1.76 Optimism Bias introduced into the Spreadsheet through the Pre-FBC Optimism Bias Factor and the Post-FBC Optimism Bias Factor focuses primarily on the difference between estimated and outturn costs only up to the point when an asset and/or service is first commissioned. The evidence currently available to Procuring Authorities, and upon which therefore, estimates will be based, is likely to originate predominantly from studies of the results of conventional and, principally, asset-focused procurements. However, if the Spreadsheet is to properly reflect Optimism Bias, then it is also important for it to recognise the way in which cash flows and/or benefits that arise after this date can be under or overestimated.
1.77 The principal reason for recognising this third type of Optimism Bias is consistency between the two procurement methods. Through the performance-based payment regime for PFI, the Unitary Charge will be priced to guarantee both asset and any associated service performance at the required level. To the extent that the required performance standard is not achieved under PFI, then Procuring Authorities are able to reduce the level of the Unitary Charge paid over. The Spreadsheet accommodates this type of Optimism Bias by introducing an Operating Expenditure Optimism Bias factor.