Value for money in transport infrastructure investment: An enhanced model for better procurement decisions

Richard Haigh,Jianfeng Zhao,David Greenwood,Niraj Thurairajah,Henry J. Liu

doi:10.1016/j.tranpol.2022.01.021

Richard Haigh, Jianfeng Zhao + Show 3 more

Open Access

https://doi.org/10.1016/j.tranpol.2022.01.021

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Abstract

This paper addresses the nebulous value for money (VfM) concept and its widely-criticised use in justifying the adoption of Public-Private Partnerships (PPPs) for transport infrastructure projects. It draws on the theories of value and identifies that value is generated in the interaction of the supply side (i.e., governments - as project sponsors and part of infrastructure delivery partnerships) and the demand side (i.e., end-users). In this sense, ‘public’ participation in transport is highlighted in the proposed framework to demonstrate that it is the combination of ‘traditional’ and ‘public’ VfM that together create a more meaningful VfM concept. To underpin the application of the framework, a dynamic VfM assessment process is developed that can facilitate the appropriate selection of a procurement method and assess its VfM throughout the project lifecycle. Unlike current examples, the framework is designed for both PPPs and their alternatives (e.g., conventional public sector procurement) and aligns ex-ante and ex-post VfM assessment. The enhanced model creates an opportunity for governments to recognise public VfM in transport interventions, shift their mindset from singular to multi-dimensional evaluation, and start to actually accumulate and exploit experience from past projects. As such, the contribution of this paper is twofold: (1) drawing upon theories of value, it depicts the ontology of VfM and addresses a missing ingredient in VfM assessment; and (2) it develops a holistic framework for the public sector to re-calibrate their VfM assessment policy when procuring transport projects.

Highlights

Transport infrastructure forms the backbone of an economy’s socioeconomic development and growth (Maciulis et al, 2009)
For large-scale transport projects (>$300 million) and in the face of fiscal constraints, the public sector is increasingly engaging the private sector in the delivery of their transport assets using a Public-Private Partnership (PPP) approach (Carpintero and Petersen, 2015)
Pro posals of this nature are justified by the assumption that PPPs can generate better value for money (VfM) than conventional public sector procurement (PSP) (Kweun et al, 2018)

Summary

Introduction

Transport infrastructure forms the backbone of an economy’s socioeconomic development and growth (Maciulis et al, 2009). An example can be seen in the South African Transport Department’s unexpected payment of R24 million (≈US$1.65 million) to the private sector on the Chapman’s Peak toll road as a result of the pandemic (National Treasury, 2021) Faced with this situation, it becomes even more important for governments to expend their budget effectively while satisfying taxpayers’ needs. Pro posals of this nature are justified by the assumption that PPPs can generate better value for money (VfM) than conventional public sector procurement (PSP) (Kweun et al, 2018). We conclude this paper by summarising its achievements and future di rections in the final section

Definitions and history

PPPs and transport procurement

VfM assessment to date

Theoretical base

Framework for VfM assessment of transport projects

Implications for procurement policy

Findings

Conclusions