The partnership model is a financial model of the public private partnership project scoped by the agency. As with the public sector comparator, it measures the net cost to government of satisfactorily procuring the output specification. Accordingly, the partnership model should span the full term of the partnership and include estimates of private sector debt and equity requirements. The model should assume that the private sector would accept the government's preferred risk allocations.
Development of the partnership model helps the government project team to better understand the private sector's key drivers, informing the development of documentation to be presented to the private sector in the competitive bidding process.
The construction of a partnership model will enable the government to forecast, in advance of entering into, and subjecting private sector parties to, a costly competitive tender process whether:
∙ a private sector solution is likely to yield a value for money outcome for government relative to traditional delivery
∙ if the public private partnership project is likely to be bankable.
The partnership model will estimate:
∙ the price that the private sector party is expected to charge for provision of the service
∙ any revenues accruing to government
∙ the cost to government of risks retained by government.