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P3-VALUE Webinars

Questions and Answers - Value for Money Analysis: Homework Assignment Review

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Homework Assignment 2: Value for Money Analysis for a Toll Concession Project

P3-VALUE Webinar - July 19, 2013

Patrick DeCorla-Souza
P3 Program Manager
Office of Innovative Program Delivery

Aaron Jette, Volpe Center
Qingbin Cui, University of Maryland

Questions and Answers

1. Should the value for money be judged over a range of assumptions for all the variables rather than a single-point value, especially if the difference is marginal? So would it be judged on the majority of the range?

As you saw, there are very difficult assumptions that you have to make, such as discount rates, value of risk, etcetera, and it behooves you to do an analysis over a range of credible assumptions and look at the answers over this range and see - well, once you have the range, you can probably look at - of course the conventional method is to do a Monte Carlo simulation. I wouldn't suggest you do that many runs of your P3 value, but you could do some extremes and then look at - credible extremes - and then look at what the range is and look at the likelihood of those different assumptions, and present the information based on what assumptions you think are most likely. But it's always a good idea to present a range. And of course, as we said in the webinar, these numbers are only one part of a much bigger evaluation where you look at broader impacts, impacts on user benefits, on other external costs and benefits that you are not accounting for in valuable for money analysis, as well as other qualitative benefits relating to whether or not you can actually get these benefits by structuring your contract in a way that you actually transfer all these risks, etcetera. So it's a much bigger issue than just cranking out the numbers here, and the tool simply helps you understand the complexity of the assumptions and the effect that these assumptions can have on your evaluation.

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