How should the use of private finance be evaluated when considering the best procurement route to deliver a public asset? 

In Scotland, the use of private finance for delivering public assets is part of the commitment set out in the Government's 2011-12 Budget2 to "explore all possible means to support higher levels of infrastructure investment than would be possible through the capital budget alone." In recognition that "Capital investment is vital to strengthening recovery and supporting sustainable economic growth" and that "Scottish Government does not have the flexibility to borrow to fund additional capital expenditure" 

In measuring the value of private finance, SFT has therefore considered the benefits brought by accelerated investment in infrastructure as compared to waiting until capital budgets become available. A calculation of this benefit, according to a methodology developed in France is set out in our annual statement of Benefits3. The social benefit of acceleration is a key aspect often overlooked. 

SFT has not undertaken quantitative value for money analysis on a project-by-project basis comparing the discounted life-cycle cost of public versus privately financed assets as the range of uncertainty in the cost and particularly risk estimates involved in such a calculation are considered to be greater than the differential between the results on each side of the equation. Our value for money approach for individual projects4 focuses on efficiently procuring the "right" asset specified to sustainably address needs not wants. 

With flexibility to borrow, the value of private finance would objectively be evaluated by considering the differential cost between forms of financing, and the differential benefits over an asset life. This could be done at an investment programme level on the basis of exemplar projects rather than by a costly analysis in respect of every individual project.