as part of the PFI Unitary Charge. It is important that Procuring Authorities separately develop a shadow bid model and do not use the Unadjusted Annual Unitary Charge to assess affordability.