8 The Home Office requested further offers from all bidders to test the value for money of the variant bid to develop 2 Marsham Street and, in order to maintain competitive tension, it decided to contribute towards bidding costs. The Home Office's bid evaluation showed that the competition was successful in producing two close but high quality bids and the Home Office considers that its decision to contribute to bidding costs was justified.
9 During the 20 month preferred bidder negotiation period, the price of the deal rose by 4.9 per cent. This increase reflects changes in scope, indexation changes and changes relating to the financing of the deal. In particular, the Home Office, supported by Partnership UK, negotiated with AGP for 50:50 sharing of any refinancing gains. In return, AGP was allowed a 1.1 per cent increase in its Internal Rate of Return, equivalent to a net present cost increase of £2.8 million. From its financial analysis using a Public Sector Comparator, the Home Office estimated that at financial close the deal cost would be lower than conventional public sector procurement of a new building and associated services.