9.4 Funding Analysis Context

The funding analysis is the key component of the affordability section of the business case (Part D). It is an estimate, given the information about the project available during the business case phase, of the total annual funding requirement for each year of the development, construction, and operating phases of the project. The calculated funding requirement is usually presented on an annual basis and can also include any costs incurred by the government during the development period, such as procurement costs.

The funding analysis can be thought of as an extension of the project budget. A complete project budget will include all elements listed in Figure 6; however, it excludes operating statement impacts such as interest and depreciation expense.

Figure 7 shows all of the components of a funding analysis. The first item is the ASP, or required revenue calculated by the Shadow Bid. Implied additional operating costs of the asset not included in the scope of the PPP are then added. An example of these would be the costs associated with delivering clinical services in a health care facility, or of faculty staffing costs in a post-secondary institution. In order for the funding analysis to be complete, the following items affecting the overall affordability of the project should be included:

• Any non-cash operating expenses such as depreciation,

• Other project-related costs not previously included, and

• contingency fund for retained risks.

Figure 7: Relationship of PPP Output to Total Funding