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Appraising PPP Projects

416 Value for Money Assessment

The procurement of a PPP project represents Value for Money when — compared to a public sector procurement option — it delivers higher net economic benefits to society, taking into consideration the whole-life costs of the project.

The purpose of a Value for Money (VfM) assessment is to indicate if a project would be more efficiently implemented under a PPP scheme or under some other procurement method[45], from the perspective of the procuring authority and considering the broader interests of society.

It should be noted that the VfM assessment assumes that a conventional procurement option is possible. As described in other parts of this PPP Certification Guide (for example, chapter 1.5.1), there may be accounting restrictions that impede a publicly financed development of the project (but which may not impede the PPP route, depending on the accounting and reporting standards applied in the country). Alternatively, the government may simply not have the funds or the access at reasonable conditions to finance the project through a conventional procurement. In this sense and in these circumstances, the requirement for conducting a VfM exercise may be exempted by the respective policy framework. But in such cases and contexts, it is equally important (or even more important) to develop a meaningful economic analysis that demonstrates strong economic and social fundamentals of the project, as well as the rest of the appraisal exercises including the affordability of the PPP project.

 

[45] A discussion of international approaches to VfM can be found in a report by the World Bank Group: Value-for-Money Analysis- Practices and Challenges: How Governments Choose When to Use PPP to Deliver Public Infrastructure and Services. A detailed review of methodologies used in sub-national governments of the United States can be found in the paper Feasibility Study Guideline for Public Private Partnership Projects, University Transportation Centre for Alabama (2010).

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