| DESIRABILITY By integrating the life-cycle and operation costs with design and construction, DBFM procurement models can provide better risk management and incentives to develop innovative approaches to output delivery. Consistent high quality services can be achieved through performance and payment mechanisms. However, risk transfer is priced into the contract. The purpose of this section is to consider whether the benefits of the contract structure are likely to outweigh this additional cost. | ||
| Issues | Question | Response |
| Risk management | Does the Programme involve the purchase of significant capital assets, where the risks of cost and time over-runs are likely to be significant? | |
| Is the private sector likely to be able to manage the generic risks associated with the programme more effectively than the procuring authority? Bearing in mind the relevant risks that need to be managed for the programme, what is the ability of the private sector to price and manage these risks? Can envisaged standardised payment mechanisms and contract terms incentivise good risk management across the programme? | ||
| Innovation | Does a preliminary assessment indicate that there is likely to be scope for innovation on a programme basis? Does some degree of flexibility remain in the nature of the technical solutions/services and/or the scope of the projects? Can solutions be adequately free from the constraints imposed by the procuring authority, legal requirements and/or technical standards? To what extent will individual project's scope, specification and operation be pre-set or open to negotiation with the private sector? Could the private sector improve the level of utilisation of the assets underpinning the programme and projects within it (e.g. through selling, licensing, commercially developing for third party usage etc)? | |
| Service provision | Across the programme, are there good strategic reasons to retain soft service provision in-house - what are the relative advantages and disadvantages? Is optimal risk allocation achieved by transfer or not and is soft service transfer essential for achieving the overall benefits of improved standards of service delivery? (Refer to the STUC Staffing Protocol) | |
| Incentive and monitoring | Can the outcomes or outputs of the investment programme be described in contractual terms which would be unambiguous and measurable? | |
| Can the programme services be assessed against an agreed standard? | ||
| Would incentives on service levels be enhanced through standard contracts and payment mechanisms? | ||
| Lifecycle costs / residual value? | Is it possible to integrate the design, build and operation of projects? | |
| Are lengthy contracts envisaged? Will long-term contractual relationships be suitable (or advantageous) for the service? Are there constraints on the status of the assets at contract end? | ||
| Are there significant ongoing operating costs and maintenance requirements across the programme and projects? Are these likely to be sensitive to the type of construction? | ||
| OVERALL DESIRABILITY | Overall, is the relevant Accountable Officer satisfied that the programme and its procurement approach would bring sufficient benefits that would outweigh the expected higher cost of capital? | |