The ‘Best and Final Offer’ process

The Department for Transport’s (DfT) announcement, in October 2010, of its approach for considering Major Schemes identified three groups of schemes.

• The Supported Pool – schemes that DfT would be prepared to fund, subject to renegotiation of funding bids from Local Authorities.
• The Development Pool – schemes that DfT will take forward for further analysis and for which DfT will invite improved funding bids from Local Authorities before deciding what to support.
• Pre-Qualification Pool – schemes on which DfT will conduct a preliminary appraisal before deciding which can join the Development Pool.

Following the DfT’s 4th February announcement in response to January’s ‘Expression of Interest’ submissions, promoters of schemes that have been confirmed in the Development Pool now face a major challenge. This is particularly so for those moving up from the Pre-Qualification Pool as by definition these schemes tend to be less developed than those that went into the Development Pool in the first place. The offers made within the Expression of Interest will require tough and informed decisions to be made by local authorities in the face of major spending cuts. It’s clear that the DfT is looking for further reductions in the call on Government funds to those put forward by promoters in January.

The next step for those in the development pool will be to submit a ‘Best and Final Offer’ bid to the DfT by 9th September 2011. Decisions by the DfT will then be made by the end of 2011 on those schemes that will receive a reactivated ‘Programme Entry’ approval. The overall funding pot available is now only around £630m (the total value of schemes in the expanded development pool is approximately £950m), but it’s over-subscribed. There will be a considerable emphasis on value for money, the amount of funding coming from non-DfT sources and the deliverability of the scheme within the CSR period.

The production of the ‘Best and Final Offers’ through a revised Business Case by autumn for all those schemes now in the development pool will require significant planning with corresponding expertise, particularly in dealing with:

• Consultation and obtaining buy-in from all stakeholders – remember cost reductions come with scope changes and previous consultation work may cease to be relevant. This includes with the new Local Enterprise Partnerships and the public.
• Ensuring that identified sources of non-DfT funding are viable, and are open to approval by S151 officers.
• Defining and managing the key delivery risks, not only in terms of construction but also the various processes that may be put in place to ensure scheme delivery such as Transport and Works Act Orders and Compulsory Purchase Orders through planning applications.
• Ensuring the deliverability of the scheme.
• Demonstrating that any reduced scope scheme still returns an acceptable value for money.
• The ‘Best and Final Offer’ will also need to take into account new appraisal guidance which we understand will be issued by DfT in early Spring.