7.4.1 Following the commencement of a formal procurement process by the City of Edinburgh Council in October 1999 by way of an OJEC Notice, an initial list of eight potential bidders was reduced to four pre-qualified bidders, leading subsequently to the request for Best and Final Offers (BAFO) from two bidders; these latter two being (1) Capital Schools and (2) ESP.
7.4.2 Following formal and systematic evaluation of these BAFO bids it was recommended that ESP be nominated as 'preferred bidder' and Capital Schools be nominated as 'reserve bidder' until preferred bidder negotiations be successfully negotiated. The ESP consortium was headed by Amey Ventures/Amey plc.
7.4.3 The BAFO bid received from ESP equated to a first-year Unitary Charge of £11.695m which fell within the Council's initial affordability target of £12.0m.
7.4.4 It was a requirement of the PPP approval process that, as part of their Full Business Case submission, the City of Edinburgh Council undertook an Economic Appraisal which included the development of a Public Sector Comparator (PSC) to test that the PPP deal represented equal or better value-for-money than a publicly funded model.
7.4.5 This analysis by the City of Edinburgh Council and their advisors calculated the basic Net Present Value of the PSC to be £116.52m as at 1 April 2000 compared to a Net Present Value of £122.342m for the ESP bid.
7.4.6 The established Treasury PFI process, however, required that a realistic assessment of the value of the risks associated with the delivery and life-cycle operation of the buildings that were being transferred to ESP under the contract be added to the PSC for a more appropriate comparison of Net Present Values.
7.4.7 A sub-group of the City of Edinburgh Council PPP Project Team, consisting of representatives of the Council staff, financial advisers and technical advisers, undertook an exercise to quantify these risks. This resulted in an assessed construction risk of £5.043m and an assessed operational phase risk of £8.381m, a total of £13.424m being added to the basic PSC net profit value, making a total adjusted PSC of £129.944m or £7.602m (6%) more than the net profit value of the ESP bid.
7.4.8 The Full Business Case presented this analysis as evidence that the proposed PPP solution represented better value-for-money than the publicly-funded option. The Full Business Case was approved by the City of Edinburgh Council on 23rd August 2001 and subsequently, prior to signing, was also approved by both Audit Scotland and the Scottish Executive.
7.4.9 A Project Agreement was signed between the City of Edinburgh Council and ESP on 8th November 2001 in relation to the design, building, finance and maintenance of a programme of 13 new or refurbished/extended schools and related projects (Phase 1).
7.4.10 This was subsequently amended by supplemental agreements in 2003 and 2004 to include a further four projects, known as the 2004 schools (Phase 2).
7.4.11 These contracts required ESP to undertake the provision of maintenance, cleaning, catering and associated facility management requirements of all the accommodation and facilities provided under the PPP1 Project Agreement and Supplemental Agreements for a period of 30 years.