Components of the PSC

•  Base Costs - represents the base cost to government of producing and delivering the project including those costs associated with the design, construction and operation. In addition it should include those periodic costs associated with the delivery of services (e.g. major maintenance, rehabilitation and replacement of components).

•  Transferable Risk - those risks that are likely to be transferred to the private sector because they are best able to manage the risk at least cost.

•  Retained Risk - those risks that government proposes to bear itself.

•  Shared Risk - those risks that are jointly shared with government and private sector.

•  The PSC is the Net Present Value (NPV) of each component added together to establish the total net present value of a traditional procurement.

Note: Alberta Finance should be consulted for further understanding/clarification around NPV.

Early, rigorous and realistic analysis of risk allocation is needed to achieve efficiencies in the P3 procurement. Section 6 provides guidance on risk identification.

A risk register (Section 6) should be developed during the feasibility analysis and updated as the project moves through the approval process.