Conventional Procurement Option

1.96 Operating Expenditure in the Conventional Procurement Option comprises:

• the "unrisked" cost of running a facility and/or service to the standard required by the Procuring Authority; and

• a cost premium to reflect the Optimism Bias that is inherent in the Procuring Authority's estimate of costs incurred and/or service performance achieved.

1.97 It is important that the unrisked Operating Expenditure is subject to Optimism Bias as, under PFI, a strict payment mechanism that underpins the performance requirements will be fully priced by the PFI partner.