If a project is to be taken forward as a public private partnership then it must be demonstrated that the recommended project delivery option is likely to deliver better value for money than the alternative, traditional means of delivery. This means that the public private partnership must be capable of generating potential efficiency savings when compared to traditional delivery options.
Efficiency savings can be realised by accessing value in the following key drivers:
• Risk allocation-There is scope to achieve savings through optimal risk allocation between government and the private sector. The public private partnership project delivery option, through the allocation of risks to those parties best able to manage them may enhance the likelihood of a better value for money outcome.
• Whole of life costing-Integration and synergy between the design, build and service operation can promote whole of life cost savings. These savings are likely to be greater where the project is characterised by a higher operational content, providing incentive for the private sector to achieve whole of life cost savings.
• Innovation-The robust competitive tender process and output-oriented service specifications of a public private partnership creates an environment conducive to innovation. Innovation may be as simple as designing 45 degree-angled window sills to discourage people from putting objects on the sill, in order to reduce cleaning costs. Innovation may also be as complex as the introduction of innovative proprietary water treatment technologies previously considered too risky to operate by a water authority.
• Improved asset utilisation-The public private partnership delivery option may promote more intensive use of assets. Additional revenues may be accessed from shared use of facilities and sale of spare capacity.
• Economies of scale-The public private partnership delivery option can result in economies of scale, where a service provider is able to increase the volume of services provided from an existing resource base. For example, a service provider may increase the output from an existing commercial cook/chill facility to service a public private partnership developed hospital or school.
• Competitive process-While the individual value drivers are able to generate potential value for money, the ability to undertake a competitive process is a key requirement in delivering a value for money outcome. As such, it is important to understand the viability of the project from a market perspective. Sufficient numbers of market players and an overall degree of project interest are required to maximise the deliverability of value drivers listed above.
Empirical evidence from similar projects may assist in estimating the impact of these value drivers.