The Shadow Bid will reflect the fact that the private sector directly incorporates insurance costs and tax impacts into the model, in addition to the estimated cost of project risks that are transferred to the private partner. These items are added as adjustments to the PSC as public sector procurement does not directly account for them. In addition, an adjustment for retained risk is added to the PSC based on the expected cost of the project risk that is not transferred to a private partner, and is instead retained by the public sector (retained risk) under the PSC structure. A similar adjustment is made to the Shadow Bid, adding the expected cost to the PPP of the risks that are transferred to the private partner.
As was the case in the previous section with project costs, any estimates or assumptions made regarding the value of these adjustments must be evidentiary-based and clearly documented to meet the audit standards of the Office of the Auditor General.