23. PFI acquisition involves a number of specialist skills that are not available to MOD in-house. In general, specialist external advice will be required on financial, legal and insurance matters, for example:
Financial
• Private financing issues (bank or bond financing).
• Financial modelling.
• Payment and performance models.
• Funding competition.
Legal
• Negotiating and drafting project specific contract schedules.
• Negotiating derogations from SoPC.
• Developing the corporate, funding and sub-contract documents
Insurance
• Identifying what cover is required and what is available in the market.
• Pricing of insurance policies.
• Inter-relationship between transferred risk and insurance requirements.
24. The MOD PFU requires advisers to confirm to acquisition teams (via a clear written endorsement of all key decisions) the following. Should advisers not support proposals to proceed, this should also be formally recorded.
a) Whether the deal proposed is appropriately structured to deliver the commercial outcome that MOD is seeking and is a realistic commercial position that represents value for money and is both deliverable and financeable in the current PFI market. In particular to highlight any material areas where the private sector bidders have raised concerns regarding deliverability and what steps are being taken to address them.
b) Whether the commercial aspects of the project (and bids received, if appropriate) have reached an appropriate level of maturity to support the current phase of engagement with the market. In particular drawing attention to any significant areas outstanding where the MOD could be exposed to risk of increased cost or delay through a lack of maturity.
c) Whether the timetable proposed to deal close is realistic indicating any key risks that may impact on the delivery of the timetable with details of the consequences (i.e. renegotiation of the price) that the MOD may be exposed to if the timetable is not met.
25. Advice should be sought from the MOD PFU on when and how to appoint external advisers and what their role might be. In addition, guidance on how to engage external financial advisers using Framework agreements is published on the MOD PFU website.