2.26 A funding competition should be presumed necessary in deals when there is only a single bidder. The benefits obtained from the Treasury building funding competition were that the project was funded with the most appropriate and best priced financing in a manner that was highly transparent. When there is only a single bidder it is difficult to demonstrate that a deal offers the best value. In this situation a department will have to take extra steps to gain sufficient assurance that the deal on offer is value for money, as there has been no opportunity for costs to be driven down by the competitive process.
2.27 There are several ways in which departments can gain extra assurance when faced with a single supplier bid, such as the use of benchmarking or a "shadow cost" model. In addition preserving the right to run a funding competition, after the selection of the preferred bidder, will give a department assurance that the financing for the project has been obtained at a competitive price.
2.28 A second situation that departments may face is where there is a prolonged preferred bidder stage. This too would usually justify a separate funding competition. Although the original bid for the Treasury project had been made in a competitive environment, the PFI market had matured considerably in the fifteen months that elapsed between the termination of negotiations and their subsequent resumption. It was therefore reasonable to assume that the type and cost of funding available had changed and it was appropriate for the Treasury to ask Exchequer Partnership to hold a competition. It would also make sense for other departments in the same position to do so.