19 Departments will not be able to achieve and demonstrate achievement of value for money if they have not created a competitive dynamic to incentivise competitive behaviour from the contractor. To achieve that competitive dynamic, departments must:
a develop a should cost model - their estimate of how much it ought to cost the contractor to deliver the required outputs - which is used as the primary financial comparator; and
b develop a credible alternative commercial solution which can be invoked if the contractor does not rise to the department's expectations.
20 The should cost model will be of little use if it has no been properly prepared. To achieve this, departments must
a obtain common information relevant to the department's should cost model and the contractor's bid in conjunction with the contractor
b use appropriate benchmarks, and, where it cannot do so, undertake detailed reviews of the contractor's underlying pricing assumptions to satisfy itself that its approach was reasonable; and
c assess the savings the contractor can make through economies of scale; efficiencies; and synergies.
21 To conduct negotiations well, departments must:
a achieve a high degree of openness and transparency from the contractor;
b gain a mutually agreed understanding with the contractor of what is required from the output specification and of the assumptions each had made in their respective models; and
c maintain the integrity of the exercise so it is not compromised.