The public sector comparator

20.  Although it is usual practice in PFI deals for a public sector comparator to be prepared, the validity of such a calculation is questionable if it would not be practicable for the public sector to develop the project conventionally. It was on just such grounds that PITO had originally decided not to use a comparator. Later on, however, PITO considered that a comparator would supplement output from the should-cost model in the assessment of value for money. PITO told us that the comparator had been used towards the end of the project to comply with Treasury guidelines and as an extra confidence check. Having gone through that process and having had it rigorously reviewed by financial and technical advisers, the public sector option had looked considerably more expensive than the PFI deal on offer from 02.¹⁸

21.  The comparator included a £170 million provision for risks, which were identified and quantified in terms of likelihood and impact. PITO told us that it had been advised that it was a regular practice in major projects to include a separate estimate for contingency. An extra £70 million had therefore been included to allow for unforeseen requirements. The comparator estimated the cost of a conventional procurement at £1,610 million, compared with a cost for Airwave of £1,470 million (Figure 3).¹⁹

Source: C&AG's Report

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18 C&AG's Report, paras 2.24, 2.27: Qq 9-10

₁₉ Qq 49-52