 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 Test Be 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 Key Market Failure / Market Abuse monitored in future

 Questions and Answers  Or…. peace & quiet / tea & coffee!