The Business Case

Each jurisdiction will have its own best-practice guidance for the development of a business case.

Some of the key items to be addressed in the business case which are particularly relevant to PPP procurement include:

•  project objectives and scope.  The business case should clearly articulate the objectives of the project and the scope of capital investment and services.

•  financial analysis. A preliminary risk-adjusted net present cost financial analysis of the capital, maintenance, ancillary services and residual value must be conducted. This will fully cost the project to determine likely funding requirements and will form the basis of the PSC used later to provide a benchmark for assessing bids. This will include the full scope of the project, which may not be reflected in the Preliminary PSC.  Data gathered and cash flows estimated during construction of a preliminary PSC will also assist the evaluation of whether the project would constitute a commercially viable business opportunity for a private party. The application and composition of the PSC in PPP projects across jurisdictions is further explained in Public Sector Comparator Guidance. and

•  risk analysis. The business case should identify all material risks associated with the project, specifying the external and project development risks for government, the project risks to be allocated to a private party and those to be retained by government. The business case should include at least a preliminary view on the cost to government of the risks which are to be built into the PSC.