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 project 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 project more effectively than the Procuring Authority?

Bearing in mind the relevant risks that need to be managed for the project, has the private sector demonstrated its ability to price and manage these risks?

Do the proposed payment mechanisms and contract terms incentivise good risk management within the project?

Innovation

Have bidder submissions displayed innovative ideas for the procurement?

Does some degree of flexibility remain in the nature of the technical solutions / services and / or the scope of the project?

Are solutions adequately free from constraints imposed by the Procuring Authority, legal requirements and / or technical standards?

To what extent has the individual project's scope, specification and operation been pre-set or open to negotiation with the private sector?

Has the private sector suggested improvements to the level of utilisation of the assets underpinning the project (e.g. through selling, licensing, commercially developing for third party usage etc)?

Service provision

In relation to the project, has soft service provision been retained 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

Have the outcomes or outputs of the project been described in contractual terms which are unambiguous and measurable?

Have standards been agreed against which the project services will be assessed?

Are incentives on service levels enhanced through the standard contract and payment mechanism?

Lifecycle costs / residual value?

Has the design, build and operation of the project been integrated?

Is a lengthy contract 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 project?

Are these sensitive to the type of construction?

OVERALL DESIRABILITY

Overall, is the relevant Accountable Officer satisfied that the project and the bids received would bring sufficient benefits that would outweigh the expected higher cost of capital?