2.6 While the level of detail covered by stages 1 and 2 will differ, the same framework is applicable in both stages. Assessing factors affecting the viability, desirability, and achievability of VfM in PFI underpins the assessment methodology. In some instances (e.g. where projects are standardised) the programme level assessment will appear to be more important for departments whereas in other cases (e.g. highly tailored projects) Stage 2 will appear to have greater importance. However, in both cases it is necessary to undertake both Stage 1 and 2 assessments in order to ensure that all the key issues are considered as early and as robustly as possible.
2.7 Stages 1 and 2 will cover factors capturing the following:
• Viability: this involves assessing whether there are any efficiency,accountability or equity issues which demand that services are provided by Government directly rather than through PFI. It also considers the extent to which the service requirements can be adequately captured in a contractbased approach, with a clear specification in output terms for PFI to transfer risk effectively to appropriate parties.
• Desirability: involves assessing the relative benefits provided through different procurement routes, such as incentives and risk transfer in PFI versus the Government's lower cost of borrowing in conventional procurement. Requires upfront consideration of the relative advantages and disadvantages associated with a long-term contractual relationship between the public and private sector, and the strength of the mechanisms that could be used to ensure that different benefits are realised.
• Achievability: involves gauging the level of likely market interest, the skills and capacity of the private sector, their appetite for risk, any lender constraints and whether the procuring authority has sufficient capability to manage the complex processes involved.