PPPs involve a particular set of incentives, underpinned by a sometime complex structure of contracts. This requires to the public sector to be explicit about the services it requires. The payment mechanism (and associated financial arrangements) is then designed to maximise the likelihood that the contracted services are actually delivered.
The benefits of requiring the public sector to say clearly what it wants are important in their own right. But beyond this, PPP may provide the private sector with broader opportunities to apply innovation at all levels of project delivery. These incentives, if effectively harnessed, can provide NFBs through three key mechanisms:
∙ accelerated delivery (delivering services earlier);
∙ enhanced delivery (delivering services to a higher standard);
∙ wider social impacts (greater benefits to society as a whole).
The remainder of this paper explores how PPP may have these three effects, and how these can be considered in VfM analyses.