11.1 The final documentation of any PPP deal comprises the legal documentation in the form of contracts and the financial documentation in the form of a financial model. This chapter sets out the key issues which NHS bodies should be aware of concerning the financial model for a scheme.
11.2 The financial model will reflect the financial basis upon which the transaction has been agreed and may be subject to adjustment in future years following a provision in the contract such as market testing. Consequently the model is a fundamental part of the contractual agreement between the parties and should be treated as such throughout the process. At financial close NHS bodies should be as familiar with the model as they are with the project agreement.
11.3 The financial model is produced by the participant and will form the financial basis of all bids received. It will become more developed as the procurement process progresses but even at an early stage should be sufficiently robust for the participant to have confidence in the accuracy of its bid. NHS bodies should specify that participants must produce a model in response to the Invitation To Participate in Dialogue that takes into account all major assumptions including detailed tax planning. This will be in the format of detailed income and expenditure, cashflow and balance sheet projections for the full contract period.
11.4 This level of detail is necessary to formulate an accurate assessment of the project company's costs and revenues and consequently the tariff payable by the NHS body for services received. It is also an essential part of the financing process.
11.5 As part of the selection procedure between shortlist and preferred bidder stage, NHS bodies should review the financial model of each participant as part of the assessment of the full bid. The areas that the NHS body should concentrate on are detailed below. Participants should be required to make their models available (including in electronic form) as part of the evaluation process.