The deal was better than the alternatives available in May 2000, the cost of the deal being similar to the forecast cost of conventional procurement

2.46 The cost6 of the 30-year PFI deal as contracted is £746.1 million. This is within the broad range of estimates of the costs of an equivalent project that is procured conventionally. Compared to the alternatives available when the deal was signed in May 2000 the PFI deal was the better option.

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6 The cost of the PFI deal could change during the 30-year contract period if Modus is penalised for poor performance, there is profit sharing after year 15, or the scope of the project is changed in ways which permit Modus to seek a price variation.

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The cost of the deal was in the middle of the range of possible costs for an equivalent conventionally procured project
MOD estimated the cost of an equivalent conventionally procured project using a public sector comparator
The PSC consisted of base costs and additional estimates for the cost of risks that might materialise
The PSC model was relatively complex
Given the risks and complexity of the redevelopment the estimated cost of a conventionally procured project could fall within a wide range
The PSC was used as a tool to review the value for money presented by the PFI bids and to evaluate the constituent elements of the bids
MOD concluded that the deal was value for money since it delivered the benefits outlined in the business case and the PFI route had benefits over conventional procurement
For negotiation and presentation purposes MOD placed emphasis on achieving a price slightly better than conventional procurement
Compared with the alternatives available there were benefits which supported MOD's decision to proceed with the deal in May 2000
Some general lessons emerge regarding the use of PSCs in the PFI procurement process