Some problems commonly experienced in the construction and use of public sector comparator s are as follows:
• introducing inappropriate and spurious detail in risk analysis. It is important to focus on the important risks-follow the Pareto principle of placing emphasis on, and allocation resources to, the significant few, rather than the insignificant many. For value for money comparison, it is the risk that is transferred that is the significant factor to be quantified
• failure to properly and systematically record the construction of the public sector comparator , including failure to record assumptions, including reality checks and validations, and failure to record sources of information. (This should not be an expensive process, and should not require additional resources-it simply requires discipline in recording material as one goes. There are clear and important benefits from a methodical and rational public sector comparator construction process)
• errors and confusion from poor financial models. It is worth investing in spreadsheet and financial modelling skills, specifying good style so that coherent and clear spreadsheets are routinely developed, and by documenting the spreadsheet properly
• changes of personnel in the government project team constructing the public sector comparator can make for difficulties, but are sometimes unavoidable. Such problems can be minimised by being meticulous in maintaining appropriate documentation
• invalid bases for estimating economic costs of occupying property, e.g. utility costs, etc.
• ignoring real price movements. No one can accurately forecast real price changes for the long time periods involved in a public private partnership procurement project. However, some facts, information and advice may be readily available for real price movements of component costs of the public sector comparator , e.g. for building material over the immediate construction period
• underestimation of the impact of foreign exchange movements, where a project requires the importation of capital equipment
• underestimation of costs, especially third party fees and performance monitoring costs to government
• underestimation of maintenance costs due to the omission of lifecycle costs required to maintain the asset in the required condition to supply the specified service
• inclusion of contingency items in the raw public sector comparator. Contingency items should be excluded from the raw public sector comparator costs and included as part of the project risks
• inconsistent output specifications between the reference project / public sector comparator and the private sector bids. Make sure that the private sector bids are not requested in terms of a different (quality of service than what is in the reference project and public sector comparator
• failure to guide the private sector bidders in terms of format and content of bids. This can make risk allocation unnecessarily difficult, if not impossible in practice. Broad guidance on style and content should be provided in the project brief
• making unverifiable assumptions about the timing of availability of public funds e.g. phasing capital investment over 15 years on the basis that public capital would be available in that timescale. The public sector comparator assumes availability of upfront funding.