PFI Assurance Issue:

1. Commercial risk allocation, transfer & management

…to provide assurance that the PFI contract will be (or continues to be) desirable with all commercial & financial risks being comprehensively identified, analysed, allocated & managed in accordance with mandated policy and best practice. Risks shall be allocated to the party best placed to manage and cost them in a value for money way and supported by good historical data10.

Commercial/Financial Assurance Guide Ref:

• DE&S Commercial Assurance Guidance: 9. Risk

• DE&S Finance Instruction: 06/08, "Through Life Financial Assurance": 3. Risk

Relevant MOD policy/guidance used as measure for assurance:11

Relevant external policy/guidance used as measure for assurance:

• MOD PFU Guidance Note - MOD Standard Project Agreement v1 for PFI Projects

• MOD PFU Guidance Note - Management of Risk in PFI Projects

• JSP 507

• JSP 525

• AOF guidance on commercial risk allocation

• HM Treasury: Standardisation of PFI contracts (SoPC) Version 4

• HM Treasury: The Orange Book, Management of Risk - Principles and Concepts

• HM Treasury: The Green Book, [Appraisal and Evaluation in Central Government]

• HMT Application note: interest-rate and inflation risks in PFI contracts

• OGC Achieving Excellence Guide 4 - Risk and Value Management

Evidence Required for each Procurement Phase

All phases:

• Risk management plan & evidence of maturity assessment results

• Risk register with qualitative and quantitative assessments, mitigations and fallback plans. To include analysis of performance, cost and time (3 point estimates), optimism bias and evidenced with appropriate historical trend analysis. For Cat A/B projects, it is recommended that a Commercial risk allocation matrix (covering details of the allocation of commercial risks as allocated between the MOD and contractor via the contract) be completed to inform the risk register.

Up to Initial Gate:

Up to Market Engagement:

Up to close dialogue and Preferred Bidder appointment:

Up to Main Gate:

Up to Contract Award:

Post Contract Award:

• Summary of any changes to the risk allocation profile since the last phase.

• Project Agreement (incl all schedules)

• Bidders response to risk allocation matrix and draft Project Agreement confirming their acceptance of proposed risk allocations.

• Interface agreements (where applicable)

• Summary of any changes to the risk allocation profile since the last phase.

• Interface agreements (where applicable)

• Summary of any changes to the risk allocation profile since contract award.

• Risk analysis for any proposed major changes.