3.9.1.5 VfM test

In the initial VfM test, the PPP Project Team must compare the NPV of the risk-adjusted BCM model, with the NPV of the PPP Model. An illustrative example of how VFM Analysis will look like:

If the NPVs are indistinguishable from each other, the PPP Project Team should consider the qualitative assessment in order to make a final decision on the preferred Method of Procurement, followed by a few additional steps that should be taken with regards to the VFM Analysis:

Benchmark the VfM results to the VfM results achieved by similar projects with similar transaction structures; and,

Identify the criteria for the project execution phase to decide when the VFM Analysis will be revisited.

At this stage, the Government Entity must be fully empowered to make a decision regarding whether it would want to retain the project because the Value for Money the private sector provides is negligible and the risks are too high for the project to be procured privately with such minimal gain, or whether the innovation and efficiency the private sector might bring, even on the margins, would be worth transferring the project to the private sector.