7. The use of the Public Sector Comparator and scope ladder
The Public Sector Comparator (PSC) remains an important tool to ensure that Government is an informed buyer and has the knowledge to drive competitive outcomes during the tender process. It is used in a number of ways to drive outcomes in PPP projects, including:
- a preliminary PSC used to better understand the potential for value when seeking Government approval for using a PPP as the preferred procurement method at the business case stage; and
- a full risk adjusted PSC used as a cost benchmark for bidders to beat during the procurement process. There is no longer an assumption that should the PSC cost expectations not be met through a competitive process that the Government will use the PSC as the basis to a revert to traditional design and construct delivery.
The Procuring Agency is required to develop a PSC that must be approved by Government prior to the release of the Request for Proposal document. Any subsequent material changes must also be approved.
Disclosure
The Government will determine the level of disclosure of the PSC and the scope ladder for each project based on project specific circumstances. Current practice of disclosing the raw PSC will continue with consideration given to complex projects that could benefit from disclosing the full PSC as an affordability benchmark and scope ladder to short listed bidders.
Scope ladder
A new requirement is for the Procuring Agency to develop a scope ladder for approval alongside the PSC. The level of development of the scope ladder will be informed by the type of PPP project. In a typical PPP project, a scope ladder would not be disclosed to bidders and only be used to inform negotiations if bids were above the PSC. Whereas for projects that have a complex output specification or where government is seeking to maximise scope, a clearly defined scope ladder would be disclosed to shortlisted bidders alongside the Risk Adjusted PSC as an
The purpose of the scope ladder is to identify any scope items bidders can either remove or add should bids be over or under the PSC. Developing the scope ladder concurrently with the PSC and RFP documents means that priorities will be clearly communicated to bidders and Project Directors will have a pre- agreed mandate to negotiate with bidders in order to present scope options to government for decision. Any scope ladder will need clear definition as it is not the intention for the scope ladder to be used to request multiple options from bidders as part of the tender process.
Any scope changes or cost movement against the PSC should be justified based on a full value for money analysis.
Quality Assurance
The accuracy and robustness of the PSC must be assessed prior to Government approval of the RFP. This will include:
- a quality assurance (QA) review workshop conducted and documented by Procuring Agencies. The objective is to improve the quality of the PSC and reduce risk of error and inaccuracies. It should ensure that outputs are an appropriate reflection of the inputs and assumptions. For guidance on the implementation of this review requirement please refer to www.partnerships.vic.gov.au.
- a separate DTF managed HVHR review of the PSC by an independent external adviser to ensure that the estimate is robust.
Roles in the development of the PSC and scope ladder
Agency
Primary responsibility for the construction and use of the PSC and scope ladder rests with the Procuring Agency, in particular the development of the output specification and Reference Project for the PSC.
The construction of a PSC requires a high level of specialist skills that will generally require the engagement of external expert advisers. The PSC construction process
Department of Treasury and Finance
DTF may be involved in assisting with developing the preliminary PSC. DTF will review the preliminary PSC as part of the business case.
DTF will review the final PSC and scope ladder when government approval is sought prior to the release of the RFP to bidders. As part of this review, DTF will manage the separate independent HVHR review of the PSC.
DTF is developing guidance to assist Procuring Agencies with aspects of undertaking value for money assessments. This guidance will include detail on the importance of qualitative criteria and assessment.