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Value for Money in Public-Private Partnership

Public-private partnerships have been increasingly used by governments around the world to finance and manage infrastructure projects and to pursue value for money. Any project, whether it is a PPP or a traditionally procured project, should be undertaken only if it creates value for money. It seems that the choice between using a PPP or traditional procurement should be simple: governments should prefer the method that creates the most value for money. However, in practice the value-for-money objective is very often blurred, and the choice between using a PPP and traditional infrastructure procurement may be skewed by factors other than value for money. The value for money assessment should also take into account the potential non-financial benefits of PPPs such as the accelerated and enhanced delivery of projects.  Experience suggests that the likelihood that a PPP projects will provide value for money is higher when all or most of the following conditions are met:

  • There is major investment involved, which would benefit from the effective management of risks associated with construction and delivery. This may be a single major project or a series of replicable smaller projects in a given sector
  • The private sector has the expertise to design and implement complex projects
  • The public sector is able to define its service needs as outputs that can be written into the PPP contract ensuring effective and accountable delivery of services in the long run
  • Risk allocation between the public and private sectors can be clearly identified and implemented
  • It is possible to estimate on a whole-life basis the long-term costs of providing the assets and services involved
  • The value of the project is sufficiently large to ensure that procurement costs are not disproportionate
  • The technological aspects of the project are reasonably stable and not susceptible to short-term or obsolescence

By Taking these conditions into account should help the Authority to identify and manage any long-term fiscal obligations (implicit and explicit) that may result from the PPP project.


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