At the centre of any decision to pursue a PPP in preference to Traditional procurement is the establishment of Value for Money (VFM) to the state from doing so. In order to assess VFM, it is necessary to establish a benchmark against which the PPP proposals can be assessed. That benchmark is termed the Public Sector Comparator (PSC), which estimates the full cost of a project's construction and future operations, including the value of any risk transfer to the private sector, and discounts the cash flows to a present value. The Government is then able to compare the Net Present Value (or Net Present Cost) with the value (cost) associated with the stream of cash flows that would be expected under a PPP arrangement.
Critics of the PPP approach, such as Jean Shaoul (2005, p.193) in the UK, highlight the uncertainties surrounding the measurement of the risk transfer and emphasize that 'risk transfer is the crucial element in delivering whole-life economy since under PFI private sector borrowing, transactions costs and the requirements for profits necessarily generate higher costs than conventional public procurement'. Shaoul was also concerned that risk transfer is often not effective or complete, since the failure of the UK Passport Agency's IT PPP resulted in delay costs to the public at large. However, Shaoul did not demonstrate that these costs to the public had been priced into the PSC, nor that the government's requirement for profit is any different from that of the private sector. Certainly, the behaviour of government owned businesses (GBEs) does not support this.