9.2.2  Adjusting the PSC

The PSC should only be changed after bids are received if it becomes apparent a significant component has been mispriced or omitted. For example, the bids could indicate the existence of risks which the team preparing the PSC failed to fully appreciate. It would be better to include the risks explicitly in the PSC than to omit them and understate the full cost of the PSC. Another example is if any assumptions change materially from when the PSC is finalised (before release of the RFP) and receipt of bids. This may be particularly relevant during elongated tender processes and/or if a marked change in market conditions has occurred since the PSC was prepared. Construction and insurance costs, for example, can be volatile and move materially between completion of the PSC and receipt of bids.

The bids may also show that some assumptions in the PSC are inaccurate. For example, if the project includes supply of commercial services, both the PSC and the bids will include estimates of demand. If the bids have relatively consistent demand forecasts at a particular level, while the PSC forecast is an outlier, it may indicate the PSC forecast is mistaken.

On the other hand, if the PSC contains numbers in which the agency is confident, it should not adjust the PSC just because the numbers in the bids are different. For example, if the agency has good estimates of construction costs, it should not reduce these just because the construction costs shown in the bids are lower.

Adjusting the PSC should be approached with caution and good judgment. In general, an adjustment will be justified if significant new information indicating that the PSC is incomplete or not credible becomes available. Making such changes should be a decision of the project manager (and steering committee where necessary), in consultation with the probity adviser. The PSC should not be altered to reflect alternate or more efficient service delivery methods by a bidder or bidders.