1.98 Operating Expenditure in the PFI Option is assumed to be higher than the unrisked Operating Expenditure that appears in the Conventional Procurement Option before the application of the Operating Expenditure Optimism Bias Factor. The higher cost reflects the fact that payments received by the PFI partner will be subject to performance deductions if agreed service standards are not achieved and that the PFI partner will succeed in passing the majority of these risks, albeit at a capped level, down to service providers through sub-contract arrangements.
1.99 In the Spreadsheet, the employment Operating Expenditure is the product of the average annual employment cost per employee and the number of employees. As PFI should not be undertaken at the expense of workers' terms and conditions, the average annual cost per employee is the same under the PFI Option as the Conventional Procurement Option as this is not expected to vary simply on account of the procurement route. The Spreadsheet does not allow differential inputs for the average annual cost per employee to ensure that PFI is never selected as a consequence of lower terms and conditions for employees. However, it is possible that the number of employees may differ under the PFI Option from the Conventional Procurement Option as services may be provided in a different manner and differential efficiencies achieved. Any differential input must be supported by evidence, and accordingly the Spreadsheet allows the user to enter a different figure for each option.