Adjusted shadow bid: The shadow bid of a particular project adjusted for risks retained by the public sector under AFP and for ancillary costs.
Alternative Financing and Procurement (AFP): A range of infrastructure project delivery methods which use private expertise and financing to strategically rebuild vital infrastructure, on time and on budget, while ensuring appropriate public control and ownership.
Ancillary costs: The soft costs of delivering a project. These costs normally include: project management, legal services, architectural and engineering, advisory and other professional fees, transaction, capital markets and fairness advisors.
Build Finance (BF): Typically considered for smaller projects that involve renovations or significant interconnections to existing infrastructure (e.g., shared HVAC, build-out of existing floors). The private sector is generally responsible for construction and financing during the construction period and the project is paid for by the public sector at the completion of construction.
Build Finance Maintain (BFM): An AFP model in which the private sector is generally responsible for construction, maintenance and long-term financing. The project is paid for in instalments over a fixed period, usually 25 to 30 years. The public sector sponsor is responsible for developing the detailed design of the facility.
Competitive neutrality: An adjustment made to remove certain perceived additional costs of delivering a project using AFP. In certain instances, the base costs under AFP delivery will include a provision for certain taxes and insurance premiums. The equivalent costs will not appear under the PSC as the public sector may be exempt from paying certain taxes and may "self insure." The adjustment consists of adding such costs to the PSC.
Construction costs: Costs incurred in completing the construction of a project, including labour, materials, construction equipment, site preparation, construction management, typical contingencies, etc.
Design Build Finance (DBF): A delivery model in which the private sector is generally responsible for the design, construction and financing during the construction period. The project is paid for by the public sector at the completion of construction.
Design Build Finance Maintain (DBFM): Typically considered for large projects involving new construction on a vacant site (greenfield or brownfield). The private sector is generally responsible for design, construction, long-term financing and maintenance. The project is paid for in instalments over a fixed period, usually 25 to 30 years.
Discount rate: The interest rate at which future cash payments are discounted to a base date to determine their value at the base date. Discounting is the process which allows costs to be assessed in current-value dollars.
Facility management: This typically includes the provision of management, maintenance and repair services related to the building and building components to allow the facility to be used for its intended purposes throughout the term of the Project Agreement, in addition to soft facilities management such as grounds maintenance, parking, security, retail services like a food court or cafeteria, and dispatch services (e.g. "one-call" help desk).
Lifecycle costs: Costs typically associated with planned or scheduled replacement, refreshment and/or refurbishment of building systems, equipment and fixtures that have reached the end of their useful service life during the project term.
Notional public sector financing cost: An estimate of the notional financing costs that the public sector would incur when a project is to be delivered using a Traditional delivery method.
Optimism bias: A tendency of those planning infrastructure projects to fail to take into account the full magnitude of risks retained by the project sponsor.
Private sector financing costs: The financing costs incurred by bidders (and ultimately passed on to the public sector) under a project delivered through alternative financing and procurement.
Private sector risk premium: The premium (exclusive of the private sector financing rate) charged by bidders to compensate for the risks transferred to them under AFP in connection with the goods or services being procured.
Project risks: Risks are events that can lead to serious cost increases, construction delays, or both should they occur. Risks can be quantifiable (e.g. construction cost overruns) or qualitative (e.g. social, political or economic risks associated with the delayed delivery of a project).
Public sector comparator (PSC): Estimated total costs (including adjustments for risks retained and ancillary costs) to the public sector of delivering an infrastructure project using Traditional procurement processes.
Risk matrix: A detailed table or chart that lists the conceivable quantifiable risks for each project. These risks range from cost overrun and design risks to planning and regulatory risks. Each risk is described in detail along with the probability of the risk occurring and a range of probable cost impacts as a result of the risk occurring.
Risks retained under traditional delivery: The project risks which are borne by the public sector when a project is delivered using a Traditional delivery method.
Risks retained under alternative financing and procurement delivery: Any project risk retained by the public sector when a project is delivered using alternative financing and procurement.
Shadow bid: An estimate of the expected private-party bid (including financing costs) for a particular AFP project.
Traditional delivery: Procurement of a project using a Stipulated Sum Contract (usually the CCDC2 form of contract) for construction and, if applicable, a series of short-term maintenance contracts post-construction.
Value for money: The difference between the Public Sector Comparator and the Adjusted Shadow Bid is referred to as the Value for Money. There is said to be positive Value for Money by procuring a project using AFP when the Adjusted Shadow Bid is less than the Public Sector Comparator.