The State of the Practice of Value for Money Analysis in Comparing Public Private Partnerships to Traditional Procurements

Abstract

Literary sources regarding public—private partnerships (PPPs) often mention the importance of conducting a value for money (VfM) analysis to determine the value of pursuing a project through a PPP versus a traditional procurement; however, few sources detail how agencies actually use this analysis in practice. This article provides a state-of-the-practice review of VfM analysis using examples from Australia, Canada, Europe, Africa, and Asia, focusing particularly on the VfM model used by agencies such as Partnerships Victoria, The United Kingdom's Her Majesty Treasury Department, and Partnerships British Columbia. Despite its growing applications in PPP projects from all different sectors, VfM has faced significant criticisms from academics and practitioners. This article evaluates reviews of VfM, noting the weaknesses and strengths of the methodology. Using the information derived from the evaluation, this article provides a guided reference for public agencies looking to adopt this VfM methodology in their current PPP decision-making framework.

Keywords

public—private partnerships value for money public sector comparator risk allocation discount rate

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