Public authorities embark on projects on the premise that an investment is economically justified, i.e. the benefits to society of having a given infrastructure asset the costs. Once it is decided that there are net benefits from the 'baseline' investment procedure (in most countries, conventional procurement), the question is whether PPPs can give greater net benefits. Most quantitative VfM analyses rely on a public sector comparator ("PSC") test. This test is basically a risk-adjusted cost comparison between procurement options for delivering a service at specifically defined standards. This cost-minimisation approach implicitly assumes the NFBs associated with the different delivery models are the same. However, based on the design of PPP contracts and the incentive structures inherent in these contracts, there are good reasons to believe that this may not be the case.
To address this shortcoming, quantitative VfM analysis should be expanded to include a benefits appraisal of each procurement option which systematically takes account of (although is not limited to) the potential NFBs associated with PPPs. The results should be presented alongside the financial cost comparison for each option in order to acquire a more complete picture of VfM. Where the net present value of NFBs is greater for a PPP option than under conventional procurement, the decision on PPP versus conventional procurement should take this into account.