The aim of the competitive neutrality adjustment is to reflect financial benefits and costs that are not equally available to bidders under different procurement models. Competitive neutrality ensures that a like-for-like comparison is being made in any value for money analysis which compares the PSC and Shadow Bid options. If competitive neutrality adjustments are not made then the PSC may be understated in some areas and will not necessarily reflect the true cost to government of traditional procurement. This may result in the selection of a sub-optimal procurement solution.
The two most common competitive neutrality adjustments made are for insurance and taxation, both of which are discussed in this section.