One of the key objectives of public private partnership policy is to ensure that the government obtains a value for money outcome.
The assessment of value for money may be considered to be three-dimensional:
• The economic assessment is concerned with the worth of the project to the government, the community and the user of the services. This assessment is based on cost benefit analysis techniques that focus on the broader economic, social and environmental impacts of the project (triple bottom line). An economic assessment should include the cost and benefit differentials arising from different project delivery options yielding different timing outcomes
• The financial assessment is primarily concerned with the likely cost of the project to the government (or end user). The assessment is based on a discounted cash flow analysis that incorporates risk valuation. The basis of the financial assessment is a whole of life comparison of the various project delivery options for the project. Using discounted cash flow techniques, the various project delivery options can be compared by measuring the net present value of each option. Typically, the net present value will be expressed as a range of likely costs as a reflection of the inherent uncertainty of risk
• The quality assessment is based on defining the service requirements in terms of the outputs sought by government. As part of business case development (stage 3), the output specification must be developed to sufficient detail for incorporation into the documentation for the binding bid stage (stage 5). The reference project and associated public sector comparator also developed for the business case must be based on the output specification, and therefore must be capable of delivering the services at the requisite level of quality. Ultimately, the final quality assessment is undertaken as part of the evaluation process during the binding bid stage, when the bids received are assessed for quality against each other and the public sector comparator.
The economic assessment forms part of the preliminary assessment. The financial assessment forms the core part of the analysis undertaken for business case development. The quality assessment is an ongoing requirement of all viable project delivery options.