4.5 Weak planning and evaluation of the costs and benefits of a project is a common finding of our work across Government. For example, impact assessments are designed to assess the needs, and likely impact, of proposed regulations. The NAO has assessed the quality of impact assessments across Government over the last decade. Although we find that the quality of impact assessments is improving, there is a wide variation in standards and there is a need to improve the sophistication of the analysis of costs and benefits of the range of options.57
4.6 Public authorities generally undertake greater scrutiny of the costs and benefits of PPPs than they do for other types of projects. In part, this is because there is greater guidance on what they need to do. The Treasury's Green Book provides guidance on the assessment of all projects.58 The Treasury provides public authorities with further comprehensive guidance on the assessment of VFM for PPPs.59 It focuses on viability, desirability and achievability, emphasising the identification of strategic and qualitative issues, and providing guidance on the quantification of costs and benefits compared to procurement through conventional funding.
__________________________________________________________________________
Figure 5
Questions that a PPP business case must satisfy
• Is PPP a good idea for this project?
• Is the project affordable?
• Has the PPP deal been appropriately structured?
• Will the private sector deliver?
• Could the public sector deliver better?
• Will the project cope with future changes?
• Do the benefits of using a PPP outweigh its costs, risks and limitations?
Source: National Audit Office
__________________________________________________________________________
4.7 Nonetheless, while PPP business cases generally demonstrate feasibility and affordability, they often do not manage to demonstrate that private finance is the best VFM option:
a The strategic reasons for using private finance are often not spelled out convincingly (see part two for a discussion on strategic issues).
b Financial modelling is error-ridden and given undue influence.
c There is insufficient evaluation of projects, including evaluation of whether the intended benefits are achieved.
d We have yet to come across robust cost analysis between procurement routes, that tests the assumptions of cost efficiency set out in business cases.
__________________________________________________________________________________
57 Delivering high quality impact assessments, National Audit Office (HC 128, 2008-09).
58 The Green Book: appraisal and evaluation in central Government, HMT (2003).