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Homework assignment: Value for Money Analysis Part 1: Developing the Public Sector Comparator
P3-VALUE Webinar - April 25, 2014
Patrick DeCorla-Souza
P3 Program Manager
Center for Innovative Finance Support
1. Could you briefly explain the other two options regarding the traffic scenario.
In the traffic scenario, the simple toll example is a flat toll and the variable toll example is a variable toll. There is data in there right now for each of these alternatives. However, we are not going to use it because we have specific data that we want to input. And so, we're going to use the template which gives us a little more flexibility to put in whatever data we want for however many years we want to input it for.
2. Wouldn't the construction contract limit inflation during the construction phase?
I guess it would depend on the type of construction contract you have. I'm not sure about the answer to that question. So, what I'm saying is basically, if there are some delays due to the government's fault, there could be increases in cost, but that would be a risk. And so, normally, the contract price that's agreed upon is the price that would need to be paid to the contractor.
3. Is it possible if you or we can lock all the cells that you have formal in there and just highlight the cells that user needs to input? Yeah, the cells that user input only are highlighted so that we know that, okay, we don't mess up other cells where it has formula.
Yeah, good comment and good suggestion and we hope as we update these tools to insert those protections. I know this is one of the last tools. We tried to do that in the other tools. This tool I don't think we've gotten to yet. So, we will try to put in those protections as we improve the tools. But, if you do mess up a tool, you can always go to the Web site and download a fresh version of the tool because I know once you've written over a formula, you can't get it back. So, that's the only solution as this point. Sorry about that.
4. Another thing is the sample that you currently are showing us on the Webinar, it's not the same sample that currently you have in the download file. Is that correct?
That is correct. Correct and maybe I should have actually downloaded the version up on the Web site. But basically, it will have numbers. You simply have to write over those numbers and put in this example. You know, the numbers in that version that you're downloading are for a different example. I think it is for a training course that we also provide that uses a different example of something like a half-a-million dollars or something cost of a project. So yes, but on the other hand, you know, you're going to-- if you have your own project that you want to put in, you're going to have to do something, and you know, work with a file that will already have numbers in it, so it's a good practice, actually to help you do it for a real project later on, okay? So because if we had given you all of these numbers already in there, you would have nothing to do. You see what I'm saying? You wouldn't have been in the-- you wouldn't have even realized that there are some cells that you can't write over. I mean, you're not supposed to write over, because they're formula cells. Because all of the data would have been in there, and as a homework, you know, you wouldn't have to do anything, you'd just have to scroll through the tool, and I don't think that's a good way of learning. The good way to learn is when you actually use your hands and input data and look at the results.
5. As Federal employee, we usually work with our State partners to come up with the Financial Plans. And these plans are usually prepared by a consultant who works for the State DOT. Their plans are very, very complicated and have so many risks that we need to cover, and also the option of financings. With the intent of these tools to Federal Highway, how would you like us to use this tool?
Just as way to understand how the-- to understand the results that you are getting from these more detailed analyses. See, if you use this, you can see, you understand where risk comes in, how does the financing assumptions, how do the financing assumptions play into the financial analysis. See, now that you've seen the various sheets, for example, that I showed you, you can actually see how a detailed financial analysis is done without actually having to look at a very detailed analysis. So this is a learning tool. It is meant to help you understand value for money analysis, and the financing spreadsheet models that consultants will be using to do the more detailed analysis that they conduct for a real project.
6. On the Risk Value, under the Assumption tab, that is your change for the $33 million. Can that incorporate a formula so that we don't have to input these numbers? This look like a lot of values to enter here for the risk value.
Yeah, you know, you could. I mean, if you're radically-- you know, there is a risk assessment tool in the P3 value suite of tools. And theoretically we could link the tool, so that it would automatically show up in your Assumption Sheet. But we decided not to do that, because we said this is a learning tool. We want people to understand the numbers. We don't want things to be done automatically. So yes, it is-- you know, it could reduce the work, but that's not the purpose. You know, like I said. I mean, the purpose of this tool is to help you to learn. And the more we can encourage students to actually put in the data, the more they will understand the data and how the tool works. So I think your suggestion would be a good one if there was a tool that we wanted to, you know, just quickly crank out some numbers. But I think the purpose of this is a little different, so we decided-- and then it would complicate the tools, too. You know? You would have to have all these tools open at the same time in your Excel files. And these are very big files. So we decided not to do that. But you know, it's not that much extra effort. And I mean, it does help you realize that, hey, you know, when you change-- when you make certain changes, you have to make sure that all your assumptions are still correct! So there's some value to that.
