Unpacking the context of Value for Money assessment in global markets: a procurement option framework for Public Private Partnerships

Zhao, Jianfeng, Thurairajah, Niraj, Greenwood, David, Liu, Henry and Yuan, Jingfeng (2023) Unpacking the context of Value for Money assessment in global markets: a procurement option framework for Public Private Partnerships. Engineering, Construction and Architectural Management, 30 (8). pp. 3583-3601. ISSN 0969-9988

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Abstract

Purpose: The unprecedented COVID-19 pandemic has further constrained the budgets of governments worldwide for delivering their much-needed infrastructure. Consequently, Public-Private Partnerships (PPPs), with the private sector’s investment and ingenuity, would appear to be an increasingly popular alternative. Value for money (VfM) has become the major criterion for evaluating PPPs against the traditional public sector procurement, and however is plagued with controversy. Hence, it is important that governments compare and contrast their practice with similar and disparate bodies to engender best practice. This paper, therefore, aims to understand governments’ evaluation context and provide a cross-continental comparison on their VfM assessment.

Design/ methodology/ approach: Faced with different domestic contexts (e.g., aging infrastructure, population growth, and competing demands on finance), various governments tend to adopt different emphases when undertaking the VfM assessment. In line with the theory of boundary spanning, a cross continental comparison is conducted between three of the most noticeable PPP markets (i.e., the United Kingdom - UK, Australia and China) about their VfM assessment. The institutional level is interpreted by a social, economic and political framework, and the methodological level is elucidated through a qualitative and quantitative VfM assessment.

Findings: There are individual institutional characteristics that have shaped the way each country assesses VfM. For the methodological level, we identify that: (1) these global markets use a public sector comparator as the benchmark in VfM assessment; (2) ambiguous qualitative assessment is conducted only against PPPs to strengthen their policy development; (3) Australia’s priority is in service provision whereas that of the UK and China is project finance and production; and (4) all markets are seeking an amelioration of existing controversial VfM assessments so that purported VfM relates to project lifecycles. Therefore, an option framework is proposed to make headway towards a sensible selection of infrastructure procurement approaches in the post COVID-19 era.

Originality/ value: This study addresses a current void of enhancing the decision-making process for using PPPs within today’s changing environment and then opens up an avenue for future empirical research to examine the option framework and ensuing VfM decisions. Practically, it presents a holistic VfM landscape for public sector procurers that aim to engage with PPPs for their infrastructure interventions.

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