3.26 Within the FBC, the comparison between the PPP option and the CPAM represents a quantitative value for money test.
3.27 As at the OBC stage, the central requirement for the CPAM is that it should represent the best estimate of the cost to the public sector of meeting the output specification on which the PPP option is based. The final CPAM should reflect any changes that have been made to the output specification, scope or functional content or timing of the scheme since the submission of the OBC.
3.28 The NHS body should assume that there would be sufficient public capital to fund the scheme and that such funding would be available over the same timescale as for the PPP option. The FBC should only assume that the PPP option will be constructed over a different timescale to the CPAM, where this is as a result of genuine innovation by the private sector.
3.29 The CPAM should be costed in line with the principles outlined in the Scottish Capital Investment Manual and over an appraisal period in accord with Generic Economic Model requirements.1
3.30 As indicated in the previous chapter, the cost of the CPAM is partly driven by assumptions about risks that may or may not materialise. The CPAM should therefore be subjected to sensitivity testing. Sensitivity testing should usually be carried out on the following variables (between CPAM and PPP analysis):
• changes in capital costs;
• changes in the length of the construction period;
• failure to achieve planned savings;
• changes in interest rates;
• variations in inflation assumptions;
• variations in activity levels.
The above list is not intended to be exhaustive.
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1 This is conventionally 60 years. In addition, an assessment of the CPAM should be done over an appraisal period which matches the primary concession period of the PPP deal (typically between 25 and 35 years).