2.33 Risk models for the public sector comparator emerged from workshops attended by stakeholders in the project from across the Agency. The participants identified and appraised over 200 risks that the project might have encountered. From this list, the procurement team selected the 49 largest risks for further analysis. For each risk, in each demand scenario, the team estimated a range for the likely cost of the risk and specified a peak value. For 47 of the 49 risks, the assigned values were stand alone amounts and so did not identify possible changes to the costs of individual items in the model.
2.34 At contract award, the estimated present value costs of conventional procurements for the base case and high demand scenarios were £280 million and £550 million respectively (2004 prices). The Agency included risk adjustments of £60 million and £105 million respectively. The public sector comparator, at £415 million4, was the average of the two scenarios, based on the Agency's experience that it tended to complete only half of the programmed projects within the originally envisaged timetable. The risk adjustment in the comparator was therefore just under £85 million (equivalent to 26 per cent of the non-risk adjusted figure) and contributed to the present value of the comparator being £30 million more than GeneSYS's final bid, £385 million (Figure 15).
2.35 We acknowledge that estimating risk relies on experience and judgement. The risk distributions in the final business case did not include the possibility of events turning out better than expected. This meant that the public sector comparator included no allowance at all for the possibility of any outcomes being more favourable than expected. The procurement team also assumed that the risks were independent of one another. The team calculated the expected cost for each of the 49 risks and summed the results together to produce a total risk adjustment (Appendix 4). Without seeing the relationship between risk values and the affected cost items we could not assess the reasonableness of the cumulative risk adjustment.
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4 Using the Government's current discount rate, 3½ per cent, the 2004 present value of the public sector comparator is £470 million (2004 prices) and the 2004 present value of the Agency's payments under the PPP is £450 million (2004 prices) (Figure 8).