Procuring Authorities will need to develop and implement thorough project-specific risk management and risk analysis procedures. In examining projects Audit Scotland and other auditors may wish to examine project appraisals. They might reasonably criticise public bodies that have placed undue reliance on subjective or poorly researched assessments of Optimism Bias and risk as the basis for selecting private finance as the procurement route, or accepting an NPD contract as offering VfM. Authorities will need to ensure that there is effective risk analysis with good evidence to support any adjustments to costings within the VfM assessments.
Conclusions drawn from the quantitative VfM analysis must be based upon detailed sensitivity analysis as point estimates of conventional procurement and non conventional procurement (CPAM / NPD) costs should not be considered in isolation. Likewise, there may be some limitations in some of the qualitative / quantitative assessments that need to be recognised (for example at this Stage, only limited account can be taken of innovation).
Therefore at Stage 2, adjustment to risk quantification and Optimism Bias figures should only reflect evidence based on past experience. In Scotland it is recommended that a bespoke risk workshop is held at this stage to facilitate the pricing of Risk and Optimism Bias. Refer to Section 5 and Annex B. Health projects should also refer to SCIM guidance at: http://www.pfcu.scot.nhs.uk/