The life cycle cost analysis should only be conducted using high-level estimates at the feasibility stage, supported wherever possible by past procurements. Overly complex modeling should be avoided at this stage due to the inherent uncertainties. The quantitative assessment will be developed further during the preparation of the Business Case.
The estimated NPV life cycle cost will be based on a number of assumptions. A sensitivity analysis should be undertaken to show the effects of different assumptions on the relative value for money of the procurement options. This analysis should be used to identify the changes in assumptions that are significant enough to change the recommendations. The analysis should assess the change to one or other of the procurement options (traditional or P3) but not both at the same time. The assessment should also identify which assumptions are most likely to change, the level of uncertainty and whether these assumptions are significant in the value for money estimate.
The sensitivity analysis should also recognize that not all risks would occur simultaneously Expert advice in risk modeling should be obtained to determine the best method to use for the specific project.