Public-Private Partnerships:New VfM Guidance

Peter Conlong

Finance & Central Services Department

Analytical Services Division

Outline of Presentation

Need for new VfM guidance HMT guidance Scottish approach Questions?

Need For New Guidance

Revisions to HMT Green Book Reports by NAO & Audit Scotland New Treasury VfM Assessment Guidance

To be applied in Scottish context

New HMT Green Book

“Unbundling” of discount rate Optimism bias Tax adjustments Emphasis on valuing benefits

Historical Problems With VfM Assessments

Focus solely on “the numbers”? Undertaken too late in process? Public procurement option not credible?

New Treasury VfM Guidance

PPP only one of a number of options Only use where appropriate & VfM Assess VfM early in process

New Appraisal Process in Scotland

Stage 1: Programme Level AssessmentStage 2: Project Level AssessmentStage 3: Procurement Level Assessment

Stage 1 - Programme Level

Stage 2 - Project Level

Undertaken at OBC stage Test specific project Qualitative & quantitative assessmentsIncreased reliance on judgement

HMT Quantitative Model

Simplified approach – reflects:point at which analysis takes placedesire that authorities be able to run the model

themselves

Use only at Stage 1 and Stage 2

Stage 3 - Procurement Level

Ongoing process from OBC to close Adequate competition? Risk-sharing deliverable? Confirm affordability Plus…

Final VfM Test

Unlike HMT, we are retaining final test of VfM against cost of public procurement

More detailed quantitative analysis Consider alongside qualitative assessment Provides clear audit trail

Summary

New guidance required 3-stage assessment process Quantitative and qualitative Retaining final VfM test

Any Questions?

The guidance is currently being finalised - we would be grateful for your views