2.34 The prime purpose of a public sector comparator is to aid the procuring department, in this case the FCO, form a judgement about the relative value for money of a proposed PFI deal and a conventionally financed alternative option. A secondary but important purpose is to enable the department to understand the economics of the PFI bid. A comparison of broad cost and revenue headings can show where the PFI bid seeks to outperform the conventional alternative. In the light of that information, the department can consider whether there are lessons from the bid which might be applied elsewhere, and, in the event of gross discrepancies between the comparator and the PFI bid, may have a basis for questioning the deliverability of the PFI bid or the reasonableness of the public sector comparator.
2.35 For the quantified comparison between the PFI deal and the public sector comparator to form a sound basis for a judgement on which alternative offers better value, the comparison needs to satisfy a number of criteria:
■ the calculations must be internally consistent and sufficiently accurate for the purpose;
■ the assumptions on which the public sector comparator are based should be consistent with those underlying the PFI proposal which is under consideration;
■ the cost assumptions underlying the public sector comparator should be reasonable, should include allowance for risk, and should reflect a reasonable estimate of the likely outturn were the public sector option actually to be implemented; and
■ the sensitivity of the comparison to changes in key assumptions should be examined.
2.36 In this case, the FCO's calculations were both accurate and internally consistent. As regards the consistency between the public sector comparator and the PFI bid, the FCO was not in a position to compare the level of construction and operating costs or their make-up under the two procurement options. Arteos declined to provide its cost model to the FCO during negotiations so the FCO did not have the full detail of Arteos's costs. The FCO obtained the cost model during the course of our study and are of the view that meaningful comparisons of the cost model and the comparator were not possible because the two were not constructed in the same way and could not have been reconciled.
2.37 Lacking details of Arteos's costs, the FCO could only undertake a limited comparison between the Arteos bid and their conventionally financed alternative option to test the reasonableness of its own and of Arteos's cost assumptions. Given the unique character of its posts, the FCO found it difficult to obtain comparable information on the likely costs of operating and providing services for the new Embassy. As a result, most of the operational costs included are the best judgements FCO professional staff could produce at the time.