25. The cost of financing a project by traditional procurement will inevitably be less than the cost of private finance-the Government can borrow at a lower rate than can a private sector entity. Hence the economic case for private finance projects must rest on achieving better value for money either through cost savings in the management of the project (including more efficient recognition of lifetime costs and risks), or through the delivery of a qualitatively superior project.
26. When assessing the procurement options for a given project, public authorities are required by Treasury guidance (the "Green Book") to make estimates of the costs of undertaking the project by the private finance route and by traditional procurement, so as to help determine which is better value for money.10 The estimated cost imputed to procurement of a given project by traditional means is known as the Public Sector Comparator (PSC). Three key factors in determining the cost estimates of private finance and traditional procurement are outlined below.
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10 HM Treasury, The Green Book-Appraisal and Evaluation in Central Government, available at http://www.hm-treasury.gov.uk/d/green_book_complete.pdf