Guidance notes - Reference project

A major element in refining the PSC is the clear and complete identification of the reference project. This is particularly important for correctly identifying material project risks and therefore risk valuation. The reference project is the most likely and efficient form of public sector service delivery that could be employed to satisfy all elements of the output specification, as outlined in the RFP, based on current best practice.

The level of detail of the reference project will differ depending on the value of the project. The time spent to build the reference project and estimate the raw costs for a large project (e.g. $300 million), should be greater than for a project worth $30 million, for example. It is recommended that a value management plan be put in place, where, at the end of the reference project estimation process, a workshop is conducted with the key stakeholders to ensure that the reference project assumptions, level of detail and price certainty attained is reasonable given the size of proposed project. Consideration should be given to whether the best technical option has been designed for the reference project and to achieve the required services, and whether this design has been costed for the Raw PSC estimates.

The process of defining the reference project should start after the project output specifications have been developed to an advanced stage. This not only ensures that the reference project encompasses all the requirements of the project, but also it may help to assess the validity of the output specifications. It is sometimes easier to define output specifications after identifying the required inputs for the requisite project services.

Note that compiling a reference project for a social infrastructure project (e.g. a prison or a hospital) may differ in focus from an economic infrastructure project (e.g. a water treatment plant, a road). Therefore, the terms of reference listed in this worked example may not apply to all projects - although the level of detail should be taken as a guide, whatever the sector. For example, the operational philosophy of the core service provider for a social infrastructure project may have a major impact on the way the key accommodation is configured. While this may not be an issue in defining the reference project for a water treatment plant, nevertheless it would still be necessary to construct a process diagram to show linkages between different treatment processes.

The type of project may also dictate the group of advisers most suitable to compile the reference project. For instance, architects may be the most appropriate advisers to lead a serviced accommodation type project, but for an economic infrastructure project, engineers may be better placed to lead the project.

Where possible a geotechnical survey of the preferred site (if applicable) is recommended for all projects. This helps to accurately estimate the costs involved in building on a particular site taking into account specific ground conditions. It also highlights whether the site has the appropriate access to services (i.e. electricity, gas, water etc.) which may impact on costs.