Using Value for Money Analysis to Evaluate Public-Private Partnerships. Value for money is defined as the optimum combination of life-cycle costs and quality (or fitness for purpose) of a good or service to meet the user’s requirement. For example, in the case of highways, the user’s requirement might be mobility and safety on a specific roadway.
Value for Money (VfM) processes have been designed and utilized in many countries to help government officials determine if, when entering into a P3 agreement, they are likely to obtain a better deal compared to conventional approaches to procure the same project. A basic assumption is that a public procurement is possible with public financing.
Also, benefits to users (if it is determined that a P3 could enable delivery earlier than with the conventional approach) are generally not quantified, although they may be considered in a qualitative evaluation.
VfM analysis may be used to assist in:
- Development of the transportation investment program, by indicating which projects are potentially suitable for P3 delivery;
- Selection of a project‟s preferred procurement option, i.e., conventional procurement or P3, and assessment of its affordability;
- Selection of the preferred bidder and negotiations with the selected bidder (if negotiations become necessary) prior to finalizing the P3 agreement