As part of the wider VfM discussion, a number of interviewees spoke about VfM drivers. Table 4 outlines these. Some relate predominantly to the procurement and delivery phases, whilst others are aimed more at the operational phase.
Table 4: PPP VfM drivers identified by interview participants | |
VfM drivers | |
Cost savings/return on investment | '[VfM is] about getting a competitive rate for what [government] receive[s], which needs to take into account the payment of management fees...and locking down…maintenance costs' (PF12). '[VfM is securing] the lowest cost option for the highest benefit...it doesn't necessary mean the cheapest cost' (PT02). 'VfM isn't necessarily driven by the dollar...price comes into it because [government needs] to buy something - a ten million dollar investment may potentially lead to twenty million dollars of value in terms of prestige or improvements...you have to look at price in context. It cannot be the sole driver' (RK10). |
Additional benefits | 'There are cases where we certainly look for a minimum set of requirements and where that might be exceeded as part of an offer of the outcome of the procurement process. For example on social infrastructure PPPs, there may be additional commercial elements to the project - it might be retail, it might be food and beverage, it might be services that we didn't brief on, didn't ask for but may be offered by the private partner as a VfM enhancement. We do value that. For us, it is VfM because it's something that we didn't ask for but it's something that we could actually like or want' (PT10). |
Productivity gains | 'The dynamic VfM equation is what you do with the building - it's the function of what you perform out of the building. With office blocks, it's a relatively simple equation. A hospital, prison, court building or school is a much more dynamic environment where you're actually delivering quite sophisticated outcomes that are single-purpose…the function is the bigger element' (RK06). 'Having a facility that's more innovative and creative...actually drives performance of a facility. The [VfM] debate ought to be about the productivity of the facility' (PT12). |
Service expectations/outcomes | '[VfM is about] service standards and how well [the private partner] meet[s] them and whether they meet higher service standards than would otherwise occur in the public system' (PT11). '[VfM is assuring] private sector parties are meeting their obligations that are set out under the project agreement...and there isn't slippage or re-framing of issues, or weaselling out of payment issues' (PF13). 'VfM is about not having [performance or availability] failures' (PF03). |
Strategic underpinning of partnering not only extends to the parameters, definition and drivers of VfM but also to its measurement. For example, in describing VfM as a longterm proposition, PT13 states that, in relative terms, value cannot solely be determined by calculating a dollar spend on a year-by-year basis during the operational phase. On the other hand, measuring VfM, say over the first five years and then assessing how that period relates to the next 25 years of the concession, may be a better predictor of VfM using both quantitative and qualitative assessments (PF11)). Over and above analysing the financial benefits quantitatively, using qualitative assessments may provide greater certainty in terms of appraising the quality of relationship between the partners (as it should have become well established at that point) e.g. judging how supportive the private partner may be in interpreting ambiguous service standards. Such assessment may provide useful for public partner decision-making with regard to the potential for improving existing VfM outcomes and/or avoiding costly partnering disputes.