A major driver of better value for money outcomes with PPP projects is the rigour imposed by the project development process. Although processes vary in each country and state, a PPP originates with a state department or agency and is evaluated with a view to the procurement options with Treasury oversight. When the project is nominated as a PPP, the agency prepares the output specification and proceeds through the approval “gateways” (see Table 3).
Table 4 The PPP Project Delivery Framework
| Step | Benchmarks |
| 1. Identify the service need | Output specification |
| 2. Appraise the options | Procurement alternatives |
|
| Evaluate financial impacts |
| 3. Develop the business case | Risk identification |
|
| Cost benefit analysis |
|
| Build the PSC |
| 4. Project development | Commercial principles |
| 5. The bid process | EOI, RfP, evaluate bids |
| 6. Project finalisation review | VfM determination |
| 7. Final negotiation | Contract & financial close |
| 8. Contract management | Formalise contract management, monitor project delivery, CAM |
The value of the PSC will also depend on the bid criteria which may include the PPP franchise term, user charges such as a toll, state charges such as an availability cost of a hospital bed, or up-front payments to the state. In the case of the Eastlink project in Melbourne, the project was awarded to the bidder with the lower user charges and the bidder based its tariffs on traffic forecasts somewhat higher than those forecast in the PSC. This was considered in the interest of toll users and met both the quantitative and qualitative value for money tests applied under the Partnerships Victoria model. In the United Kingdom, the PSC is being gradually being eliminated from the PPP evaluation process.