1.2  The Underlying Methodology

1.2.1  The Model uses a number of scheme specific assumptions to identify the cost of delivering a portfolio of housing assets and services under the PFI for both HRA and non-HRA projects.

1.2.2  Based on this cost, Authorities are required to identify the necessary sources of funds that are required to make the project affordable. This includes the calculation of the implied size of PFI credits, and identifies the level of local resources required to support the revenue element (the 'affordability gap').

1.2.3  Finally, the cost outputs are linked to a housing specific version of the HM Treasury (HMT) quantitative VfM model to demonstrate whether or not PFI offers VfM when compared against equivalent public sector procurement (see section 4.4). The inclusion of the HM Treasury VfM model has been approved, and as a result, there is no need for local authorities to submit the HMT model separately.