Identify all relevant costs over the chosen project timeframe. Relevant costs are costs for work that is included in the scope of the project to be delivered by the P3 contractor and costs that differ between procurement models. An example of costs that are outside the scope of the financial bids but differ between procurement options (so need to be included in the analysis) are procurement costs. Procurement costs for a P3 are generally higher than for a conventional approach so should be included in a comparison between the PSC and Shadow Bid.
A consistent scope is required for the PSC, Shadow Bid and financial bids. Comparing the PSC and Shadow Bid will determine the most advantageous procurement option. Comparing the PSC to the financial bids will determine VFM for the project. When evaluating which costs to include in the PSC and Shadow Bid, consideration must be given to whether costs will be incurred within or outside the agreement. For example, school projects require furniture and equipment that is supplied and installed by the school boards. The costs for the furniture and equipment form part of the total project costs but would be excluded from the PSC and Shadow Bid as they are procured separately from the school building, do not vary between procurement options and the bidders will not include the cost of furniture and equipment in their bids. To ensure the cost comparison and VFM determination is meaningful, costs must be included consistently in the PSC, the Shadow Bid and the comparison of final bids to the PSC.
Costs and benefits may include:
Capital Items | |
• Construction | • Change orders/scope changes |
• Property, plant and/or buildings | • Demolition/site preparation |
• Land/facility assets | • Decanting/occupant placement costs |
• Specialized machinery/equipment | • Terminating any existing agreement or lease |
• Information technology/specialized software | • Financing |
• Fixtures and furnishings |
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Annual Operating Items | |
• Internal overhead (i.e. operations and maintenance salary and benefits) | |
• Lease payments | • Administration costs |
• Facility operating and maintenance |
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Cyclical Items | Receipts |
• Repairs and maintenance | • 3rd party lease revenue |
• Information technology/software upgrades | • Parking or other revenue |
• Fixtures and furnishings | • Gain on sale of land and/or buildings |
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Residual Value | |
• Buildings | • Machinery and equipment |
• Land | • Loss of sale of land or buildings |
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Benefits (should include both agency and user benefits) | |
• Early completion | • User cost savings |
• Capital savings | • Innovation |
• Operational savings | • Reduced environmental impacts |
• Revenue generation |
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Consideration should be given to when the benefits will be achieved, who will be the recipient of the benefits and certainty of benefits.