Box 1.3: Quantitative Assessment- Aims, Objectives, Inputs and Output

The use of the spreadsheet developed by HM Treasury for the quantitative VfM assessment is a requirement for the Stage 1 assessment and for the vast majority of Stage 2 assessments. Stage 2 requirements are further discussed in 1.25.

Aim: The analysis is intended to contribute to an assessment of whether the PFI option presents VfM compared to a conventionally procured project.

Objectives: The quantitative assessment aims to:

• Inform the qualitative judgement of officials involved in allocating capital between programmes, and of procuring authorities at project level in determining VfM;

• Enable projects to make appropriate use of private capital, to justify explicit additional costs against the benefits achieved as a result of transferring risk to the private sector; and

• Increase the evidence available to departments to support future procurements, and to be able to defend decisions taken in the context of government policy.

Input: The quantitative assessment considers how the quantifiable costs of using PFI as the procurement route are likely to compare with those of conventional procurement. For the PFI option, it calculates the cost of the project if it were to be funded through private finance. For the conventional comparator it assumes the capital expenditure is funded by public sector capital. Departments and project teams will therefore need to secure as much evidence as is practicable and reasonable when substantiating their quantitative analysis. Procuring Authorities should notethat:

• The evidence base will need to be continually refreshed by the incorporation of new information from projects at all stages of procurement and operation. The procuring authority should avoid relying on over-elaborate estimates and should conduct sensitivity analyses;

• If the current evidence base is inadequate, then other information should be sought to justify the inputs into the model and steps taken to remedy this gap for future procurement (the Quantitative User Model Guidance addresses ways this can be achieved); and

• While at the programme level the assessment will inevitably be conducted using high-level estimates, the assessment will develop as more detailed information is known about the programme and individual projects up to the completion of the Stage 2 assessment at the OBC.

Output: The results of the quantitative assessment at both Stages (1 & 2) should be presented, along with the qualitative assessment, as part of the business case for projects. The interpretation of the quantitative result is discussed in the VfM Quantitative Assessment User Guide and below.