To appropriately incorporate construction cost and life cycle efficiencies into the business case analysis, all potential efficiencies should be estimated at the same time and by the same people as a means of avoiding duplication. Generally, construction efficiencies are estimated by the project team and consultants together. If construction efficiencies are identified under a PPP model, the total of these estimated efficiencies is subtracted from the QS construction cost estimate for the PSC. This adjusted cost estimate then becomes the construction cost estimate for the Shadow Bid.
In a similar way, anticipated life cycle cost efficiencies identified under a PPP are subtracted from the projected life cycle cost estimates based on traditional procurement.
It is important to consider that in identifying efficiencies, there may be occasions where a PPP approach results in an added cost, or negative efficiency, in which case it should be netted out of the overall capital or life cycle adjustments. For example, in constructing infrastructure that is part of a broader network (e.g., a bridge), the cost associated with maintaining it as a stand-alone item might be greater than incorporating it into a broader maintenance program already underway for the rest of the system. In such a case, a percentage inefficiency would be determined based on localized maintenance, and a corresponding adjustment would be added to the base cost estimate under a PPP to properly reflect this in the comparison.