Wider VfM factors include externalities and non-market impacts. These result when a project produces benefits or costs, either to the Procuring Authority or to the public sector as a whole, that are not directly included in the price of that particular project. Externalities can be positive and negative in economic effect. Examples of project externalities might include:
• changes in operating practices achieved by involving the private sector in the delivery of services, which are then used as an exemplar to inform and influence operating practices where similar services are being provided under conventional arrangements;
• on the one hand, developing or, on the other hand, eroding specialist project and/or procurement management skills through over-reliance on one or other procurement methodologies;
• cultural barriers in an organisation being eroded by introducing a mixed economy of providers with different standards of corporate and individual behaviour.
Innovation can also be an important factor. Where, for example, the scope for innovation in the provision of the required service or project is judged by the Procuring Authority to be high, a case could be made for ascribing a value to innovation for the private finance / NPD Option. Although difficult to quantify, valuing innovation may be particularly relevant where:
• the asset and/or associated service modelled for the purposes of determining the CPAM Option is acknowledged to be based on practices that are conservative;
• good evidence exists that approaches to the delivery of an asset and/or service that differ to those assumed for the CPAM Option are in common use in related sectors, in other parts of the country or perhaps even, in other countries;
• the asset and/or associated service modelled for the purposes of determining the CPAM Option is subject to obvious physical or service constraints that would not be imposed in the same way on NPD partners (for example, where an NPD partner might be able to offer a significantly different balance between new and refurbished buildings to that in the CPAM Option).
Timing of delivery may also be a factor. In general, NPD deals take longer to negotiate than conventional procurement options. However, once procured evidence suggests that the construction phase of projects is quicker, and less subject to time overruns. If good evidence exists to support assumptions about the likely overall timing of projects, then this may be factored into VfM assessments. This is likely to involve bringing forward both the benefits and the costs of the project (e.g. where payments for a new road are likely to begin more quickly than might have been assumed in the base case). Such arguments should not, however, be based solely on assumptions about likely capital budget constraints. Decisions about procurement routes should be based solely on VfM - not accounting treatment.
As a sensitivity in procurement, an assessment of the impact and value of the differential benefits reflecting a switch back to Conventional Procurement (from NPD Procurement) can be undertaken. This would reflect the delay that a "switch" would cause.