4.4. Raw PSC
| The Raw PSC provides a base costing under the public procurement method where the underlying asset or service is owned by the public sector. This includes all capital and operating costs, both direct and indirect, associated with construction, finance, maintenance and delivery of the service (or underlying asset) over the same period as the term under the PPP proposal and to a defined performance standard as required under the output specification. A comprehensive and realistic allocation of all direct and indirect costs is necessary. Expected cash flows for the Raw PSC need to be forecast over the life of the project. Therefore, it is important to fully understand the method of delivery under the project to identify the nature and timing of all key costs. |
|
The raw PSC should not include any valuation of risks to which Government remains exposed. In many cases, the public procurement method may involve an element of design and construction outsourcing or other forms of private contractor management.
The raw PSC should not include any third party revenues.
| Challenges in Using the PSC The following are some of the key challenges that are faced while using the PSC. • Forecasting costs for new public sector projects in a sector where there has been no PPP is difficult • It assumes the public sector can always deliver capacity, has access to funds and is compliant with best practices • Public sector data is not always available • Estimating the quantum, probability and timing of risks is subjective - Government agencies tend to have an 'optimism bias' while estimating the values of risks • Estimating the PPP reference is subjective • Choosing the discount rate is controversial |