Private sector provision may be more likely to provide a better solution where the scope for the following is greatest:

❑  Innovation to reduce costs or to improve observable outcomes;

❑  Generating additional revenue flows by sales to third parties;

❑  Reduction in risk of cost overrun or benefit shortfall;

❑  A contractor is able to exploit economies of scale in the provision of services (e.g. IT support or facilities maintenance);

❑  Savings in whole life costs and/ or for improved outcomes through effective design (e.g.: where a broad range of services may be provided in association with an asset, or when many inputs must be integrated in delivering a service, or where whole life and operating costs are importantly determined by good design);

❑  Clear specification of quality standards in absolute terms or in terms of client satisfaction;

❑  Ability of private sector to control discrete elements of the project without excessive oversight or interference; or,

❑  Clear boundaries and interfaces between public and private sectors.

Provision by the private sector may be less appropriate where:

❑  Risks which threaten the viability of a project are outside the control of the contractor (and these risks cannot be separated contractually from the project);

❑  The predominant risks are ones where the public sector has the comparative advantage in managing them;

❑  A large degree of discretion is required in determining the quality of services, and quality is not observable; or,

❑  Bidding costs are large in proportion to the value of the project (although there may be means of reducing these costs).