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Value for Money for Public-Private Partnerships: A Primer

This primer addresses Value for Money Assessment (VfM) for public-private partnerships (P3) and has been prepared as a companion document to FHWA’s recent primers on Risk Assessment and Financial Structuring and Assessment for P3s.  The VfM analysis process is used to compare the aggregate benefits and the aggregate costs of a P3 procurement against those of the traditional public alternative.  VfM assessment is different from benefit-cost analysis, which determines whether investing in a public sector project is a good use of societal resources.  They are also distinct from the process of establishing whether or not a project is actually affordable to the government.

The primer contains nine chapters.  Following an introduction, Chapter 2 provides an overview of the VfM analysis process. Chapter 3 discusses discounting of future costs and revenues to facilitate comparison of the procurement alternatives in terms of present value. Two key components of the PSC are life-cycle costs and the costs or risks. They are discussed in Chapters 4 and 5 respectively. Toll revenue risk is discussed separately in Chapter 6. Chapter 7 discusses quantitative assessment of VfM and Chapter 8 discusses qualitative assessment. Finally, Chapter 9 presents a summary with cautionary notes based on experience to date.

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HTML version of Draft Report (September 11, 2012)

PDF version of Draft Report (September 11, 2012)

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