7. A PFI contract may be suitable where:
• The required capability needs a major capital investment (greater than £20 million) in new or refurbished capital assets (e.g. infrastructure or equipment);
• the nature of the required capability allows the Department to define its needs as service outputs in an output based specification that can be adequately contracted for in a way that ensures effective and accountable delivery of public services over the long term,
• the allocation of commercial risks between the public and private sectors can be clearly made and enforced, and the private sector has the ability and willingness to accept significant levels of risk transfer2 and is able to effectively manage those risks through life, especially those associated with construction and delivery;
• the private sector has the necessary skills and competencies to provide the required service and there is sufficient market capacity and interest to generate and sustain healthy competition;
• the nature of the assets and services identified as part of the scheme, as well as the associated risks, are capable of being costed on a whole-life, long-term basis;
• the overall value of the contract is sufficiently large to ensure that procurement costs are not disproportionate;
• the contractor can be robustly incentivised to provide the required level and quality of service through-life;
• the requirement and associated technology and other aspects of the sector are stable over the contract term, and not susceptible to fast-paced change;
• planning horizons are long-term, with confidence that the assets and services will be required for a long period into the future (typically greater than 15 years);
• the scope of the service has clear boundaries with manageable interfaces with other systems, services or projects and lends itself to providing the service provider with "end-to-end" control of the relevant functional "input" processes;
• there is scope for innovation in either the design of the solution or in the provision of services;
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2 E.g. design, construction, operation, availability, obsolescence, financing, and residual value.