Financial Partnerships Unit

Current Issues that impact on Project Affordability and VFM

Ben King

Financial Partnerships Unit

Overview House Rules Current Issues Q&A

House Rules – VFM / Affordability Should be tested and assessed at each key milestone

- OBC / OJEU / PB / FBC VFM

- Importance of defined scope / risk transfer interface Affordability

-First year AND every year / transparency & clarity

Public Sector must try and control / manage

Minimise the inevitable delay!

Insurance Pricing and Availability: VOLATILE / UNCERTAIN Public Sector want vs what Private Sector can deliver

(OGC side letter) PuK / HMT consulting (standardisation of deliverable

benchmarking arrangements for opex insurances) SE providing input

Importance of Balance Sheet TestBe aware of SPV / FSA issue

Best Value Funding Solutions Concession length vs Optimal Debt length

- RSG, Tenor and Tail of loan

- Lifecycle / Handback / Flexibility

Payment Arrangements Evaluating senior debt options

- Bank / Bond

- Level playing field & qualitative and quantitative.

Key element assessed in PB KSR

Funding competitions guidance

Phased / Interim Payments Economic benefit

- Risk transfer vs budget availability

- Lifecycle / Handback / Flexibility

Develop in competition – but limitations as full project scope unknown- Consider: contractual / financial / STUC implications

Relationship to RSG- Circular to Council’s

- Annex B clarified / ITN drafting

Must be a Council driven agenda

Calibration Project bespoke = flexible area Influences funders views on performance / termination Develop calibration model

so Council / Bidders / Funders understand implications of:

- performance & deductions

- Warning notice levels / Duration

- Repeat Failure tolerances

- Minimum deduction levels / GSU’s

Unless shared with Bidders, contentious

Key to VFM pricing and an affordable project

Avoiding Re-scoping May address affordability but could compromise VFM? Clarity / Deliverability / Correctness of initial scope fundamental to

project success- Constraints in market- Refurbishments- Correct use of BaFO

Planning / site issues addressed early on- Funders / SE won’t accept these risks : NOR should Council’s

Council Management / Dialogue KeyMarket Failure / Market Abuse monitored in future

Questions and Answers Or…. peace & quiet / tea & coffee!