The PSC was developed progressively from the business case onwards, with the final PSC completed in November 2007, at contractual close. This was consistent with the Partnerships Victoria policy and guidance. It requires the progressive refinement of the PSC as a project moves through the various stages of development from initial option appraisal and the decision on whether or not to pursue a PPP procurement approach, through the procurement phase, and if required, prior to contractual and financial close.
There were various changes to the PSC between November 2005 and December 2007 and changes were considered, documented and appropriately approved in line with government requirements. The PSC for the project was approved by government in September 2006 and was $1.057 billion when the project brief was released to the market in October 2006. Inputs to the PSC financial model at the project brief stage were valid and supported by appropriate documentation.
To use the PSC appropriately in the evaluation process, adjustments are made to both the total PSC and the bid valuations where necessary. This enables 'like-for-like' comparisons of all bids.
The net present costs (NPC) of private sector bids are compared to the PSC to assist in determining whether the project, if conducted under a Partnerships Victoria structure, would deliver better value for money than the PSC.
The PSC was used as part of the procurement process. Adjustments made to the PSC to enable a like-for-like comparison with bids included:
• retained risk adjustments, as the state holds this risk under either scenario
• cleaning services adjustment, which were included in the preliminary PSC and the PSC approved by government in September 2006, but subtracted from the PSC at the project brief stage and the final PSC following a government decision in early October 2006 to remove these services from the scope of services to be delivered under the project agreement
• additional space adjustments, as estimated cost impacts associated with the provision of additional space to the University of Melbourne and the Murdoch Children's Research Institute were added to the PSC to make it comparable to the bids.