The PSC in the STEPS deal was used by the Departments as the baseline when evaluating the value for money of the private sector bids. The comparator was based on an assumption that the Departments would continue to own and manage the estate in house, but run the estate more efficiently than in the past (for example, through greater efficiencies in facilities management costs such as cleaning and security and through reductions in the number of staff needed the manage the estate).
To enable comparison with the bids the PSC was constructed on a common basis with them;
■ The same properties, range of services and standards to those in the bids were used in the PSC.
■ Services excluded from the deal were similarly excluded from the PSC.
■ The PSC assumed that the estate will not be static and therefore identified income from sale freeholds and income from letting and subletting to private tenants.
■ New properties were excluded from the PSC since the value for money of these is evaluated on a case by case basis. The bids similarly excluded new properties.
■ The PSC was modelled for different levels of flexibility and could therefore be compared to the bids, which were also examined on different flexibility profiles.
The Departments' financial advisers provided technical advice and support to develop the model and ran it to provide the information. The Departments' property advisers also provided technical advice and undertook specialist costings. The assumptions and workings of the model were refined and validated at a series of workshops using Departmental staff. The team also obtained assurance from a financial modelling company that the structure of the model was valid.
Finalisation of the PSC involved de-constructing the individual sections of the model to test that they performed as anticipated. Each test was cross-referenced to the appropriate section of the model and the assumptions that lay behind that section. Following finalisation the model was tested for sensitivities. Results of the sensitivity testing are given below with a breakdown of the PSC costs.