A detailed evaluation of project costs and revenues is required (see nearby box). It is important that those costs are considered, based on the same scope of services being requested within the PPP structure. The PSC should also consider all costs relating to the project, including costs that will not be transferred to the private sector under any structure.
| Cost/revenue headings • Capital/construction costs - Construction period - Life-cycle costs (operations period) • Operating costs - Core services - Non-core services - Maintenance - Insurance • Taxation • Third-party income (based on public sector ability to generate) |
Cost and revenue should be estimated based on precedent (construction and operating) methodologies used by the public sector on similar projects. It is important that cost estimates not be overly optimistic to avoid creating an unfair comparison. The key question for the public sector when costs are being finalized is whether the project could realistically be delivered within the budget proposed if required. If this is not the case, then the budget should be adjusted to a more appropriate level.