Convergence of consortia and London Underground's cost estimates in the public sector comparator.
As a matter of policy, public sector comparators, which are the public sector's estimate of delivering the same level of service as the PPP/PFI scheme under consideration, are not made public during the competition.
This is because the public sector is looking to obtain best value through competition. There is a justifiable concern that disclosure of the public sector comparator would lead to bids only marginally below that value, so that competition would have been dampened.
The PPP public sector comparator is now fully disclosed in LU's Final Assessment Report. This report, which is being provided to the Committee by TfL, analysed the full background to the transaction, the alternatives available to LU for bringing investment to the Tube, and TfL's alternative proposals. In reviewing whether the PPP was value for money, LU considered in depth both the quantitative analysis, comparing the bids to the relevant PSC, as well as the qualitative arguments, why the PPP offered better value over public sector alternatives.
During the PPP procurement, the public sector comparator was regularly updated to reflect improving asset and performance data, a better analysis of underlying risks, and LU's changing performance requirements. Similarly the private sector bids were being updated on the basis of the same updated data and its own due diligence.
The chart included by the NAO in Appendix 3, figure 3.2, which compares movements in the 30 year public sector comparator with movements in the bidders' Infrastructure Service Charge in the first seven and a half years, shows that over time the relative rate of growth of those figures converged, ie that by the end of the bidding period they had grown by about the same amount since March 2000. This reflects the fact that they were responding to the same changes in underlying data and performance requirements.
While over time the respective costs grew at the same rate, the private sector bids were growing from a lower level. Throughout the procurement process, the total bid costs were at the bottom of, or below, the range of the public sector comparator. The extensive quantitative analysis conducted by LU therefore suggested throughout that the deals represented value for money. This, combined with the qualitative analysis documented in the Final Assessment Report, led LU to consider that the PPP represented the best overall value for money from a range of possible alternatives.