The Analysis of Value-for-Money (VfM) for Public Private Partnership Infrastructure: A Public Sector Comparator Approach

Abstract

Countries around the world have welcomed Public Private Partnerships (PPPs) as an alternative to finance infrastructure. The Thai government is also increasingly aware of the importance of infrastructure and the need to tap private resources to help finance strategic infrastructure projects. However, in choosing PPP schemes over traditional project procurement, it should be more about efficiency and value for money (VfM) in delivery of the project rather than the reason of fiscal constraints. Accordingly, the detailed, quantitative analysis of the value for money of PPP projects is vital for the success of the projects from the public sector’s point of view. One of several methods used by many governments in determining whether the private proposals offer better VfM to the public sector is a Public Sector Comparator (PSC). Essentially, the PSC estimates the hypothetical risk-adjusted cost if a project were to be financed, owned and implemented by government. In Thailand, as the new PPP law was signed into law in 2013, it is required by law for the responsible agency to compare the public’s total cost between traditional public procurement and PPP models, but, as to how the cost of the project will be compared, there is no definitive guideline on this. Therefore, this paper is to study how the PSC can be used for the evaluation of PPP infrastructure projects in Thailand. The main processes of the PSC will be reviewed, drawing from international experience. Example of how the PSC can be applied in real practice will also be presented. The results of the study showed that PPP project involved higher project life cycle cost to the government. However, in terms of risk, PPP project helped substantially minimized the cost risk.