11. Typically banks will provide between 80-90% of the capital required to fund a PFI deal by way of a loan to the bidding entity. Before agreeing the terms of the loan the bank will ensure that it understands the risk profile of the deal and that it is content with the way the risks are allocated under the terms of the contract. It achieves this through a process known as funder's due diligence where it conducts an in-depth review of the commercial, legal, financial and technical aspects of the deal. As a result of its due diligence, the bank may wish to conduct further negotiations to resolve any remaining concerns. Under either the Negotiated or Competitive Dialogue procedures funders are unlikely to become fully committed to financing terms until after the selection of a Preferred Bidder (PB).
12. It is also the default position that a Preferred Bidder Debt Funding Competition (PBDFC) be run to secure the best financing terms for individual PFI projects3. Such competitions are managed by the PB but the MOD will have the ability to oversee it, through its external financial advisers and the MOD PFU, to ensure the most cost-effective solution is accepted.
_______________________________________________________________________________________________
3 Subject to some exceptions