A preliminary Public Sector Comparator (PSC) and a Shadow Bid Model (SBM) must be developed for a likely PPP during the Business Case and/or Procurement Strategy phases, unless otherwise agreed by NSW Treasury. The PSC and SBM is updated prior to the request for proposal being released to shortlisted bidders to reflect the most up to date information prior to receiving bids.
The PSC and SBM are intended to inform the likely value for money drivers and the likelihood of achieving value for money in the case of a PPP procurement.
The PSC:
• represents the State's best and/or likely alternative to the PPP; and
• is compared to the final risk adjusted tender price to determine value for money on a quantitative basis, noting the broad definition of value for money per the NSW Procurement Policy Framework (see also Section 6.5.5) of these Guidelines.
The SBM:
• represents the Responsible Agency's best estimate of the private consortia's bid price to deliver the output specification under a PPP project structure
• should reflect the private consortia's expected costs, capital structure and Commercial Principles; and
• serves as a basis for evaluating and interrogating the reasonableness and affordability of the bids, enabling the evaluation panel and advisers to validate and challenge the bids on a comparable basis.
The PSC and SBM require a high level of technical expertise in project costing, financing and risk analysis. The Responsible Agency is required to consult with NSW Treasury, and the PSC and SBM must be developed in conjunction with NSW Treasury. Responsible Agencies should use internal resources (where possible) and engage various technical experts to advise on capital and operating cost estimates, as well as any revenue estimates. Given estimates are subjective, they should be verified through benchmarking analysis, independent review or other checks. Stress testing of model robustness and key assumptions should be conducted.
The National PPP Guidelines provide detailed guidance on constructing PSCs for social infrastructure. Responsible Agencies must consult with NSW Treasury to obtain the appropriate discount rates (including risk-free rate) for the PSC and SBM used in availability and User-charge infrastructure projects.
The same discount rate should be used to assess bids against the SBM. This may vary subject to the level of systematic risk transferred to the private sector. The SBM may also be used as an indicator of affordability. The Responsible Agency must consult with NSW Treasury immediately if at any time affordability issues are likely to arise.
After a project is approved for PPP procurement, the PSC and SBM are to be refined within the approved parameters/limits and updated in line with the terms of the RFP, draft Project Deed and output specification.
The PSC and the SBM are dynamic and should be updated as new information is received, but should be finalised prior to, or soon after, RFP release. The PSC and/or SBM must not be modified after the opening of bids unless there is an obvious significant error or new information which impacts on the estimated forecasts. Any such changes must be documented, consulted on and approved prior to making any modifications to the PSC and/or SBM.