11.6 A financial model is a financial representation of the transaction agreed between the parties and is documented as financial projections of the project company throughout the life of the contract period. The financial model should contain the following as a minimum:
• assumptions book including description of model methodology
• proposed funding structure and sources and uses of funds
• input schedules
• projected profit and loss accounts
• balance sheet projections
• cashflow projections
• funding schedules
• calculation of project returns for the different elements of financing
• supporting schedules (e.g. loans, fixed assets, taxation, payment mechanism).
11.7 The financial model incorporates the key financial assumptions on which a bid is based and forms the basis of the calculation of the annual tariff. The NHS body must be clear when comparing bids what assumptions have been made, and how they impact upon the model.
11.8 For example in a £50 million construction contract a 0.5% difference in assumed interest rates could have a £250,000 per annum effect on the annual tariff. Consequently it is important that NHS bodies understand why competing participants have made different funding assumptions. Is this simply a different estimate of potentially the same rate or does one participant have a genuine ability to raise funds more cheaply than another?
11.9 The NHS body must confirm that there is consistency between data and assumptions in the model and the equivalent general areas of the bid and the project agreement as submitted by the private sector.