A.1 In general, measures with one or more of the following characteristics should not be pursued:
• Short term only, at the expense of VfM;
• Harmful to the core function(s) of the project or in contravention of safety standards;
• High implementation costs / fees relative to savings;
• Requiring the Authority to take back unacceptably high levels of risk or risks better managed by the private sector.
A.2 The table below sets out some measures that are generally unlikely to offer VfM and the main reasons why:
| Non-Recommended Measure | Primary Rationale for Non-Recommendation |
| Debt service holiday | Additional borrowing without improving risk transfer |
| Additional borrowing without improving risk transfer | |
| Re-profiling unitary charges | Often linked to additional borrowing, inconsistent with paying for a service (see SoPC4 7.2.2) |
| Authority purchase share in PFI provider company | An investment rather than savings, Authority takes back equity risks |
| Authority buys / prepays senior debt | Generally poor VfM under Green Book analysis (swap break costs, Authority takes back senior debt risks, low historical debt pricing / market value), risks windfall gain to lender unless purchase price discounted |
| Take back hard FM or lifecycle timing & pricing risk | Complex and difficult to establish VfM, goes to core of risk transfer, high transaction costs |
| Reduce handback requirements | Present value of savings likely to be small, goes to core of risk transfer, high transaction costs |
| Pay unitary charge in advance | Not permitted under SoPC4 7.2.1 (although payment in-month is), may require breaking swap, may end up enhancing equity |
A.3 Authorities should not explore these measures unless they are convinced that their particular contract represents an exceptional circumstance. If an Authority believes that a non-recommended measure is appropriate for their contract, it should seek advice from their departmental PFU.
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1 Excluding rescue refinancings, although a VfM analysis in respect of increased termination liabilities is still required in this case. See HM Treasury's Application Note "Value for Money in Refinancing" (http://www.hm-treasury.gov.uk/d/application_note_value_for_money_280205.pdf)
2 See section 1.6 of HM Treasury's Application Note "Value for Money in Refinancing".