2.70 In the final stages of a PFI procurement, the PSC comparison becomes, however, increasingly theoretical since there are many additional costs that a department would bear if it chose to cancel a PFI project and to commence the procurement again using conventional methods. For example, there would be cancellation costs and delays to the realisation of benefits. In addition, there would be no certainty that the future price under conventional procurement would match or improve upon the current PFI price. In this case, in February 2000 MOD estimated these additional costs to be at least £55 million including £10 million to cover cancellation costs. These are real costs that were relevant to the business decision of whether to proceed with the deal, even though technically they would not be included in a PSC which seeks to measure the comparative cost of an equivalent project using conventional procurement.
2.71 In terms of making a business decision as to whether to go ahead and sign the PFI contract, a department should, in the late stages of a procurement, assess the relative costs and benefits of the different options, which are then open to it. MOD carried out this form of comparison in this project when, in February 2000, it assessed the real costs that would be incurred under three options then available: cancelling the PFI deal and just carrying out essential building maintenance, deferring closure of the deal in the hope of negotiating some further concessions from Modus delaying it by two years to allow a new procurement under either PFI or conventional procurement to take place or going ahead as planned. As noted in paragraph 2.64, this analysis confirmed that proceeding with the PFI deal was then the preferred option.
2.72 Another form of comparison which may also be valuable in the late stages of a procurement is the use of a 'should cost' model which seeks to benchmark each element of the preferred bidder's proposed solution. This is useful if there are price changes during the preferred bidder stage of a procurement where the competitive tension is reduced. In MOD's procurement the PSC included detailed cost elements and was used as the basis of evaluating and negotiating the PFI bids. Where a PSC is not as detailed as that used by MOD, or where the costs are likely to be significantly different under PFI procurement, a 'should cost' model will help to ensure that the bids represent value for money.