The output from the Shadow Bid is an important element of a comprehensive project budget, but does not comprise the complete project budget11. A project budget is defined once the preferred procurement option has been identified, and includes the total amount of funding needed to complete the project within its proposed scope, including both capital and operating components. When constructing the PSC and Shadow Bid only direct costs that vary based on the type of procurement option are considered in order to simplify the scope of the analysis12. Other important budget components such as the owner's retained costs are generally not included in the models. These need to be estimated by the project team separately to be included with the Shadow Bid model output in order to create a complete project budget.
Figure 6 below illustrates how output from the Shadow Bid model forms part of the overall project budget.
Figure 6: PPP Project Budget Components
| Shadow Bid Output + Retained Costs + Expected Cost of Retained Risks = Total Project Cost |
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11 The output from the Shadow Bid model for the purposes of a project budget would be the stream of annual service payments over the concession period, and not the net present cost of the PPP option.
12 Refer to Section 3.1 for more details associated with constructing both models.