A public sector organisation wishing to let a concession under the PFI advertise it in a way calculated to attract number of bids from which it chooses the one it judges most advantageous. Each bid will quote a Unitary Charge, which is the payment that the bidder wishes to receive to provide the specified collection of services. Though price is not only dimension along which bids are evaluated, it is significant one. Bidders will compete with vigour to minimise the Unitary Charge they quote.
It is standard practice for bidders to set their Unitary Charge with the help of a financial model. This is a set mathematical equations which is used to infer from various assumptions, the costs involved in the venture and the future financial results of the project company that the bidder set up specially to execute the contract. In practice, in great majority of projects, these equations are set out in spreadsheet on a computer.
Operis has been provided with the financial model used the Bidder to structure and price the Transaction. It has use to work out how the Unitary Charge quoted by the Bid might have been different from the one quoted had certain of the costs involved been different. The costs in question are margins that applied to the bond used to finance the project.