PSCs for social infrastructure will be constructed as a cash-flow model under traditional delivery methods because, unlike economic infrastructure, social infrastructure is primarily funded by payments from the Government. There is limited or no third-party revenue generated by the infrastructure.
The cash flows for social infrastructure in the PSC will include three core components:
• The base costs of delivering the services specified in the project brief under the traditional funding method
• A competitive neutrality adjustment (if applicable), covering any expenditure-based taxe fees and charges that the agency is not required to make by virtue of its Government-owned status
• An estimate of the expected cost of risks that could potentially crystallise over the life of the project. The PSC should be able to distinguish between the expected cost of risks that would be retained by the Government and those that would be transferred to the private sector.