Theoretically, a PPP project is favoured only when its generated benefits/revenues exceed the total costs including the additional costs compared with a public sector project. To ensure this, government regulations guiding PPP schemes may establish some value for money or public sector comparator (PSC) criterion. For example, in the United Kingdom of Great Britain and Northern Ireland and in Australia the net present value of the proposed project as a PPP scheme is compared with its value if implemented by the public sector. A project is implemented through the PPP modality only when it promises to give a superior value for money as a PPP project compared with its value as a public sector project.
There are, however, problems in applying the PSC concept ranging from methodological issues to various practical limitations involving the concept. Some of the major problems include lack of consensus on discount rate, high costs of financial modelling, omitted risks, lack of realistic data for meaningful comparison of implementation by the public sector, and non-existence of a public sector alternative. In view of these serious limitations of PSC, it may not always be a feasible proposition to apply the concept in developing countries.