NEXT STEPS IN IMPLEMENTING THE NEW APPRAISAL PROCESS

7.15  An early and comprehensive appraisal of both the financial and non-financial factors of each procurement option should lead to a low probability of projects not proceeding as expected by procuring authorities close to contract close. But investment programmes will need to be actively managed to ensure sufficient budgetary flexibility to alter the procurement route in the event that this proves necessary so that the best value for money procurement option can always be pursued. The process is shown schematically in Box 7.2.

Box 7.2: Three stages in VfM appraisal

By applying this appraisal process throughout the competitive process, public sector clients will safeguard value for money by:

•  ensuring there is no inherent preference for a particular procurement option;

•  making the quality of the competition an explicit part of evaluation;

•  encouraging intelligent management of market capacity as part of procurement and pre-tender dialogue;

•  feeding information back into projects and programmes in earlier stages of procurement. This will be supported going forward by the improved signed deals list and the adviser database; and

•  providing an early warning of when competitive tension may be reducing, and how this can be remedied.

PFI procurement will only be pursued if these assessments show that it will deliver value for money.

7.16  HM Treasury will consult on the guidance for the new value for money appraisal framework with Departments, particularly in terms of the timing and application of the tests to ensure that they represent best practice and fit in with existing processes for allocating and managing investment (including the next Spending Review). The development and implementation of the new framework will not be allowed to disrupt programmes or individual projects which are already underway. More detail on the scope and application of the new value for money appraisal framework can be found in Annex A. The Annex covers in more detail:

•  the factors to be considered at each of the three stages of assessment: investment test, project test and final procurement test; and

•  the elements included in the economic analysis undertaken at each stage.