3.15 The table below documents the key underlying considerations relating to achievability:
| Achievability
Market appetite - Is there sufficient appetite in the market to take the project forward under a revenue financed structure that is without equity and with capped returns on finance?
Transaction costs and client capability - Is there sufficient client side capability to manage the procurement? - Can appropriately skilled procurement teams be assembled? - Is there a sufficient budget to fund the procurement process?
Competition - Is there evidence that the private sector can deliver the required outputs? - Is there likely to be sufficient market appetite for the project?
Meaningful use for surpluses - Has a meaningful use been identified for any project cash surpluses over a programme to ensure that they can be distributed for the benefit of the public sector or wider community? |
3.16 In assessing the above, consideration should be given to the likely level of market interest. Market appetite is likely to differ depending on the nature and risk profile of projects in a programme and therefore market testing should be carried out to gauge interest. Procuring bodies should also consider whether the public sector has the management expertise to manage a programme and individual procurements and how costly they will be to procure (transaction costs of public and private sector participants).
3.17 When assessing achievability the public sector must ensure that the appropriate Accountable Officer is satisfied that the procurement programme is achievable, that there is sufficient client side capability to deliver the project and that projects will be attractive to the market.
3.18 Scotland has a track record of delivering revenue financed Programmes that meet these requirements. Programmes should be developed building upon previous experience and standardised methodologies and procurement practices.
| Stage 1: The Quantitative Assessment |
3.19 When undertaking the Programme Level Assessment, a representative project (or projects) should be selected for the purposes of high level quantitative modelling so supportable conclusions across the whole programme can be drawn. If an investment programme encompasses elements with significantly differing characteristics, then examples from each different class of project will need to be considered.
3.20 For the quantitative VfM assessment appropriate technical support and databases which estimate applicable capital, lifecycle and revenue costs of a capital investment or capital investment programme should be utilised. In addition benefits, risks (including Optimism Bias) and relevant transaction costs should be assessed. When combined these considerations amount to the "Conventional Procurement Assessment Model" (CPAM). On an individual project where the procurement route has not already been determined at a Programme Level, the CPAM will be compared against the NPD financed option derived from a Shadow Bid Model.
3.21 Further detail on the quantitative assessment and the application of Optimism Bias and Risk is contained in Appendix J.
3.22 The following high level qualitative indicators should be assessed at the programme level:
• Economies of scale and efficiency gains across a programme;
• Programme set up costs and transaction costs of public and private sector participants relevant to financial / non financial benefits of the programme;
• Continuous improvement and related cost savings; and
• Transfer of risk through standardised contracts.
| Results of the Qualitative and Quantitative Assessments |
3.23 At the completion of Stage 1, the results of the Qualitative and Quantitative Assessments will need to be combined to identify the preferred option. This should provide justification for the preferred procurement route, on an individual project or programme basis, and recognise any limitations of the component parts of the assessment.
3.24 It should be noted that the Quantitative Assessment must be viewed in light of the results of the Qualitative Assessment. Care must be taken in evaluating the relative weighting of the qualitative and quantitative assessments. Where possible, reference should be made to previous experience and evidence bases.
3.25 Procuring Authorities, Agencies and Directorates can then assess the VfM implications further at the project level investment (OBC) stage.
3.26 Appendix B details the reporting requirements for this stage of the assessment.
3.27 The following section reviews the application of the VfM guidance at a project level from the development of the Outline Business Cases through to OBC project approval prior to commencing procurement through the OJEU.