Competitive neutrality in public-private partnership evaluations: a non-neutral interpretation in comparative perspective

Internationally, public-private partnerships (PPPs) have become an increasingly common part of government infrastructure programmes. The public sector comparator (PSC) is the key quantitative test to ensure that PPP projects achieve much vaunted value-for-money (VFM) compared to projects managed solely by governments. Despite attracting much debate over the preceding two decades, one component of the PSC that has received relatively little attention is that of competitive neutrality, which is the requirement to remove any advantages either delivery method, private or public, may have due to ownership. Competitive neutrality policies have found favour over the last two decades in an effort to enhance micro-economic competitive tension. In response, this article reviews the conceptual basis for competitive neutrality and considers how it has been applied within the PPP guidelines in eight G20 economies. It finds that, while most governments apply some principles of competitive neutrality, the application varies widely, with a tendency to favour the PPP option. It also finds that the objectives of VFM and competitive neutrality are competing and, in fact, contradictory, which raises the issue of whether a competitive neutrality adjustment should be made to all PPP evaluations. The conclusion is that such an adjustment should not be made in all instances.