2.32 Before developing and submitting the FBC, the NHS body will have identified the best PPP bid. All price sensitive aspects of the proposed contract (including the risk transferred) will have been negotiated and agreed at preferred bidder stage. The procuring entity should be fully assured of the value for money and affordability of its scheme, preferred funding solution and related balance sheet assessment.
2.33 The primary purpose of the FBC is to enable the NHS body to demonstrate that its scheme meets the approval criteria set by SGHD. The existence of detailed risk analysis provides assurance that the full implications of risk have been considered and that risks are fully costed into the affordability and value for money analyses.
2.34 The method by which the NHS body plans to manage risks should be demonstrated in detail within the FBC document. The NHS body should demonstrate how risks have been transferred to the private sector partner via reconciliation to the project agreement. It should outline how it plans to manage the risks it has retained via the inclusion of a detailed risk management strategy.
2.35 The risk analysis undertaken at this stage builds on that carried out for the OBC. It is important to note, however, that in certain circumstances, the range and expected value of risks will have changed. Moreover, the results presented in the FBC should reflect the actual risk transfer achieved in the deal. The FBC stage can therefore be distinguished from the OBC stage at which point only the desired risk allocation was outlined.
2.36 From OBC stage, risk work in relation to PPP projects is covered and reviewed as part of the Key Stage Review Process.
2.37 The remainder of this section outlines the type of risk analysis that should be undertaken between the OBC and FBC stages and clarifies how risk analysis should be presented in the FBC. For the purposes of considering risk, the aim at this stage is to demonstrate:
• value for money:
• the robustness of the assumptions behind the risk analysis;
• affordability;
• risk management.