Abstract
The concept of value for money (VFM) is the fundamental reason for most PFI projects to be attractive in many developed and developing countries. The concept encourages governments to deliver Mega projects by using PFI procurement method. The aims of this paper are to investigate the notion of VFM for PFI projects by different countries (i.e. UK, Australia and Japan) and to discover the detailed components of Public Sector Comparator ( PSC ) protocol to evaluate VFM. Based on the consideration of these models, the paper proposes a framework of VFM assessment for PFI projects in Malaysia. The proposed framework outlines six processes to be considered: key assessment criteria (affordability, risk sharing and competition) of VFM assessment; VFM assessment approach by using PSC; VFM appraisal by application of three tests (financial, qualitative and cost benefit analysis); VFM drivers; benefits; and barriers that could affect the VFM assessment process. Hence, achieving VFM can be described in terms of three core components; economic, efficiency and effectiveness of PFI projects. The framework developed in this paper will help to gain a better understanding of VFM in PFI projects and to establish PSC guideline in the evaluation of VFM.
Highlights
Private Finance Initiative (PFI) was originated in England in 1992 under the United Kingdom’s Tory-led government of John Major (Williams, 2005)
This paper attempts to review, synthesize and developed a framework of value for money (VFM) assessment for PFI project in Malaysia based on the notions of VFM assessment model from the UK, Australia and Japan
It attempts to investigate the components of Public Sector Comparator (PSC) as a tool to evaluate VFM
Summary
Private Finance Initiative (PFI) was originated in England in 1992 under the United Kingdom’s Tory-led government of John Major (Williams, 2005). PFI is one type of Public-Private Partnerships (PPP) where project financing rests mainly with the private sector (Akintoye et al, 2003). The capital invested in a project is financed, constructed and leased back to the private sector over a pre-determined period of between 25 and 30 years. This is inline with a number of empirical studies by various researchers (Akintoye et al, 2003; Zhang, 2005; Zhang, 2006; and Pitt & Collin, 2006) indicating that PFI is a method in which project delivery rests mainly with the private sector, which includes designing, constructing, financing and operating the asset. The basic idea of PFI as noted by Shinohara (1998) is based on the concept that public sector purchases “public services provided by private sector to increase the quality and deliver value for money”
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