1.79 The way in which VfM is to be assessed under new guidance, and in particular the role of pre and post-FBC Optimism Bias, removes the need to risk adjust the Conventional Procurement Option. However, it does not remove the value in Procuring Authorities completing and updating a risk analysis for the project under consideration.
1.80 The purpose of this risk analysis is threefold. First, it identifies all relevant risks that are introduced by the decision to proceed with a project, irrespective of which party has responsibility for managing the risk. Second, it identifies which party is best placed to manage each risk. Some risks will fall exclusively to either the Procuring Authority or to the private sector, whilst others will be best dealt with as a shared risk. Project risk-analysis will seek to fairly allocate risks and the (conventional or PFI) competition and, subsequently, the (conventional or PFI) contractual terms entered into by the contracting parties will need to capture the agreed risk allocation. Third, those risks that are likely to remain with the public sector under the two different options need to be managed and therefore, suitable risk management plans need to be developed by the Procuring Authority. These plans will be different depending on which procurement route is chosen, not least because, under the PFI Option, some of the risks are dealt with by transferring them, through contract, to the private sector.