Value for Money in Public-Private Partnerships
A growing number of governments are using Public-Private Partnerships (PPPs) to deliver infrastructure and other essential basic services. Ideally, decisions on whether a project is implemented as a PPP should depend on whether “value for money” (VFM) will be achieved. This is where the benefits of risk transfer combined with private sector incentives, experience, and innovation outweigh the increased costs of contracting and financing seen under PPPs. But the use of VFM to inform PPP decision-making is difficult and can be controversial. Countries that have used VFM have faced some significant methodological challenges and concerns that the analysis can be misinterpreted or manipulated.
To inform this debate, the World Bank Institute (WBI), the Public-Private Infrastructure Advisory Facility (PPIAF), and the World Bank’s Latin America and Caribbean region’s PPP Beam convened a global roundtable of PPP practitioners to discuss VFM and how it can be assessed. The aim of the roundtable was to draw lessons from countries that have relatively well-developed approaches and tools for VFM analysis. The main conclusion was that despite the challenges while implementing, governments and infrastructure users benefit from having VFM at the center of their PPP decisions.
Participants agreed that governments need to strike the right balance between qualitative and quantitative approaches particularly in new PPP programs, where capacity and data are limited. Quantitative VFM approaches should be regarded as a tool to consistently and systematically assess the combined result of a set of assumptions than as a scientific process that provides “proof” of VFM. Integrating VFM analysis into overall public investment planning processes was recommended with some arguing it could and should be applied to all major infrastructure projects, to assess the best procurement option.
The roundtable participants also identified areas where the World Bank Group (WBG) could help. There is little systematic data on PPPs and major infrastructure investment project outturns and the WBG could assist in collecting information on this and create mechanisms to pool country-level data. Also, since VFM may be lost during project implementation and delivery because of poor contract management, the WBG could help in strengthening capacities in this area.
View below the different workshop presentations and view the PDF on Value-for-Money Analysis under Related Links.
Recent Developments in VfM Analysis in Latin America
Value for Money Test in Korea
Value for Money in Capital Budgeting & Procurement Practices
Value for Money in PPP Projects: The UK Experience & Lessons Learnt
British Columbia - Value for Money
Value for Money (VfM) Analysis: Virginia’s Experiences & Lessons Learned
Value for Money (VFM), Madhya Pradesh, India
Gautrain: Using the PSC & Determining VFM
PPP Evaluation Process in Chile
VfM Approach in Developing Country PPPs