1.15 Other factors that may have an important impact on the VfM of a particular procurement route include:
• Externalities: As set out in the Green Book7, the assessment of externalities -negative or positive - is necessary in making an investment decision. For example, the undertaking of a procurement may have an impact on the supply side capacity of a particular part of the private sector. While this should be undertaken as part of the Green Book investment assessment, should different externalities exist for different procurement routes then these also must be taken into account in making the VfM assessment.
• Long-term certainty: Most PFI projects are procured under long-term contracts. The process of procuring long-term infrastructure and services funded by private finance can often provide greater certainty of the whole-of-life costs and standard of service compared to conventional procurement. This certainty may reduce absolute flexibility, but provided the procuring authority carefully considers the scale and scope of the service needed over a long-term and structures the contract for a commensurate term, may still generate a better VfM outcome. Upfront departmental consideration of the long-term policy strategy therefore should also feed into the VfM assessment.
• Well developed projects are required before release to market: It is important that procuring authorities allocate sufficient resource to adequately prepare and develop the project before formal engagement with the market. Excessive bid costs and delays in the procurement process resulting from poorly developed projects often erodes the VfM in procurement. This is prevented through strong project management and setting realistic timetables to ensure that projects are well developed before release to market.
________________________________________________________________________
7 http://www.hm-treasury.gov.uk./media/785/27/Green_Book_03.pdf