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         Capital Planning and Asset Management


                     Pre-ITF Key Stage Review

                                     June 2009

                                     Page 1 of 22

PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
 Health PPP Project Review
 Pre-IFT (Invitation to submit Final Tender)

 What is the purpose of this review?

 This review should not be regarded as a tick sheet or pass/fail exercise. It is a tool to
 assist NHS Bodies to stop, and consider, if they are advanced sufficiently in their project
 development, and documentation, to proceed to issue of a project IFT, which will secure
 high quality, sustainable bids, with minimal bidder qualifications.

 In the following five sections there are questions for NHS Bodies to consider as part of a
 self-assessment. NHS Bodies should respond to every question. Questions marked (E)
 will form the focus of the external review.

 Previously, the Pre-OJEU KSR will have been undertaken prior to the OJEU of the
 project. At this stage, the Health Board would have provided information detailing their
 approach to the CD / ITPD stage which would have been part of the Pre-OJEU review.
 Post this the PQQ Stage and Dialogue Stage would have taken place. Ahead of issuing
 the Invitation to Participate in Dialogue (ITPD), NHS Bodies may have opted to
 complete the Pre-ITPD Key Stage Review Document. In those cases, a number of the
 questions in this Pre-IFT review will already have been answered, and can be repeated
 here (subject to any changes). This IFT review initially recaps on how the Dialogue
 stage proceeded and goes on to assess readiness to issue the Invitation to submit Final
 Tender document.

                                        Page 2 of 22

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 How will this review be carried out?

 No later than 4 weeks prior to the review being carried out, NHS Bodies are required to
 give a preliminary indication of a date for this review to:

 Deputy Director, Capital Planning and Asset Management
 Scottish Government Health Finance Directorate
 Basement Rear
 St Andrew’s House
 Regent Road
 Edinburgh EH1 3DG

 Two weeks before the review is required the NHS body should confirm the final date, or
 seek an amendment.

 One week before the date of the review, the completed Pre-IFT Review Document
 should be submitted in electronic (CD-ROM) and paper format along with a copy of
 the final draft project IFT documents and a copy of the milestone project
 programme to Claire Phillips, Partnerships UK, 1 St. Colme Street, Edinburgh EH3
 6AA. An electronic version only of the review document should also be sent to the
 Deputy Director, Capital Planning and Asset Management at the above address.

 The Scottish Government Health Directorate (SGHD) has asked Partnerships UK (PUK)
 to carry out the review on their behalf, the review process should last no more than two

 On completion of the review PUK will compile a draft report and where required discuss
 or clarify it with the project team prior to the submission of a final report to the SGHD.

 The NHS Body’s Chief Executive, or Chair of the project steering group, should make a
 written response to the Deputy Director, Capital Planning and Asset Management
 setting out the NHS Body’s response to any recommendations made in the report

 The SGHD will review the NHS Body’s response and may ask to meet with the project
 manager, project team or project steering group Chair or Chief Executive to discuss any
 arising issues.

                                        Page 3 of 22

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Please complete the following template.

 Project Outline

 NHS Body


 Project Title and
 Brief Description

 Scope of Services in

 Estimated Project NPV
 (state discount date and
 appraisal period)

 Expected Indicative first
 full year Unitary
 (as used to project PPP
 affordability ex shadow

 Project Director            Name
 Contact details

                             E mail

 Second contact              Name


                             E mail

                                       Page 4 of 22

PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc

          Section                                Topic               page

 One: Update and             Review of PQQ / Dialogue period (and      5
 Affordability                ITPD)
                             Affordability target
 Two:                        Payment mechanism                         7
 VFM                         Risk matrix
                             Shadow model

 Three:                      Project agreement                         9
 Commercial Issues           Funder agreement

 Four:                         Project management                     11
 Deliverability                Planning/land issues
                               Consultations/approvals
                               IFT documents
                               Technical matters
                               FM
                               Evaluation

 Five:                       Technical                                16
 Data Room and               FM
 background Information      Policy documents

 Six:                                                                  17

                                      Page 5 of 22

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Section One
Update and Affordability

                                                                    Suggested Evidence

                                                                    Part of self-assessment (I)
                                                                    Part of external review (E)
Update          Key objective: Describe outcome of PQQ and
                ITPD stages

1.1             How many PQQs were received?                        Provide
                What number of interested parties were taken
                forward to the dialogue stage and how long did
                the dialogue period last?

1.2             Has the dialogue phase been closed down – are Covering                  I
                all matters of substance resolved in order to letter /
                proceed to IFT stage.                         Reports etc

                What were the key outcomes of the dialogue

                Provide details of the down selection process /
                evaluation undertaken.

1.3             Have there been changes to the project scope Table /                    I    E
                since the issue of OJEU notice / Pre-OJEU KSR covering letter
                that have arisen from the dialogue stage and and report
                which impact affordability / VfM and Risk

                (For instance, has the capacity of the facilities
                involved altered, have there been changes due to
                discoveries made by detailed technical surveys,
                has the risk profile altered significantly?)

                What have been the major cost movements since
                the issue of OJEU?

Affordability   Key objective: Is the AT realistic and robust?
Target (AT)

                                       Page 6 of 22

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Section One
Update and Affordability

                                                                     Suggested Evidence

                                                                     Part of self-assessment (I)
                                                                     Part of external review (E)
1.4            Are all the inputs to the affordability model and Covering                I
               the Bid Comparator Model (BCM) up to date? Do letter
               they reflect the PPP specification and risk
               transfer. Have they been updated for changes in
               the dialogue stage?

               (For instance have all the construction figures
               been reviewed and verified, have the FM costs
               been updated to reflect the detailed services
               specification and have all these been signed off
               by internal and external advisers?)

               What base date has been applied to construction
               costs? What level of construction cost inflation
               and to what point has been assumed?

1.5            Has an AT been calculated and set for bidders? Covering                   I    E
               Is it based on a shadow bid model calculation? letter

               What information on affordability (and related
               cost information from NHS Bodies estimates)
               has previously or will be made available to
               bidders? And at what time?

1.6            Is there clarity re the projected Net Present Cost,   Covering            I   E
               Unitary Charge and year on year affordability         letter/
               envelope of the project and wider impact on the       Minutes of
               Health Economy (i.e. costs outside the                meeting
               PPP/costs retained)?

               Given any changes post OJEU, has the project
               the required NHS Board and SGHD approvals to
               proceed on this basis, including full sign off and
               support re affordability implications?

               Please replicate and complete the table below for
               the duration of the concession period, applicable
               to your project (25 or 30 years etc) ex annual
               project Unitary Payment from the Shadow Bid
               Affordability Model. Please state the assumed
               LIBOR/funding rate inclusive of buffers (25bp

        Year       1             2            3          4 etc

                                       Page 7 of 22

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Section One
Update and Affordability

                                                                         Suggested Evidence

                                                                         Part of self-assessment (I)
                                                                         Part of external review (E)
Estimated (first
full year) UC
Source 11
Source 2
Source 3 …etc
1.7                Does the affordability sign off include best case Minutes of              I
                   and worst case sign off? In respect of this, please meeting
                   list the sensitivities (e.g. interest rate movement)
                   that have been assessed over the period of the
                   contract.                                            Covering
1.8                Are there any other proposals to meet
                   affordability implications (e.g. sale of land, third
                   party development)?

      For example Source 1 could be “Transfer of Existing Services Budget”
                                           Page 8 of 22

  PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section Two

Payment        Key objective: Confirm that the standard
mechanism      payment mechanism (SPM) and related
               documentation has been applied

2.1            Has the standard form health payment               Relevant       I   E
               mechanism been applied (with robust                example
               consideration of areas for the NHS Board to        papers and
               calibrate undertaken e.g. tolerances)?             confirmation

               Has a payment mechanism calibration model
               been constructed (and tested) bespoke to the
               project? Do BCM designs match to the defined
               functional areas and functional units? Will the
               calibration model, and worked examples of
               outputs, be shared with bidders during the IFT
               period (or previously in the dialogue period).

               Has the payment mechanism been tested (via
               the calibration model) against a range of likely
               project specific performance and “what-if”

2.2            Is the NHS Body satisfied that the service Covering               I
               specification and the payment mechanism are letter
               synchronised and that the incentives delivered
               by the payment mechanism reflect the priorities
               and desired outputs of the NHS Board?

               The NHS Board should indicate how it has
               arrived at its decision that the payment
               mechanism meets its requirements and is
               optimal VfM.

2.3            How has the payment mechanism been
               developed during the dialogue period through
               discussion with bidders?
               How will the payment mechanism be finalised
               during the IFT period through discussion with

Procurement    Key objective: Have all project specific risks
Risk matrix    transferred and retained been identified,
               quantified and is there a view on balance
               sheet treatment?

                                    Page 9 of 22

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Section Two

2.4            Has there been identification and quantification Explanation       I   E
               of all project risks (BCM/PPP/retained risk/ of
               transferred risk etc)?                             methodology
                                                                  and risk
               Is the risk identification/quantification based on figure build-
               the NHS standard risk matrix/standard up.
               contractual position as detailed in the SGHD

2.5            What is base value of the BCM (NPV terms)?        Covering         I
               What adjustment has been made for specific
               risk, optimism bias and tax adjustment in
               arriving at the final BCM value?

2.6            What is the current VfM headroom in actual and Covering            I   E
               in % terms?                                    letter

               Confirm assumed LIBOR/funding rate used in
               shadow bid NPV that is part of quantified VfM

2.7            Has the NHS Board considered the balance Covering                  I   E
               sheet position (based on an Initial Views letter
               assessment if available)?

Shadow Bid     Key objective: Does the shadow bid model
model          deliver sufficient and robust clarity on the
               affordability position?
               Based on NHS Body’s assessments, are
               proposals expected to be VfM?

2.8            What differences on cost and risk assumptions Covering             I
               are there between the PSC/BCM and shadow letter
               bid model?

2.9            What sensitivities have been applied to VfM and Summary            I   E
               affordability estimates?                        information

2.10           What contingency %, if any, has been included Covering             I
               within the construction costs and what base letter
               date has been applied to construction costs?

                                    Page 10 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section Two

2.11           Has the SG guidance on VFM assessment            Covering
               during the Procurement Stage been taken          letter/copy of
               account of?                                      proforma ex
                                                                Appendix 5
               (Refer to SG VfM Assessment Guidance)            of VfM

2.12           Has appropriate reference to guidance been       Reference
               utilised to work up the NPD aspects of the IFT   workshops
               documents and the related vfm / affordability    etc
               sign offs been updated?

                                    Page 11 of 22

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Section Three
Commercial Issues

Project       Key Objective: The PA must reflect the SGHD
Agreement     Project Agreement Version 1 (SGHD PA) and
              it should be developed in detail in respect of
              project specific commercial terms.

3.1           Does the Project Agreement vary from the SGHD                   I   E
              PA and if so, where and why?                  Schedule

              What process has been undertaken to confirm
              any project specific changes with SGHD?

3.2           Has the NHS Body stated its position clearly in Copy of draft   I   E
              the IFT on key commercial and contractual PA with
              issues?                                         Deltaview (or
              Is all supporting NPD documentation developed? showing
              Were these previously discussed in the ITPD to SGHD
              period?                                         PAv1)

              Including, but not limited to:

              Third party income, application of STUC protocol/
              soft FM testing, benchmarking of soft services,
              energy and utilities, handback provisions,
              change mechanism, capital receipts, latent
              defects, ground conditions, termination triggers ,
              permitted      borrowings      and     insurance
              benchmarking/cost sharing

3.3           Has the NHS Board made it clear in the IFT that Covering        I
              the successful bidder will be required to sign a letter
              letter of commitment prior to becoming preferred
              bidder (OGC Standardisation of PFI Contracts,
              reference clause 33.3)?

3.4           Has the NHS Body stated its position clearly on      Covering   I   E
              warning notices and termination triggers levels?     letter

3.5           Has the NHS Board’s position on % sharing for Covering          I   E
              general change in law been stated?            letter

3.6           Has the NHS Board provided a warranty in Covering               I
              respect of information provided to bidders letter
              regarding transferring employees (if applicable)?

3.7           Does the IFT ask bidders to state or agree a Covering           I
              mechanism for financial adjustment if the TUPE letter
              information provided by the NHS Board is flawed
              or requires adjustment prior to financial close?

                                      Page 12 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section Three
Commercial Issues

Project       Key Objective: The PA must reflect the SGHD
Agreement     Project Agreement Version 1 (SGHD PA) and
              it should be developed in detail in respect of
              project specific commercial terms.

3.8           What process is in place to reflect guidance that
              becomes relevant to the project post the IFT
              being issued?

3.9           In the view of the project team, what aspects of Covering    I   E
              the IFT (if any) are least resolved, and how letter or
              would they rank those issues in terms of risk to table.
              successful project delivery?

3.10          What, if any, aspects of the project scope remain
              intentionally unresolved?

              How will it be ensured that these will be resolved
              and be bale to be taken account of in the final

Funder        Key Objective: Bidders’ funder support is
Agreement     clearly and unequivocally stated.

3.11          Is the requirement for funder support/evidence of Covering   I   E
              deliverability clearly stated and appropriate term letter
              sheets/letters of support contract acceptance

3.12          Is a draft Lenders Direct Agreement included as Covering     I
              part of the IFT documentation? Note that letter
              Schedule 6 to the SGHD PA is the Funders
              Direct Agreement.

3.13          Is there direction to the bidders in the IFT to              I   E
              compete sources of finance/run an internal
              funding competition?

              Are reference funding rates for the IFT
              submission applicable to different sources of
              finance consistent to allow like for like

              For bond funded solutions, has a set bond
              margin, UK rate and underlying credit rating
              assumption been stated?

                                    Page 13 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section four

Project          Key Objective: Process and protocols are in
Management       place to ensure maximum benefit is derived
                 from the previous ITPD procurement stage
                 and now the IFT stage.

4.1              Please describe the status of the dialogue Provide                I
                 stage – how long it took, tenderers not taken reports
                 forward, confirm that it is completed etc
                 Is there an ITPD evaluation report / commercial letter
                 developments summary?

                 Are the IFT submission requirements of what
                 must be submitted, where and when clearly
                 stated? How do these relate to the ITPD

                 Do the technical bid deliverables mirror NHS estates
                 Design Development Protocol? (In recent deals the
                 DDP has been amended to ask for greater detail,
                 i.e. a number of 1:50 drawing, with the bid.) If not
                 what are the bid deliverables based on?

                 Have clinicians signed off the output
                 specifications, the final payment mechanism
                 functional areas/units classifications and

4.2              Are protocols and evaluation procedures in             Covering   I
                 place for all the evaluation areas, including the      letter
                 “in-house” bid (if applicable)?

4.3              Is a detailed Project Management Plan in place Appropriate        I
                 for the IFT phase covering:                    plans etc

                  site visits;
                  evaluation criteria and protocols, (including
                   acceptance of standard contract);
                  management of meetings;
                  procedures for clarifications;
                  NHS Body approvals; and
                  schedule of meetings (commercial, legal
                   technical etc)

                 Is user (i.e. clinicians, staff side) involvement,
                 including meetings with bidders properly
                 timetabled. (Bidders often complain about not
                 seeing enough of the user whilst developing
                 their plans.)

                                       Page 14 of 22

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Section four

4.4              Has the NHS Board updated/reviewed the Covering              I
                 internal procurement risk register and letter
                 management plan? Have delivery risks for this
                 stage of the procurement been considered and

                 Has the NHS Board considered the risks to
                 concluding the IFT stage successfully,
                 considering potential delays and the impact of
                 previous and ongoing dialogue etc.

4.5              Have all the necessary financial capacity Covering           I
                 checks been completed successfully on the letter
                 bidders (including their key contractors) who
                 are on the IFT short list?

4.6              [Not used]                                                   I

Planning/        Key Objective: To minimise risk to project
Land Issues      programme and to close down potential
                 commercial problems.

4.7                                                        Covering
                 Are all Outline Planning Permissions in place?               I
4.8              Are there any outstanding planning issues Covering           I   E
                 which the NHS Board must manage?          letter

4.9              Are any/all planning development      briefs If not,         I
                 approved and available for bidders?          explanation
                 What status do the planning briefs have (eg outstanding
                 have they appropriate approval)?             information
                                                              and timeline.
4.10             Do the planning briefs include all off-site Covering         I   E
                 requirements, such as road or access letter
                 improvements,      any     site   associated
                 environmental       or      water    course
                 works/assessments etc?

                 What expectation is expressed in the IFT on
                 planning risk - is it capped?

                                     Page 15 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section four

4.11             Has the review of site ownership been Covering                 I
                 completed successfully and are the reports on letter
                 all site titles complete and available for

                 Have buildings and ground conditions surveys
                 been completed and does the BCM costing
                 take proper account of these (in terms of base
                 costing and risk?

4.12             Have any site purchases required for the Covering              I
                 project been completed?                  letter
4.13             Have any land valuations required been Covering                I
                 completed?                             letter with
4.14             Are there any outstanding land issues?            Covering     I   E
Consultation/    Key Objective: To minimise risk to project
Approvals        programme and to close down potential
                 commercial problems.

4.15             Have all     statutory   consultations    been Covering        I
                 completed?                                     letter

                 Are there any outstanding issues?

4.16             Has there been continued consultation with Covering            I
                 stakeholders and has it raised any concerns or letter
                 potential risks to the success of the project?

                 Has the consultation process been conducted
                 in accordance with SGHD guidelines?

4.17             Has the IFT evaluation criteria and process Extracts of        I   E
                 been approved by the appropriate NHS Board minutes and
                 committee/ group?                           copy of

4.18             Are all NHS Board approvals to proceed in Extracts of          I   E
                 place?                                    minutes

                 Is the NHS Board’s legal advisor satisfied with
                 the vires position to date?

IFT              Key Objective: To maximise the opportunity
Documents        for bidders to submit full and unqualified

                                     Page 16 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section four

4.19             How long have the bidders been asked to hold Covering     I
                 their IFT tender prices and what provisions letter
                 have been made for indexation thereafter?

                 Is there a protocol stated in the IFT to deal with
                 implications of delays to financial close/cost
                 increases post PB appointment?

4.20             How many mandatory variant bids (if any) has Covering     I
                 the NHS Body requested? Please detail these. letter

4.21             What are the major service interface issues in Covering   I   E
                 the project. (also cover PPP/non PPP estate on letter
                 the site etc)

                 Are all the service interface issues fully
                 developed and expressed within the IFT.

                 Is the position on interface energy use and
                 monitoring defined?

                 Is it clear that the PB will be responsible for
                 energy costs related to construction activities?

4.22             Is there sufficient information in the IFT Covering       I
                 documents, backed up by information in the letter
                 data room, on availability requirements and
                 restrictions on the times during which
                 construction and/or scheduled maintenance
                 should not be undertaken?

                 This information is required to assist the FM
                 service provider refine their bid and for the
                 building contractor to scope their programme of
4.23             Has the requirement to have the Full Business Covering    I
                 Case made public, following financial close, letter
                 been stated in accordance with the
                 requirements of HDL (2002) 49?

Technical        Key Objective: To maximise the opportunity
                 for bidders to submit full and unqualified
                 bids and to close down potential
                 commercial issues.

                                      Page 17 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section four

4.24             Have all necessary surveys been completed?          Covering   I
                 Including but not limited to: geo-technical,
                 asbestos,        structural, fabric condition,
                 utilities/diversions etc.

                 Is the position on warranties, relating to survey
                 information, clearly stated?

4.25             Are plans of any existing           buildings/sites Covering   I
                 available and complete?                             letter

4.26             Are accommodation requirements expressed in Covering           I   E
                 outputs but with explicit information where letter,
                 required, including storage/toilet requirements? sample

4.27             How does the IFT address the issue of room Schedule            I   E
                 sizes/layouts? (e.g. by reference to guidance or
                 by implicit statement. If guidance is being used
                 which guidance is it?)

4.28             Are the room data sheets complete?               Covering      I   E
                 (Sample of data sheets, to include: examples
                 treatment room, day bed area, recovery room,
                 consulting room, operating theatre, diagnostics,
                 waiting areas, offices),

4.29             Has the NHS Board expressed maximum and Schedule               I   E
                 minimum temperature limits and if so what are

                 Who will provide energy – explain risk sharing

4.30             Is the NHS Boards requirement for fixed Extract or             I   E
                 furniture and equipment clearly expressed? example

                 Does the requirement have clinical sign off?

4.30a            What is the scope of medical equipment and
                 ICT provision? Has this been fed into payment
                 mechanism, unavailability and termination

                                     Page 18 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section four

4.31             Where construction works are adjacent to, or Covering    I   E
                 within, existing buildings, has the bidder been letter
                 asked to provide detailed method statements in
                 respect of management of construction in an
                 education environment?

                                   Page 19 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
FM              Key Objective:         To maximise the
                opportunity for bidders to submit full and
                unqualified bids and to close down
                potential commercial issues.

4.32            Please detail the proposed arrangements for Covering           I   E
                delivery of FM, listing the services to be letter
                provided and the intended service provider (eg
                contractor, in house, etc as appropriate).

                Does this cover fully all interface issues?

4.33            Is all the information required for facilities    Covering     I
                management available?                             letter

                Including, but not limited to:
                 Energy information – historic use, pricing,
                   BEMS systems data
                 Existing Service Level Agreements
                 Catering data
                 Dietary and nutrition requirements
                 Staff details (how many, pensionable status,
                   length of service etc)
                 GIFAs of existing buildings

                Is there sufficient information in the IFT and
                data room for subcontractors to fully scope and
                price their work programmes?

Evaluation      Key Objective: The successful bid will be
                sustainable and will meet the quality and
                affordability standards set by the NHS

4.34            Are tender evaluation teams established?          Evaluation   I   E
                Is all IFT evaluation criteria fully developed?

4.35            Has the IFT evaluation criteria been approved Covering         I
                by the NHS Board? Does it reflect competitive letter
                dialogue requirements?

4.36            Is the criteria for evaluation stated in the IFT Covering      I
                and is it consistent with the ITPD evaluation letter
                protocol / criteria?

4.37            What will be the requirement for pricing Final

                How long must tender pricing be held open for?

                                     Page 20 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section Five
Data Room and Background Information

Policy          Key Objective: To maximise the opportunity
documents       for bidders to submit full and unqualified

5.1             Has an accessible         data      room   been Covering      I
                established?                                    letter

                Are the NHS Board Standing Orders in the
                data room?

5.2             Are all policies/information that relates to Covering         I
                facilities, in the project data room?        letter

5.3             Are all relevant Conditions of Employment for Covering        I
                NHS Body Facilities Management staff in the letter
                data room?

5.4             Are all IT strategic policy documents in the data Covering    I
                room?                                             letter

5.5             Where applicable, is there information available   Covering   I
                on existing IT infrastructure and any existing     letter
                warranties in place?

                                    Page 21 of 22

 PPP - e2d9c9ac-4d87-4c6c-ae84-a162a61950d1.doc
Section Six

Thank you for completing this review.

In order that other Authorities can benefit from your experience, the Scottish
Government would be grateful if you could complete the following questions.

Were there any aspects not covered by
this review that you feel should have been

Did you find the review difficult to
understand or complete? If so, please be

Do you have any other comments to make
about the review process?

                                        Page 22 of 22

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