8 The Home Office compared the cost of the PFI solution to a single PSC figure, rather than a range to reflect the uncertainty associated with the PSC costs. To determine the PSC's sensitivity to its risk adjustment, a simulation14 was carried out which determined a standard deviation of £7 million, 15 per cent of the total risk adjustment and 1.5 per cent of the total value of the PSC.
9 In addition to the modelled risk adjustments, the Home Office also identified other sensitivities that could affect the comparison between the PSC and the cost of the PFI solution including the cost of surrendering the Queen Anne's Gate lease, impact of changes in interest rates on the cost of financing the PFI deal, impact of changes in property values and risks associated with compensation claims for rights of light. The Home Office concluded that while the 2 Marsham Street solutions carried more risk, in all but the least likely, worst case scenarios, the analysis showed that the PFI bid was the cheapest solution.
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14 In order to adjust the PSC for risk, minimum, maximum and most likely values were assigned to the inputs where there was judged to be risk. A mean adjustment was then calculated for each risk in the PSC and a simulation package (Crystal Ball) was used to model the total risk in the PSC and the uncertainty associated with the calculation, expressed by the standard deviation.