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P3 Toolkit

Analytical Tools

P3-VALUE: Shadow Bid Tool User Manual

December 31, 2013

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Appendix A: Qualitative Assessment Issues Checklist

This checklist considers various qualitative factors and corresponding questions to consider during VfM analysis. Although there is no set guidance or checklist for the United States, this checklist has been developed using examples from VDOT, Australia, and the UK.

Viability

Project Level Outputs

  • Is the agency project delivery team satisfied that a long term contract can be constructed for this project?
  • Is the requirement deliverable as a service and as a long term arrangement?
  • Can the contract describe the requirements in clear, objective, output based measurable terms?
  • Can the quality of the service be objectively and independently assessed?
  • Is there a good fit between needs and contractible outputs?
  • Can the contract be drafted to avoid adverse incentives and to deliver quality services?
  • Is service certification likely to be straightforward in terms of agreeing to measurable criteria and satisfying the interests of stakeholders?
  • Does the project have clear boundaries (especially with respect to areas of procuring agency control)?
  • If there are interfaces with other projects, are they clear and manageable?
  • Can the service be provided without the essential involvement of agency personnel?
  • To what extent does any involvement of agency personnel negate the risk transfer that is needed for VfM?
  • Is the contractor able or likely to have control/ownership of the intellectual property rights associated with the performance / design / development of the assets for the new service?
  • Will existing or planned elements within the scope of the project – or related to it – be complete before the start of the new service?
  • Will there be significant levels of investment in new capital assets?
  • Are there fundamental issues relating to staff transfer or other workforce issues?

Facilities Management (Soft Services)

  • Are there good strategic reasons to retain soft service provision in-house e.g. longer-term implications of skill transfer?
  • What are the relative advantages and disadvantages? Is optimal risk allocation achieved by transfer or not?
  • Is there a commitment that the assumed benefits can be delivered without eroding the overall terms and conditions for staff?

Operational Flexibility

  • Is there a practical balance between the degree of operational flexibility that is desired and long term contracting based on up-front capital investment?
  • What is the likelihood of large contract variations being necessary during the life of the contract?
  • Can the service be implemented without constraining the delivery of future operational objectives?
  • Is there confidence that operational flexibility is likely to be maintained over the lifetime of the contract at an acceptable cost?

Equity, Efficiency and Accountability

  • Are there public equity, efficiency or accountability reasons for providing the service directly, rather than through a PPTA contract?
  • Does the scope of the service lend itself to providing the contractor with "end-to-end" control of the relevant functional processes? Does the service have clear boundaries?
  • Are there regulatory or legal restrictions that require services to be provided directly?
  • Is the private sector able to exploit economies of scale through the provision, operation or maintenance of other similar services to other customers (not necessarily utilizing the same assets)?
  • Does the private sector have greater experience/expertise than the procuring agency in the delivery of this service? Is the service non-core to the procuring agency?
  • Is a PPTA procurement for this project likely to deliver improved VfM to the Commonwealth as a whole, considering its impact on other projects?

Overall Viability

  • Is the agency satisfied that a suitable long term contract can be constructed and that strategic and regulatory issues can be overcome?
Performance/Desirability

Risk Management

  • Is the private sector likely to be able to manage the generic risks associated with the program more effectively than the procuring authority?
  • Bearing in mind the relevant risks that need to be managed for the program, what is the ability of the private sector to price and manage these risks?
  • Can the payment mechanism and contract terms promote good risk management?

Innovation

  • Is there scope for innovation in either the design of the solution or in the provision of the services?
  • Does some degree of flexibility remain in the nature of the technical solution/service and/or the scope of the project? Is the solution sufficiently free of constraints imposed by the Commonwealth's legal requirements and/or the agency's technical standards?
  • Does a preliminary assessment indicate that there is likely to be scope for innovation in the program?
  • Could the private sector improve the level of utilization of the project assets (e.g. through selling, licensing, commercially developing for third party usage etc.)?

Contract Duration and Residual Value

  • How far into the future can service demand be reasonably predicted?
  • What is the expected life of the assets? What are the disadvantages of a long contract length?
  • Are there constraints on the status of the assets after the contracts end?
  • Given the possibility of changes to the requirement, the assets and the operating environment, is it possible to sustain VfM over the life of the contract utilizing mechanisms such as benchmarking and technology updates?

Incentives and Monitoring

  • Can the outputs of the investment program be described in contractual terms, which would be objective and measurable?
  • Can the service be assessed independently against an agreed standard?
  • Would incentives for service delivery be enhanced through a P3 payment mechanism?

Life Cycle Costs

  • Is it possible to integrate the design, build and operation elements of the project?
  • Are there significant ongoing operating costs and maintenance requirements? Are these likely to be sensitive to the type of construction?
  • Overall desirability Overall, is the agency satisfied that the P3 would bring sufficient benefits that would outweigh the expected higher cost of capital and any other disadvantages?
Achievability

Market Interest

  • Is there evidence that the private sector is capable of delivering the required outcome?
  • Does a significant market with sufficient capacity for these services exist in the private sector?
  • Is there likely to be sufficient market appetite for the projects in the program? Has this been tested? Is there any evidence of market failure for similar projects?
  • Have any similar projects been let to the market? Has the procuring agency's commitment to a P3 solution for this type of project been demonstrated?
  • Does the nature of the project suggest that it will be seen by the market as profitable?
  • Are the risks associated with design, development and implementation manageable?

Other Issues

  • Is the procurement feasible within the required timetable? Is there sufficient time for: resolution of key agency issues; production/approval of procurement documentation; selection and evaluation of Proposers, negotiation, approvals and due diligence?
  • Is the overall value of the project significant and proportionate to justify the transaction costs?
  • Does the nature of the deal and/or the strategic importance of the work and/or the prospect for further business suggest that it will be seen by the market as a potentially profitable venture?
  • Does the agency and the P3 office have the skills and resources to define, deliver and support the service throughout the procurement and the subsequent delivery period?

Overall Achievability

  • Overall, is the agency satisfied that a P3 procurement program is achievable, given an assessment of the market, Authority resources and the attractiveness of the proposal to the market?

 

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