56 As part of the decision about whether to proceed with a scheme under PFI, the Government requires that local authorities develop a financial benchmark - the Public Sector Comparator (PSC). This is intended to show whether a PFI scheme will cost less than a similar scheme involving the same outputs, funded in the traditional way. Development of the PSC challenges public sector managers to understand and project the revenue, capital and risk costs that will be generated by their strategic decisions. The calculation is complex and involves estimating construction costs, running costs and the value of risks transferred over the PFI contract length.I Demonstrating VFM in this manner is one of the keys to securing government subsidy via PFI credits, and provides a benchmark for PFI providers to beat. It is officially described as one of the significant inputs to inform judgement about whether a project will achieve good VFM, but it falls short in two important ways because it:
• compares a PFI scheme's cost with a hypothetical alternative, rather than an actual set of costs from comparable schemes; and
• considers the projected PFI contract cost before the design is finalised rather than the actual outcomes of the final contract negotiations.
__________________________________________________________________________________
I That is, placing a value on the likely cost of future risks, such as a major repair bill, actually occurring.