The recommended approach is for the Owner to request Proponents to submit their proposed Corporate Overhead and Profit with their EOI and again with their RFP, together with commentary on the Owner's proposed definition of the Corporate Overhead and the proposed structure of the Commercial Framework. When assessing each Proponent's Corporate Overhead and Profit and comparing those amounts proposed by competing Proponents, the Owner should ensure that:
The Proponents' profit lies within prevailing industry norms for the current commercial environment. If the amount is too low, this is unlikely to encourage the NOPs to supply their best teams and/or may inadvertently encourage inflation of the TOC in order to increase the likelihood of saving and hence increase Proponents' profit. By contrast, an excessive profit will reduce VfM by increasing costs and reducing commercial incentives for the NOPs to improve performance.
Tendered fees from competing Proponents need to be reconciled to account for any differences in the definitions of Reimbursable Costs and Corporate Overhead. For example, some Proponents will include the cost of items such as IT support, payroll administration, defects liability period and safety plans in their Corporate Overhead. Others will levy the project an additional cost allocation.
The selection process recognises that the NOPs' fee has a marginal impact on the VfM outcomes for the project compared to other VfM elements such as the Project Solution, and this should be considered when designing the selection criteria and weightings.