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Accelerated Procedure |
Procedure under which shorter advertising periods are permitted due to urgency
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ADB |
Activity Data Base
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Affiliated undertaking |
Any undertaking where the contracting entity may exercise a dominant influence
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Aggregation |
Adding together the value of separate contracts for the same supply, service
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Appraisal |
The process of defining objectives, examining options and weighing up the costs and benefits and risks and uncertainties before a decision is made. |
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Attestation |
Certification that contracting entities' award procedures conform to Directives |
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BAFO |
Best And Final Offer |
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Balance sheet |
A list of everything a company owns and owes at a given time. The amount of everything owned always equals how much the company owes plus how much belongs to its owners. A financial statement describing a company's financial situation at a moment in time. The balance sheet includes a company's assets, liabilities and shareholders' equity on a given date, usually the last day of its financial year. |
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Bank Margin |
The margin of interest the bank charges on the senior debt over the base rate. |
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Bates Review |
In May 1997, the incoming Government commissioned Malcolm Bates, Chairman of the Pearl Group, to undertake a rapid review of the PFI. He delivered his report in June 1997. |
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Bidder |
A private sector syndicate (or in-house team) bidding for a PFI procurement. |
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Bond |
An IOU issued by companies or by local governments when they borrow money. |
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Call-off Contracts |
Contracts providing for quantities to be called off as required by purchaser
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CCA |
Credit Cover Amount. |
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CDM Regulations |
The Construction (Design and Management) Regulations 1994; |
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CIPFA |
Chartered Institute of Public Finance and Accountancy. |
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Collateral warranty |
A warranty to a third party who has an interest in the primary contract.
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Compliance Directive |
Alternative term for Remedies Directive when applied to the Public Sector Utilities.
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Concession Period |
The duration of the contract. |
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Concessions Contracts |
Contracts for which the reward is the right to exploit rather than payment. |
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Contingency |
An allowance included in the estimated cost of a project to cover unforeseen circumstances. |
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Cover ratio |
Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed-charge coverage ratio.
Top of the page
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DBFO |
Design Build Finance Operate. One of a number of terms used to describe the main features of PFI arrangements. Variations include DCMF (Design, construct, maintain and finance). |
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Derogation |
Reduction of stringency or non-application of a rule (e.g. Directive)
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Design Contests |
Competitions to provide a plan or design to be selected by a jury.
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Direct agreement |
If the public sector awards a PFI contract to company X, it may simultaneously conclude a direct agreement with some or all of company X’s funders. The direct agreement allows the funders to replace company X as the PFI partner under the main contract (without the contract being terminated) in a situation where company X was failing to perform and the public sector would otherwise terminate the contract. A direct agreement is advantageous for the funders, because it gives them an extra degree of protection for the finance they have put up for the contract; and for the public sector, because it provides extra insurance that the private sector will perform. This is also sometimes known as ‘‘step-in rights’’ for funders. |
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Direct Effect |
Principle that EC Directives apply directly and immediately to government bodies
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Directive |
EU legislation which member states must translate into national legislation |
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Discounting |
The comparison of quantities which are distributed over time by converting them to a present day value, by applying a discount rate. |
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Economically advantageous |
Award criterion taking account of other factors as well as price
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Equity |
Funds provided by the shareholders of a business, giving ownership rights including the right to variable returns based on the performance of the business. |
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Excluded sectors |
Sectors excluded from original EU public procurement rules.
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Exclusive Rights |
Grants of exclusive rights may make bodies subject to the Utilities Directive
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FBC |
Full Business Case |
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Financial appraisal |
Analysis of cash flows. |
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FITN |
Final Invitation to Tender |
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Force Majeure |
Act of God. An event that is outside the control of any party to a contract. |
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Framework Agreements |
Agreements laying down terms, conditions & prices governing future contracts |
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FRS |
Financial Reporting Standard. |
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Gantt Chart |
A Gantt Chart is a diagrammatic representation of the timing and duration of the various sequential phases of a project, commonly used in project management, and routinely available in many project management software packages. |
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GDP Deflator |
An index of the general price level in the economy as a whole, measured by the ratio of gross domestic product (GDP) in nominal (ie cash) terms to GDP at constant prices. |
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Green Book |
Guidance issued by HM Treasury on how to appraise investment in public
services. |
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HMIC |
Her Majesty's Inspectorate of Constabulary. |
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IM |
Information Memorandum |
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Indicative notice |
An advance warning of a contract to be awarded at some time in the future |
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In-house |
Pertaining to a separate unit within an entity, as distinct from a third party
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Intellectual Property Rights |
All present or future interests, whether legal or equitable, in patents, registered or unregistered designs, trade marks and service marks (whether registered or not), copyright, design right, and all other intellectual and industrial property rights including those subsisting (in any part of the world) in inventions, designs, drawings, performances, computer programs, semiconductor topographies, plant varieties, confidential information, business names, goodwill and the style of presentation of goods or services and in applications for protection thereof |
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Interest Rate Swap |
A binding agreement between counterparties to exchange periodic interest payments on some predetermined principal, which is called the notional principal amount. For example, one party will pay fixed and receive variable. |
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IPS |
Industrial and Provident Societies. |
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IRR |
Internal Rate of Return. The rate at which future cash flows, discounted back to today, equal its price. |
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ITN
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Invitation To Negotiate
Top of the page |
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Joint Venture |
A business venture jointly controlled by two or more independent firms |
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LIBOR |
London Inter Bank Offering Rate - Normally the bank base rate of interest. |
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MBO |
Management buy out. |
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Mezzanine Debt |
See Equity |
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MIPS |
Median of Public Sector Schemes |
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Monte Carlo Simulations |
A statistical method of calculating the effect of risk on outcome by producing a probability distribution of possible outcomes |
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Negotiated Procedure |
Procedure where only chosen suppliers are invited to negotiate contracts.
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Non-Priority Services |
Services subject to less stringent rules in Services & Utilities Directives
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Notice |
General term for advertisement placed in the Official Journal
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NPV |
Net Present Value. The aggregate value of cashflows over a number of periods discounted to today ’s value. |
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OBC |
Outline Business Case |
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OGC |
Office of Government Commerce
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OJEC |
Official Journal of the European Communities. |
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Open Procedure |
Procedure where bidders can apply without prior selection
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Opportunity cost |
Value of most valuable alternative use (eg the value of an asset in the next best alternative use to which the asset could be put). |
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Optimism bias |
A tendency to budget or the best possible (often lowest cost) outcome rather than the most likely. This creates a risk that predicted outcomes do not fully reflect likely costs. |
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Output Specification |
A statement of the needs to be satisfied by the procurement of external resources |
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Partnership sourcing |
Long term relationship between purchaser and supplier involving mutual trust
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PCL |
Provision for Credit Liabilities. |
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Periodic Indicative Notice |
Summarises the procurements the advertiser expects to place in coming period.
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PFI |
Private Finance Initiative. A long-term contractual public private partnership under which the private sector takes on the risks associated with the delivery of public services in exchange for payments tied to agreed standards of performance. |
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PFIC |
Private Finance and Capital Unit of the DOH - Was PFU.
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PITN |
Preliminary Invitation to Tender |
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Post-Tender Negotiations |
Negotiations with prospective suppliers, held after tenders have been received
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PP |
Planning Policy, relates to Town and Country Planning Act and planning regulations |
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PPPs |
Public/Private Partnerships. An arrangement - often with legal force - between public and private sector organisations to their mutual benefit. |
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PQQ |
Pre-qualification Questionnaire |
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PRG |
Project Review Group. A Treasury Taskforce chaired inter-departmental group that oversees the approvals process for local authority PFI projects requiring Government support. |
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Prior Indicative Notice |
Published indication in OJ of an intention that contracts will be placed..
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Priority Services |
Services subject to more stringent rules of the Services & Utilities Directives
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Probability |
The extent to which a certain event is likely to occur, measured by the ratio o the number of times that event does occur to the total number of cases possible. |
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Project company |
A company set up by the members of a PFI consortium to sign a PFI contract and take on the responsibilities under that contract. Often it will be a special purpose vehicle, i.e. its responsibilities under the PFI contract will be its only activity. |
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PSC |
Public Sector Comparator. A comparator is a benchmark against which value for money is assessed. A PSC is constructed on the assumption that the procurement is undertaken through conventional funding and that significant managerial responsibility and exposure to risk is retained by the public sector. |
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Public Law |
"Bodies Governed by Public Law"; part of definition of Public Authorities
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Public Undertakings |
Undertakings controlled by the state either by ownership or by regulation. Top of the page |
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Qualification System |
System for selecting bidders to be invited to tender for a Utilities contract |
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Relevant activities |
Those activities which are subject to the (Utilities) Directives
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Remedies |
Compensation or corrective measures taken when Directives have been breached
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Residual value |
The expected value of a capital asset at some future date, normally the end of a contract. |
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Residuary Services |
Services subject to less stringent rules in Services & Utilities Directives
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Restricted Procedure |
Procedure where bidders are selected by an open first round invitation |
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Risk |
The possibility of more than one outcome occurring, and thereby suffering harm or loss. |
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Risk allocation |
The process of assigning operational and financial responsibility or specific risks to parties involved in the provision of services under PFI. Also see Risk Transfer. |
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Risk matrix |
A table used as a management tool throughout the procurement process. It will usually constitute a listing of the various risks and uncertainties to which particular project options are exposed, together with an assessment of the likelihood of their occurring and the financial or other impact on the outcome of the project. |
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Risk register |
A document which identifies the bearer of a particular risk, (eg a risk matrix which will also contain quantitative assessments (i.e. costs and likelihood's)
of the characteristics of the risks). |
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Risk transfer |
The allocation of risks associated with the operation of a PFI contract according to the principle that the risk should lie with the party best able to manage it. |
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Senior debt |
Debt finance for a project company that ranks first in the order of priority: it is repaid ahead of subordinated debt or equity, and so has lower risk than either. |
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Sensitivity analysis |
Analysis of the effects on an appraisal of varying the projected values of important variables. |
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Services |
All purchases other than Works or Supplies
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Shareholder loans |
Finance for a PFI project company from a bidding consortium, in the form of loans from the consortium members. Shareholder loans may be used to finance a bid; for the implementation of a contract, they will usually need to be supplemented by other forms of funding. |
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SOC |
Strategic Outline Case |
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Special purpose vehicle |
see project company. |
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SPV |
Special Purpose Vehicle, see project company.. |
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SSAP |
Statement of Standard Accounting Practice. |
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Standardisation |
Adjustments made either to the PSC or to the bids to ensure a standard approach is taken to costing the same or similar items. |
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State aid |
Payments by the state, remission of debts, privileged access to govt contracts
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Subordinated debt |
In the context of PFI, debt finance for a project company which ranks in the order of priority ahead of equity but after senior debt. |
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Switching point |
The value of a key variable at which the output of the model changes from positive to negative. |
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TTF |
Treasury (PFI) Taskforce. Reporting directly to the Paymaster General, the Taskforce has two branches. The first deals with PFI policy and issues guidance notes and technical guidance. The other branch provides practical assistance with the procurement of significant projects. The projects branch chairs the Project Review Group. |
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TUPE |
The Transfer of Undertakings (Protection of Employment) Regulations 1981. This implements the Acquired Rights Directive (77/187/EEC) |
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Unbiased Estimate |
An estimate where the probability of the out-turn being higher then the estimate is equal to the probability of the out-turn being lower the estimate. |
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Uncertainty |
Arises when the outcomes of courses of action are indeterminate or subject to doubt. |
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Utilities |
Electricity, Gas, Water, Telecommunications & industries with special rights |
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Variability |
A spread of possible outcomes around an expected outcome. |
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Variants |
Tenders which meet minimum specifications but vary in technical terms |
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VFM |
Value for Money. |
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Works |
Construction and civil engineering
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