The financial model forms a critical component of a Partnerships Victoria project throughout its lifecycle. The private party develops its financial model during the procurement phase. This model sets out in detail the specific cash flows required by the private party to deliver its proposal. It is usual in Partnerships Victoria projects for the model to be updated at financial close, becoming the 'base-case financial model' for the purposes of the project deed.
The financial model continues to be used throughout the life of the project, particularly as a key input to the calculation of the financial consequences of change events and compensation events. The project deed will include specific processes for updating the model to reflect changes. In user-pays projects such as toll roads, the financial model is also an important input to various demand risk-sharing mechanisms, such as the government party sharing in additional revenue generated by the private party, and adjustment mechanisms to deal with the impact on demand of changes in the surrounding road network.
Given the complexity of the financial model, the contract director should consider obtaining expert advice from external financial advisers and/or Treasury Corporation of Victoria on its use and interpretation. The contract manager should also institute quality assurance processes (such as version controls) to ensure that any updates to the model are correctly recorded.