Abstract
Infrastructure public private partnerships (PPP) procurement must be carefully selected on the basis of value for money when compared to conventional procurement. While the value for money analysis has been widely used to ensure low procurement cost in PPP, little is known with respect to its effectiveness and data source. The paper explores existing value for money assessment model and reports its deficiencies in ignoring project revenue and network data collecting. Addressing the current issues, a new revenue based value for money assessment model with Monte Carlo simulation technique is proposed. Data used for simulation come from project participants who obtain and share data through an online virtual collaborative platform. By applying this online technique, project data is more easily shared and reused. This data transmission process is automated and seamless. Then, the effectiveness of new model was examined by using a hypothetical toll road case. It shows that the new value for money assessment model demonstrates the significant advantage in estimating the risk, cost, and revenue variance and assisting the public agency to make decision in the procurement phase.
Highlights
Since the use of Public Private Partnerships (PPP) has gained increasing global popularity, countries such as United Kingdom spent approximately 12% of its total annual infrastructure capital expenditure in PPP
Value for Money (VfM) is often regarded as a monetary value savings produced by selecting the PPP option versus a traditional procurement option
If the cost of the traditional procurement is higher than the PPP, the difference between the two costs is the potential savings, or the VfM that can be achieved through the PPP procurement option [2]
Summary
Since the use of Public Private Partnerships (PPP) has gained increasing global popularity, countries such as United Kingdom spent approximately 12% of its total annual infrastructure capital expenditure in PPP. VfM is often regarded as a monetary value savings produced by selecting the PPP option versus a traditional procurement option. The calculation of such savings is the concept behind the VfM analysis or VfM assessment. The current VfM analysis deals only the first phase of ensuring VfM from PPP projects, namely procurement cost. Our paper tries to present a revenue-based VfM assessment model using online simulation technique. A case study was given, where the online Monte Carlo modeling technique was used in the new model to assess a range of potential cash flow outcomes for the PSC (Public Sector Comparator) and PPP bid
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