4.2.1 As PFI is about the delivery of a stream of services over the longer term, judgements should be made on whole life costs rather than on individual cost components incurred at particular junctures. The evaluation of bids needs to focus on the overall cost of services over the life of the contract rather than on the phasing of items of expenditure or individual cost components within it. For example, in competing for the same service requirement, two rival bidders may have different approaches, with one choosing to have high up-front capital investment with lower future upgrade/maintenance requirements, and the other relatively low initial capital investment but with more frequent renewals and upgrades. The procurer should concern itself with the overall NPV of bidders' unitary charges rather than the mix or balance of individual components within it. If the asset reverts to the public sector at the end of the contract, the procurer should also assess the residual value of that asset to get a whole life value of each bidder's proposals.
4.2.2 Procurers should not unpick bids by comparing and contrasting constituent elements against each other. However, it may be useful to identify separate cost elements in order to enable procurers to seek clarification where, for example, a strong bid on price may have underestimated the resources required for a particular service element. If overall deliverability and price over the contract period are both judged to be capable of achieving the output specification and are affordable, then the bid offering best value for money in terms of whole life cycle costs and quality of service should be accepted, provided that acceptable financing terms have been secured (see 4.4 below).
4.2.3 The achievement of value for money will normally be driven by the private sector bidding in competition. A Public Sector Comparator (PSC) is a systematic approach to informing the Accounting Officer's judgement on whole life value for money compared with alternative approaches to achieving the public sector's objectives. There should, therefore, normally be a PSC. But it is important to bear in mind that this is not to be regarded as a pass/fail test, it is a quantitative way of informing judgement. If there is only one feasible bid on the table, it may not represent a particularly good deal. In this situation the procurer must assess the bid very carefully. In the absence of competitive tension, comparison with a publicly funded option (PSC) will be critical. Procurers should be as open as possible with bidders in terms of disclosure of the PSC.
4.2.4 Alternative benchmarks have also been considered as appropriate by the National Audit Office. For example, where there has been only one final bid or, exceptionally, where after a preferred bidder has been selected it is necessary to change the specification, in the absence of competitive tension, benchmarking of the bidder's price for the service will be important as well as the usual comparison with a PSC. The benchmarking may be with a similar recent privately financed project or with information on costs and rates of return which is available in the market (see the NAO Report on the Dartford and Gravesham Hospital).
4.2.5 Further guidance on PSCs can be found in Treasury Taskforce Policy Statement No.2 "Public Sector Comparators and Value for Money" and in a forthcoming Technical Note (No.5) "How to Construct a Public Sector Comparator."