Value for Money Test

The "public sector comparator" used in some other countries is a useful tool, but is not evidence that a PPP is superior to conventional private sector procurement.

Some jurisdictions, e.g. Victoria and the U.K., require the establishment of a "public sector comparator" against which a PPP is evaluated.

This "value for money" test is, however, problematic. In particular, it is difficult to factor in the cost of things going wrong over the total life of the project. More generally, the public sector comparator is necessarily hypothetical, so its credibility is difficult to test.

It should not be surprising that there has been much debate about whether PPPs offer value for money. The limited available empirical evidence favours PPPs. For example, HM Treasury concluded that of 61 PFI projects, 89% were delivered on time or early and all were delivered within public sector budgets.17

But, aside from the problems with the public sector comparator, these studies suffer from the fact that few PPPs are more than one third through their lives.