Table 2.E: Indifference Point Analysis for Schools Project

2.16  The Indifference Point Analysis shows that, all other things being equal, the Capital Expenditure under the Conventional Procurement Option would need to decrease by 11%, whilst the Capital Expenditure under the PFI Option remains unchanged, for the Procuring Authority to be financially indifferent between the two procurement methods. This lies outside the default benchmark tolerance of 5%.

2.17  The Conventional Procurement Sensitivity Multipliers allow the Procuring Authorities to undertake combined sensitivity Indifference Point testing. For example, if a lower level of CapEx results in a smaller facility and henceforth lower OpEx, the Procuring Authority can test the CapEx Indifference Point whilst assuming a lower level of OpEx. If the lower level of CapEx under the Conventional Procurement CapEx Indifference Point scenario is assumed to give rise to a reduction of 15% in total OpEx, then the OpEx employment & non employment sensitivity multipliers should be set to -15% and the CapEx Indifference Point tested again. The analysis shows that CapEx under the revised Conventional Procurement Option would need to decrease by a lesser extent of 7% for the Procuring Authority to be financially indifferent between the two procurement methods. However this still lies outside the default benchmark tolerance of 5% and should reassure the Procuring Authority that the PFI Option may well deliver VfM.

2.18  The analysis also shows that that, all other things being equal, the Unitary Charge under the PFI Option would need to increase by 6%, whilst all other costs under the Conventional Procurement Option remained unchanged, for the Procuring Authority to be financially indifferent between the two procurement methods. Again, this lies outside the default benchmark tolerance of 3%.