Value for money and quantitative assessment

The PSC is the key management tool in the quantitative assessment of value for money during the tender process and the evaluation and comparison of proposals. The proposals will be assessed against the PSC to determine whether they offer value for money based on quantitative analysis.

An important first step in the RFP evaluation process is to undertake a preliminary quantitative comparison of the proposal to the PSC to identify any potential funding issues.

Proposals will be ranked according to their risk-adjusted net present cost (NPC) relative to the risk-adjusted PSC. Adjustments may be made to the NPC of individual proposals according to their preferred risk allocation.

As considered in the Commercial Principles, all risks not explicitly taken by government will be borne by the private party. The financial impact of the risks taken by government (e.g. retained risk) should be added to each proposal to show the total project delivery cost.

The evaluation report should include the financial analysis of the proposals and their comparison to the PSC.

In circumstances where none of the bids offer value for money compared with the PSC, further analysis may be required, but in the absence of other offsetting net benefits, government reserves the right to terminate the PPP procurement process and procure the project through other methods.

Government may choose to proceed with a PPP option even where, based on single-figure estimates, little or no value for money is evident (and vice versa). For instance, it is possible that a bid above the single figure PSC estimate could be considered to offer value for money compared with the PSC, because the PPP delivery mechanism provides greater cost certainty and decreases government's risk exposure.

Further details on value for money considerations are provided in Section 9 of the Public Sector Comparator Guidance