Value for Money

What do you mean when the product you got is value-for-money? How does that compare to the idea that a product is cheap? Cheap is a comment about the price you pay, nothing necessarily to do with the value you get for your what you pay. Value-for-money is probably what we are thinking of when we hope to get a ‘cheap product’ – because it implies that for the value you’re getting, the price is great! The value is a lot more.

Now in Public-Private Partnership (PPP) projects in infrastructure, there is the idea of a Value-for-Money (VfM) analysis. The idea is really to compare the PPP mode of procurement against that of traditional public sector procurement. In other words, it is taken that the government will need or want to implement the project, just a matter of how the project would be implemented. And in that spirit, PPP is not so much an enabler of projects than just a mere enhancement option that may make the project more efficient/effective, having already established the need for it.

I think too often, we get a little confused about VfM assessments and use it to evaluate if a project should go ahead or not. The Cost-Benefit Analysis that is used to establish the case for the project should be done even before the VfM – and at times, the VfM might be able to take advantage of that work to ensure that the private financing can result in a more efficient outcome. It is important that we see PPP as a mere enhancement rather than a panacea.

A lot of narratives about using private financing to alleviate state budget strains have been overly generalised and becomes simply untrue – because the state might be able to obtain financing at a lower cost and then deploy those funds into projects. So the private sector participation must contribute a lot more than that – and be able to articulate to the governments and help them echo those deeper advantages to the people. And for public sector contracting agencies, there are going to be private sector players coming along to promise lower cost of capital – but someone has to pay for it and you will have to consider whether you’re comparing quality like-for-like and if the output really is going to be as desired. The challenge of outsourcing is that responsibility to deliver projects is still that of the governments’.

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