VIABILITY

For PFI to be viable the investment objectives and desired outcomes need to be translatable into outputs that can form the basis of a contract and a sound payment mechanism; for example the quality and quantity of the outputs need to be ones that can be measured. Many service areas can be described in contractual terms, but some areas will be inherently 'non-contractible' as outputs.

Issue

Question

Stage 2 Assessment Requirement

Project level outputs

Is the project delivery team satisfied that a long term contract can be constructed for this project? Can the contractual outputs be framed so that they can be objectively measured?

The project team will need to update the Stage 1 assessment. Evidence will need to be provided as to:

• how operable contracts would be constructed;

• what contractual outputs/requirements (KURs) will be measured; and

• how the contractual outputs/requirements will be measured.

Is the requirement deliverable as a service and as a long term arrangement? Can the contract describe the requirements in clear, objective, output-based terms?

The project team will need to update the Stage 1 assessment. The project will need to provide such as the Output Based Specification (OBS) as evidence.

Can the quality of the service be objectively and independently assessed?

The project team will need to update the Stage 1 assessment. The project team will need to provide the high-level performance indicators that will be used as the basis for measuring the successful delivery of the services required.

Is there a good fit between needs and contractible outcomes?

The project team will need to update the Stage 1 assessment.

Can the contract be drafted to avoid perverse incentives and to deliver quality services?

The project team will need to update the Stage 1 assessment.

Does the project require significant levels of investment in new capital assets?

The project team will need to update the Stage 1 assessment and confirm the:

• level of investment required; and

• new capital assets to be built or refurbished.

Are there fundamental issues relating to staff transfer? Would any transfer be free from causing any loss of core skills that have strategic and/or long term importance to the procuring authority?

The project team will need to update the Stage 1 assessment highlighting the potential number, if any, of civilian staff likely to transfer under TUPE plus the effect on Military manpower. The local Human Resources Business Partner will need to provide an input as to whether there are any overriding HR strategic issues that need to be taken into account.

Is service certification likely to be straightforward in terms of agreeing measurable criteria and satisfying the interests of stakeholders?

The project team will need to highlight any specific issues and how they intend to resolve them.

Does the project have clear boundaries (especially with respect to areas of procuring authority control)? If there are interfaces with other projects are they clear and manageable?

The project team will need to update the Stage 1 assessment by identifying any specific interfaces or dependencies with other projects. The project team will need to state how they intend to manage these interfaces.

Can the service be provided without the essential involvement of Authority personnel? To what extent does any involvement negate the risk transfer that is needed for VfM?

The project team will need to confirm whether there is an essential need for the Authority to be involved in the delivery of the service. If there is a need, the project team will need to identify any specific dependencies such as manpower, data etc that the contractor will have to rely upon from the Authority. The project team will need to assess what the potential impact of failure of the Authority to provide the services and resulting impact upon VfM.

Is the contractor able or likely to have control/ownership of the intellectual property rights associated with the performance/design/development of the assets for the new service?

The project team will also need to make an assessment as to whether is a strategic need for the Authority to retain control of IPR and what the likely consequences are to Department if it doesn't.

Will existing or planned elements within the scope of the project -or interfacing vitally with it - be complete before the start of the new service?

The project team will need to provide an assessment as to whether service will commence prior to the completion of the asset and what impact it might have to user. The project team will need to assess the how the transition phase will be managed before full service commencement.

Operational flexibility

Is there a practical balance between the degree of operational flexibility that is desired and long term contracting based on up-front capital investment?

The project team will need to update the Stage 1 assessment by stating the specific long-term tradeoffs between operational flexibility and cost that the Department and project are willing to accept for this project.

What is the likelihood of large contract variations being necessary during the life of the contract?

The project team will need to update the Stage 1 assessment taking into account any technological advances; impact of organisational changes and future demand for the services.

The project team will also need to state what measures that intend to take to manage change over the life of the contract.

Can the service be implemented without constraining the delivery of future operational objectives?

The project team will need to update the Stage 1 assessment identifying any constraints that may impede the delivery of future objectives.

Is there confidence that operational flexibility is likely to be maintained over the lifetime of the contract, at an acceptable cost?

The project team will need to provide evidence of the stability of the requirement from a Departmental perspective and the potential likelihood of change whether it is small or large. If change is anticipated or likely to happen, the project must demonstrate it has sufficient funding to allow for operational flexibility under a PFI contract.

Equity, efficiency and accountability

Are there public equity, efficiency or accountability reasons for providing the service directly, rather than through a PFI contract?

The project team will need to update the Stage 1 assessment.

Does the scope of the service lend itself to providing the contractor with "end-to-end" control of the relevant functional processes? Does the service have clear boundaries?

The project team will need to update the Stage 1 assessment.

Are there regulatory or legal restrictions that require services to be provided directly?

The project team will need to update the Stage 1 assessment.

Is the private sector able to exploit economies of scale through the provision, operation or maintenance of other similar services to other customers (not necessarily utilising the same assets)?

The project team will need to assess the likelihood of whether economies of scale can be exploited and, if it can, what is the potential upside to the project.

Does the private sector have greater experience/expertise than the procuring authority in the delivery of this service? Are the services non-core to the procuring authority?

Is a PFI procurement for this project likely to deliver improved value for money to the department as a whole, considering its impact on other projects?

OVERALL VIABILITY

Overall, in considering PFI, is the department satisfied that suitable long term contracts can be constructed, and that strategic and regulatory issues can be overcome?

The project team will need to provide a brief narrative summarising whether the overall investment objectives and desired outcomes can be translatable into outputs that can be contracted for, measured and agreed as well as ensuring that strategic and regulatory issues can be overcome.