4 The PSC was based on an assessment of the likely costs of a hypothetical set of contracts to construct and operate 2 Marsham Street, including construction costs, lifecycle capital expenditure, operating costs and an assessment of the risks associated with these costs. In determining inputs and risk adjustments, the Home Office were advised by professionals with expertise in construction, accommodation services and property.
5 The PSC also includes costs that would be retained by the Home Office in either the conventional procurement or the PFI scenario, such as revenue from disposal of the existing estate, running costs for the existing accommodation before occupation of 2 Marsham Street and business rates. It was necessary, therefore, to add these costs to the PFI bid unitary payment stream to allow a like-for-like comparison between the PSC and the cost of the PFI solution. However, the costs added to the PFI solution have been adjusted to reflect savings expected to accrue under PFI. The Home Office assumed that the construction period would be longer under conventional public sector procurement as the PFI timetable was considered ambitious. Under PFI, savings in the running costs of the existing estate and revenue from disposal of the existing estate, would be generated earlier.