Appendix B: PSC construction checklist

The following checklist may be helpful in verifying that a Public Sector Comparator (PSC) has been rigorously constructed according to the guidance provided in this technical note.

Defining the scope of the Reference Project

Does the Reference Project satisfy the requirements under the output specification?

Is the Reference Project based on the most efficient and appropriate form of public sector delivery?

Does the PSC reflect the public sector delivery proposed in the Reference Project?

Quantifying the various elements of the PSC

Verify that all costs have been included in the four elements of the PSC (Raw PSC, Competitive Neutrality, Transferred Risk and Retained Risk).

Ensure that all capital costs (upfront and ongoing), and operating and maintenance costs to deliver the service are included.

Ensure that all material and quantifiable risks have been identified and accurately valued using appropriate valuation techniques.

Run a sensitivity analysis to determine the flexibility and robustness of the PSC model if changes are made in the key assumptions and the underlying Reference Project.

Has a sanity check been performed on the various components of the model to verify that the assumptions are reasonable, including capital, operating and maintenance costs?

Ensuring an adequate audit trail is maintained

Record and discuss the key assumptions used in the PSC. Are these assumptions realistic and appropriate taking into account observation of past practice, performance, current practice and anticipated future developments?

Record valuation methodologies employed for various costs, including the techniques used to value key risks.

Construct a detailed risk matrix analysis including the expected consequence of risk, financial impact and proposed mitigation strategy.

An independent party should check the reasonableness of the assumptions and confirm that the assumptions made have been incorporated correctly into the model to produce an accurate result (both arithmetic and logic).

Compliance with all applicable procedures and approvals

Ensure procurement team has appropriate resources to devote to the construction of a PSC.

Determine the disclosure policy for the PSC, having regard to the expected level of competition in the market and other relevant factors.

Ensure the portfolio Minister and the relevant Cabinet committee (where appropriate) have formally signed off on the final PSC before the commencement of the bidding process.

Ensure the portfolio Minister has formally confirmed to the Treasurer that the PSC has been met or improved upon by an acceptable bid.