RESOURCES/FEATURED STORIES

Assessing Value for Money (VfM) Approaches

01 June 2013
Assessing Value for Money (VfM) Approaches
PPIAF provided funding to a roundtable conference on lessons learned and challenges of VfM assessments. The activity was designed as a knowledge exchange session among practitioners involved in PPP programs and those advising on PPP related issues. The workshop had a strong focus on assessing the validity of the public sector comparator (PSC) approach to VfM analysis. The PSC methodology compares the risk-adjusted cost to government (or users) of a PPP approach to

PPIAF provided funding to a roundtable conference on lessons learned and challenges of VfM assessments. The activity was designed as a knowledge exchange session among practitioners involved in PPP programs and those advising on PPP related issues. The workshop had a strong focus on assessing the validity of the public sector comparator (PSC) approach to VfM analysis. The PSC methodology compares the risk-adjusted cost to government (or users) of a PPP approach to procurement with the equivalent cost of implementing a proposed project through a traditional public procurement. The outcome of this analysis should then provide government decision-makers with a quantitative analysis of what efficiencies that a PPP approach can deliver in providing public infrastructure and services

The roundtable session took place on May, 28, 2013 in the World Bank headquarter offices in Washington, DC. The session was attended by technical staff involved in PPPs from the Ministry of Finance, PPP agencies and PPP units from Brazil, Chile, Canada, India, Korea, South Africa, the UK and the US. Lessons learned from each country's experience were presented and will be summarized in a report which will be available soon. From the PPIAF team, Mr. Satheesh K. Sundararajan, Infrastructure Finance Specialist, participated in the event and made a presentation on VfM approach in developing country PPPs.

Some of the questions and concerns discussed and presented during the session were the following:

  • Is the PSC methodology sufficiently robust to provide a decision-making framework for PPP vs. Traditional Procurement (TP)?
  • When should the PSC be developed (i.e. before project preparation, during project preparation, after project preparation, before project tender process, after tender is complete, before contract signature)?
  • Incentives of those preparing the VfM and the need for independents checks and balances?
  • How to interpret the results of VfM analysis?
  • Should the government announce the results of the PSC before the tender?
  • How can other approaches support the VfM decision?

Session 1 focused on the findings of VfM Practices in OECD Countries and presentations on Value for money in capital budgeting and procurement practices, Value for Money in PPP Projects: the UK Experience and Lessons Learnt and France's experience and the implementation of VfM approaches were made.

Session 2 focused on Country Experiences and Lessons Learnt from the US, Chile and Korea on Value for Money (VfM) Analysis: Virginia’s experiences and lessons learnt, PPP evaluation process in Chile, and Value for Money Test in Korea.

Session 3 highlighted Country Experiences and Lessons Learnt from CanadaIndia and South Africa. In addition a presentation on recent developments in VfM analysis in Latin America was made which showed examples and different approaches used in Brazil, Chile, Mexico, Peru and Uruguay.
 
On a country level, currently PPIAF is supporting the government of Peru in updating an existing VfM methodology and in applying it to three potential PPP projects. The experiences and lessons learned identified in this activity will be shared with other developing country clients by the PPIAF team to be taken into account when they are preparing PPP projects.