P3 Toolkit

Analytical Tools

P3-VALUE Analytical Tools

December 2012

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Chapter 1 - Introduction

Purpose of Guide

This Orientation Guide (Guide) introduces P3-VALUE (Public-Private Partnership Value for Money Analysis for Learning and Understanding Evaluation) users to public-private partnerships (P3s) and the methods used in P3 evaluation. The Guide reviews the different types of P3s in the United States and their benefits and limitations, and explains how public agencies may evaluate different procurement options for a particular project. The Guide explains how P3-VALUE can help users understand the processes and considerations that go into a rigorous quantitative analysis of P3 procurement options for transportation projects. It is important to note that the Guide is based on the experience of the U.S. P3 market and therefore reflects the terminology and methodology practiced in the United States.

Overview of the P3 Toolkit and P3-VALUE

The Federal Highway Administration's (FHWA) Office of Innovative Program Delivery (OIPD) is producing a P3 Toolkit comprising tools and guidance documents to assist in educating public sector policymakers, legislative and executive staff and transportation professionals. The P3 Toolkit forms the base of a broader P3 capacity-building program which includes a curriculum of P3 courses and webinars. The P3 Toolkit will address Federal requirements related to P3s and four key phases in P3 implementation: (1) Legislation and Policy; (2) Planning and Evaluation; (3) Procurement; and (4) Monitoring and Oversight.

P3-VALUE and its accompanying evaluation resources are a key component of the P3 Toolkit. They serve as a reference for decision-makers and practitioners seeking to understand P3s as a financing alternative for major capital projects. The P3 Toolkit includes the following P3 evaluation resources:

• This Orientation Guide to summarize the issues and factors that are evaluated when considering a P3 as a financing and procurement mechanism;
• Three Primers, one each on Risk Assessment, Value for Money Analysis and Financial Structuring and Assessment;
• A suite of analytical tools called P3-VALUE to help practitioners understand the process for evaluating P3 approaches and to educate users on methods for assessing the viability of a P3 approach to infrastructure delivery. User Guides and Frequently Asked Questions provide technical advice in support of this suite;
• Evaluation Guidebooks (under development) for practitioners seeking a deeper understanding of evaluation processes and data sources as well as the concepts, assumptions, inputs and outputs involved in the above analyses; and
• P3 Screening Tools (under development) for the program development as well as the project development phases along with supporting user guides to assist practitioners seeking to perform a preliminary screening evaluation of the suitability of a P3 for major highway projects (costing $100 million or more).

The evaluation resources serve as references for decision-makers and practitioners seeking to understand P3s as alternative methods of delivering major transportation projects. P3-VALUE provides a set of integrated analytical tools to help practitioners understand processes used to quantitatively evaluate procurement options. Practitioners can use P3-VALUE to familiarize themselves with the process of evaluating procurement decisions, the data required to conduct quantitative assessments of procurement options and the impact that various assumptions can have on the desirability and feasibility of different procurement structures. P3-VALUE is for educational purposes only and is not intended to guide decisions on actual projects.

As depicted in Figure 1-1, P3-VALUE is comprised of four interactive, integrated spreadsheet-based analytical tools that allow users to explore different components of Value for Money Analysis (VfM) including:

• Risk Assessment Tool – This tool allows users to document project risks and risk management strategies and to estimate the costs of risks under different procurement structures.
• Public Sector Comparator (PSC) Tool – This tool allows users to calculate the risk-adjusted costs for a project that is designed, financed, constructed, maintained and operated under a traditional public sector delivery model.
• Shadow Bid Tool – This tool allows users to calculate the costs of payments to a private partner for delivering a project as a P3 concession.
• Financial Assessment Tool – This tool allows users to compare the PSC and Shadow Bid costs for procuring a project and to assess the financial subsidies required using different procurement methods.

Figure 1-1. P3-VALUE Overview

Accompanying user guides and other resources include:

• User guides for each analytical tool that explain how to use the tools; and
• Evaluation Guidebooks for practitioners seeking a deeper understanding of evaluation processes and data sources as well as the concepts, assumptions, data requirements, inputs and outputs of the above analyses.

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