9.1.1  PSC vs. bid - net present cost comparison

Every evaluation will consider a range of quantitative and qualitative factors. Usually the quantitative factor which receives the most attention is benchmarking the cost of the PSC against the costs in the bids received. To do this, the payment cash flows proposed by bidders are discounted to produce the net present cost (NPC) to government of each bid. This is compared to the NPC of the PSC, calculated by discounting the net cash flows in the PSC.

Note that care needs to be taken to ensure any departures from the RFP in bids are taken into account to ensure a like with like comparison with the PSC.

The cash difference between the NPC of a bid and the PSC is a powerful number. But despite all the care which has gone into the production of the PSC cash flow forecasts, the evaluating agency needs to look through the apparent certainty of any single figure, and recall that it is still an uncertain estimate, and that it only captures some of the important elements in choosing how to deliver a project. For some projects, a sophisticated risk valuation process is warranted.