4.3.3.  Fully Scoped Public Sector Comparator and Evaluating PPP Bids

A PSC is an estimate of the net present value (NPV) of a project's whole of life costs and revenues using the most efficient and likely form of Government delivery. The PSC must be fully updated prior to the Government receiving detailed proposals from the shortlisted bidders. It is the main quantitative tool in determining whether a PPP Bid is value for money. However, the PSC is a dynamic tool. It may need to be updated for comparison with final bids, subject to certain constraints9.

The construction of a PSC requires a high level of technical expertise in project costing, financing and risk analysis. NSW Treasury is responsible for advising on the development of PSCs and will assist agencies with advice on technical issues, including the discount rate (also see Volumes 4 and 5 of the National Guidelines) to be used in comparing PPP Bids to the PSC.

Where an agency wishes to deviate from the methodology in the National Guidelines and determine a specific discount rate based on current market data, NSW Treasury must approve the discount rates used.

The PSC is a quantitative benchmark with inherent limitations as forecasts span the life of the proposed contract period. Estimating the impact of risks on costs and revenue is complex and often subjective. To maintain its usefulness as a tool, the PSC will be:

•  accompanied by qualitative considerations in determining the potential value for money of a private finance arrangement;

•  subject to sensitivity testing and scenario analysis; and

•  sufficiently flexible to allow new information to be incorporated as it comes to light.

The PSC should be developed on a basis that is consistent with the nature of the proposed project. The calculation of the PSC varies for economic and social infrastructure projects, with key differences outlined below.

Government also recognises that individual projects may have characteristics of both economic and social infrastructure projects. Such projects will need to be considered on a project specific basis with reference to Volumes 3 and 7 of the National Guidelines.

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9 See NSW Treasury for guidance on when it is appropriate to update PSC after the receipt of RFP submissions.