| The Value for Money (VfM) Assessment Guidance August 2004 introduced a 3-stage assessment process and replaced Treasury Taskforce 'Technical Note 5'. This updated version of the Value for Money Assessment Guidance retains the 3-stage process and the application of both a qualitative and a quantitative test (for which there is separate user guidance) during stages 1 and 2. It also incorporates additional information which reflects some of the policy developments in PFI since 2004. This guidance supersedes the previous VfM guidance and should be used by procuring authorities, both at department and Local Authority level, who are considering the use of PFI for procurement. The VfM assessment guidance highlights different issues that procuring authorities should consider in establishing what the driving factors for VfM will be in their particular projects. It sets out the process and methodology to be used in considering whether the factors driving VfM will be realised through the use of PFI procurement. At stage 1 the procuring authority, typically the sponsoring department's central PFI team, should undertake the qualitative and quantitative analysis for programmes considered likely to be suitable for procurement through PFI. At stage 2 the project team should conduct more detailed analysis on the individual projects making up the programme. This must be completed as part of the Outline Business Case. Where these assessments conclude that PFI will deliver VfM, the stage 3 assessment is then a continuous appraisal following OJEU up until financial close. This stage is to ensure that the conclusions from the previous stages continue to hold given the latest information including the prevalent market conditions. At all stages, the emphasis in the guidance is on: Evidence: making a robust assessment based as far as possible on detailed evidence and previous experience. Data should be collected on all projects and used to aid future assessments. Early assessment: it is important that appraisals are started early, and are undertaken prior to engagement with the market. Late changes to a project once procurement has commenced are likely to erode VfM. Sufficient resourcing and planning: In order for the VfM drivers to be effective and for overall VfM to be achieved, the procurement needs to be well planned, managed, executed and transparent, whichever procurement route is chosen. The guidance emphasises that procuring authorities must ensure they have sufficient capable resources to apply to the procurement itself. Taking account of more recent policy developments in PFI, the VfM assessment guidance now also includes a strengthened test for assessing VfM from soft services in PFI and further details on the factors to take account of in considering sufficient operational and financial flexibility; the process for single bidder procurements; and consideration of contract duration caps. Further guidance will follow on some of the areas mentioned. |