1.124 The Spreadsheet enables Procuring Authorities to incorporate a number of Indirect VfM Factors. Examples of Indirect VfM Factors that Procuring Authorities might seek to consider and value as part of their project assessment are Externalities and Non-Market Impacts.
1.125 These result when a project produces benefits or costs, either to the Procuring Authority or to the public sector as a whole, that are not directly included in the price of that particular project14. Externalities can be positive and negative in economic effect. Examples of project externalities might include:
• changes in operating practices achieved by involving the private sector in the delivery of services, which are then used as an exemplar to inform and influence operating practices where similar services are being provided under conventional arrangements;
• on the one hand, developing or, on the other hand, eroding specialist project and/or procurement management skills through over-reliance on one or other procurement methodologies;
• cultural barriers in an organisation being eroded by introducing a mixed economy of providers with different standards of corporate and individual behaviour.
14 Annex 1 of The Green Book (www.hm-treasury.gov.uk/greenbook)