December 27, 2013
Agencies considering P3 procurement options for a highway project may find it useful to conduct a VfM analysis to compare the potential of different project delivery structures to provide value for money. As part of a VfM analysis, the PSC represents a baseline projection of the costs for public sector delivery that serves as a benchmark against which an agency may consider the costs of P3 procurement. The specific steps for completing a VfM analysis are:
The PSC Tool and User Manual utilize a hypothetical highway project as an example to demonstrate how certain assumptions affect the PSC's results and how those outputs inform the VfM analysis. As outlined in Figure 2, the PSC Tool contains four major classes of worksheets that are color-coded by purpose.
Once a public agency has made the decision to move forward with a project, it may consider the options available for the project's delivery structure. If an agency is considering P3 procurement, it may conduct a VfM analysis to inform the selection of the preferred delivery structure. In developing a VfM analysis, public agencies rely on the outcomes of several other tasks conducted in a project's development (e.g., traffic and revenue forecasts and risk assessment) to inform the assumptions made in the analysis.
Agencies typically conduct a VfM analysis after completing the above tasks. An agency may consider qualitative factors earlier in the project development process to assess the potential procurement options that will be evaluated quantitatively in the VfM analysis.
Figure 2: Key Components of the PSC Tool
|Function||The worksheets found within the green tabs allow users to accept the PSC Tool's disclaimers, review key terms and definitions, and navigate through the tool via an 'Index' tab. It is important to note that users must accept the disclaimer on the 'Introduction' tab before accessing the remaining content of the PSC Tool.|
|Assumptions & Examples||The worksheets found within the blue tabs provide users with an editable template of key project assumptions regarding project costs, funding, and revenue. Users enter all the PSC inputs into blue-shaded cells or select the appropriate options from available drop-down menus.|
|Cash Flows||The worksheets found within the gray tabs present the hypothetical project's cash flows based on the assumptions input by the user in the blue tabs. Users cannot alter data in the gray sheets.|
|Outputs||The worksheets found within the yellow tabs calculate the hypothetical project's net present cost (NPC). Users can conduct a sensitivity analysis and a scenario analysis on the NPC. There is another disclaimer users must accept prior to viewing the outputs.|
The PSC considered should be the most likely project delivery alternative to a P3. The PSC may be structured as a traditional design-bid-build alternative or it may be structured as design-build or even design-build-finance procurement if these are reasonable alternative delivery structures for the project's public sponsor.
There are a number of qualitative factors, such as those listed below, that agencies should consider when developing the PSC. Agencies should consider qualitative factors first to decide on the project delivery structure and requirements of the PSC and ultimately to decide which project delivery structure best achieves the project objectives.
Chapter 8 of the Primer provides additional guidance on qualitative VfM assessments.