The evaluation of procurement options is mainly concerned with identifying the method of delivering a project that will result in the greatest value for money on both a financial (quantitative) and qualitative basis. In financial terms, value for money is established by calculating the estimated cost of a project, based on a particular PPP procurement method, and comparing it to the estimated cost if the project were procured entirely by the public sector using a traditional method.
The evaluation of procurement options typically involves two main steps. The first step identifies key procurement objectives, and provides a qualitative assessment of a wide range of available procurement options including both traditional, public sector procurement and PPP models. The assessment of these procurement options is intended to identify the two most appropriate public and partnership procurement alternatives, which then form the basis of comparison in the detailed procurement options analysis for the project.
The second step in the assessment involves a more detailed, quantitative analysis that compares the preferred PPP approach to a traditional procurement method. To do this, a comprehensive risk analysis is conducted and financial models representing the two procurement methods are developed and compared. A financial model is developed for a project based on a traditional procurement method, also known as a public sector comparator (PSC5), and is compared to a financial model created based on PPP procurement, also known as a Shadow Bid. It is called a Shadow Bid because it is an estimate based on an expected bid.
The results of this quantitative comparison between the PSC and the Shadow Bid, together with the qualitative criteria, are used to determine the procurement method that provides the best potential value for money.
Quantitative value for money is achieved through lower overall project costs resulting from a particular procurement method. Qualitative value is achieved when a particular procurement method is best able to support the qualitative goals and objectives of a project.
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5 PSC is an internationally recognized term.