2.3  Components of the PSC

The PSC comprises four elements:

•  Retained risk;

•  Raw PSC (base costing);

•  Competitive neutrality; and

•  Transferred risk.

Figure 2-1  Components of a Public Sector Comparator

These components highlight that a PSC should represent the total lifecycle cost to government of meeting the output specification under direct public procurement.

The key characteristics of the PSC are that:

•  it is expressed as the Net Present Cost of a projected cash flow based on the project-specific discount rate over the life of the contract;

•  it represents the most efficient form of public sector delivery;

•  it includes an adjustment for Competitive Neutrality; and

•  it contains an assessment of the value of the risks that are to be transferred to bidders and the risks that are to be retained by government.