3.9.1.4  Sensitivity analysis

Before creating this model, it is expected that the PPP Project Team would have narrowed down the list of delivery options to three or fewer, running separate versions of the base cost model for each option. Then, when the PPP Project Team settles on one delivery option, based upon some combination of greater Value for Money and ease of implementation - amongst others - it is advised to run sensitivity and scenario analyses, testing various iterations of key variables to see how the VFM Analysis is impacted. These key variables could include:

  Inflation rate;

  Capital expenditure and operating costs - with a +/- percentage change;

  Unitary indexation percentage - with a +/- percentage change;

  Gearing ratio - changing ratio of debt/equity;

  Changes in the concession period - +/- shift in the number of years;

  Project delays; and,

  Financing costs.

Ease of implementation is not expected to be objective criteria. However it is expected to be qualitative criteria which is determined through the following parameters:

1.  Precedent PPP structures

2.  Compliance of the structures' requirement with local legal requirements

3.  Capacity of the contracting authority to manage the structures