i Encouraging market interest in a PPP project is crucial to the creation of competitive tension. Some of the Agency's higher scoring, pre-qualified bidders did not respond when the Agency re-advertised the project nearly a year after it had first invited parties to express an interest in bidding. Delaying going to the market until the scope and structure of a project are clear should result in a more realistic time table.
ii In putting together the PPP deal, the Agency negotiated a range of contractual terms designed to protect value for money, including the pre-priced schedule of additional works that the Agency can call off as and when required. Authorities should always consider carefully whether the expected scale of future changes to the services they require make a standard PPP contract suitable. If not, they should consider introducing protections similar to those negotiated by the Agency for the NRTS.
iii Current Treasury guidance recommends that authorities use a public sector comparator in the early stages of a project to assist in the selection of the best procurement route. Inevitable uncertainties in pricing a comparator project, particularly adjustments for risk, mean that authorities should not rely on a single figure public sector comparator but should consider a range of values. Public sector comparators should not be used as the sole test of value for money for a particular procurement route. Instead, authorities should conduct wider analyses of the costs and benefits of each available procurement route.
iv The procurement team's preparations for the preferred bidder negotiations included acquiring extensive knowledge of GeneSYS's financial model and the underlying costs. During the competitive phase of the procurement, the Agency required bidders to submit their financial models and input costs as part of their bids. Later, the Agency incorporated GeneSYS's financial model and the costs into the contract to aid in the evaluation of future changes not covered by the pre-priced schedule of works. Authorities should follow the Agency's example. They should obtain and analyse their bidders' price build ups, as well as the bidders' financial models, to assess the reasonableness of the tendered prices. Authorities should also ensure that they retain an understanding of the bases of their contractors' prices sufficient to test the value for money of any variations to the services.
v While authorities will always require high quality professional advice to get good value for money when procuring a PPP deal, it is equally important that costs are monitored carefully. This is particularly important where a project, such as the NRTS, undergoes major changes in scope and structure. Authorities should produce realistic procurement budgets and timetables, especially for the use of professional advisers and prepare realistic updates for any agreed changes in project scope.
vi During the procurement, the NRTS project experienced two major changes. The first brought the operation and maintenance of local connections between over 14,000 roadside devices and the national trunk cable network into the scope of the project. The second transferred some upgrades of the network, which were not immediately required, out of the proposed initial works and into the call-off arrangement for pre-priced additional works. While the Agency had justifications for the changes, the case for change may not be so clear in future PPP projects. When a project is to undergo major changes in scope, Authorities should formally evaluate the impact of the changes on the overall value for money of the project.
vii The Agency's practice of delegating day-to-day management of projects to advisers meant that we have not been able to access all the information we required from the Agency in a timely manner. Changes in staff within an authority and in advisory firms will occur over time and it would be unacceptable if, in future years, nobody understood the background to the key characteristics of a PPP deal. Authorities should always have easy access to key documents and maintain, in-house, a good understanding of the contractual and operational issues associated with their projects.