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Value-for-money measurement in public-private partnerships

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  • Grout, Paul A.

    (Centre for Market and Public Organisation, University of Bristol)

Abstract

Public-private partnerships (PPPs) are long-term partnerships between the public and private sectors that usually involve the private sector undertaking investment projects that traditionally have been executed (or at least financed) and owned by the public sector. This paper considers alternative approaches to value-for-money tests and discusses some of the main conceptual problems associated with these tests. It explains why comparisons between private bids and a public sector comparator are difficult and prone to significant error. It is argued that tests centered on comparisons between private sector alternatives are well focussed, less prone to measurement error than other tests, and more likely to deliver the best candidate from the group it considers. The paper also considers the PPP evidence from the United Kingdom and summarises the experience of outsourcing in the private sector.

Suggested Citation

  • Grout, Paul A., 2005. "Value-for-money measurement in public-private partnerships," EIB Papers 7/2005, European Investment Bank, Economics Department.
    • Handle: RePEc:ris:eibpap:2005_007
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    Citations

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    Cited by:

    1. Miranda Sarmento, J. & Renneboog, L.D.R., 2014. "Anatomy of Public-Private Partnerships : Their Creation, Financing, and Renegotiations," Discussion Paper 2014-017, Tilburg University, Center for Economic Research.
    2. Blanc-Brude, Frederic & Goldsmith, Hugh & Valila, Timo, 2007. "Ex Ante Construction Costs In The European Road Sector: A Comparison Of Public-Private Partnerships And Traditional Public Procurement," Economic and Financial Reports 2006/1, European Investment Bank, Economics Department.
    3. Marian W. Moszoro, 2021. "The Public‐Sector Cost of Capital: An Empirical Test of Peltzman’s Conjecture," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(5), pages 1273-1285, October.
    4. Moszoro Marian W., 2018. "Public–Private Monopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(2), pages 1-15, April.
    5. Andrea MAIRATE & Francesco ANGELINI, 2006. "Cost-benefit analysis and EU cohesion policy," Departmental Working Papers 2006-34, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    6. Marian MOSZORO, 2014. "Efficient Public-Private Capital Structures," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(1), pages 103-126, March.
    7. Evgenios Tassopoulos & Sotirios Theodoropoulos, 2014. "Residual Value and its Importance in Concession Agreements for Infrastructure Problems," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 32-40.
    8. Claude Montmarquette & Iain Scott, 2007. "Taux d'actualisation pour l'évaluation des investissements publics au Québec," CIRANO Project Reports 2007rp-02, CIRANO.
    9. Harry Clarke, 2007. "Conserving Biodiversity in the Face of Climate Change," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 14(2), pages 157-170.
    10. Frédéric Blanc-Brude & Hugh Goldsmith & Timo Välilä, 2009. "A Comparison of Construction Contract Prices for Traditionally Procured Roads and Public–Private Partnerships," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(1), pages 19-40, September.
    11. Miranda Sarmento, J.J. & Renneboog, Luc, 2016. "Anatomy of public-private partnerships : Creation, financing, and renegotiations," Other publications TiSEM dc944be7-8594-4439-90da-6, Tilburg University, School of Economics and Management.
    12. Eriksen, Knut Sandberg & Jensen, Svenn, 2010. "The cost of second best pricing and the value of risk premium," Research in Transportation Economics, Elsevier, vol. 30(1), pages 29-37.

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    More about this item

    Keywords

    private finance initiative; value for money; discount rates; outsourcing;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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