The PSC is a cost assessment of delivering the project using traditional public sector delivery methods. It serves as a benchmark for comparison with the Shadow Bid estimate of the costs of delivering the project as a P3. The PSC should represent the most likely project delivery option alternative to a P3, which may be a DBB, a DB, or DBF procurement, depending on the procuring agency. The PSC Tool models risk-adjusted project life cycle costs to calculate the costs of delivering the project using the PSC procurement approach.
In constructing the PSC, the procuring agency must first estimate project life cycle costs (see Table 3). Project life cycle costs include the costs of procuring, designing, constructing, financing, operating and overseeing a project over a defined period. The PSC should also consider potential project revenues derived from tolls or other sources as well as potential funding and financing for the project. The PSC tool allows users to enter cost and revenue assumptions, which the tool uses to model baseline project cash flows from preliminary project design and procurement through the proposed concession period.
|Capital Costs||Includes costs for development of the project, including planning, environmental documents, design and procurement, right-of-way acquisition and construction.|
|Operations Costs||Day-to-day costs of operating the project such as snow and ice removal.|
|Maintenance Costs||Items such as replacement of lighting.|
|Reconstruction and Rehabilitation||Items such as bridge or pavement replacement.|
|Financing Costs||Costs associated with the interest charged on public or private debt, returns to private equity, as well as other costs, such as issuance fees|
Estimated project cash flows are then adjusted for the costs of risks and for competitive neutrality. Outputs from the Risk Assessment Tool may guide user's assumptions concerning risk adjustments to the PSC. The costs of both retained and transferrable risks are added to the baseline PSC cash flows in different project phases depending on when the risks are likely to have an impact on project costs. To calculate the net present value (NPV) of project cash flows, a discount rate is applied. The discount rate represents the time value of money – cash flows in later years are valued less than cash flows in earlier years.