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The Value for Money Question

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Public Private Partnerships in Nigeria

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Abstract

This chapter discusses the concept of value for money (VFM) in PPPs. VFM is a very important concept in PPPs and is typically applied in two different but interrelated ways. The first application is that it used to make a decision before the commencement of a project as a PPP. At this stage, VFM is used to consider the viability of pursuing a project as a PPP as opposed to using traditional procurement. Second, it is used at the conclusion of a project as an evaluation tool. In this regard, it is used as the benchmark to consider whether a PPP project is successful or otherwise. This chapter explores these two approaches in detail.

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Notes

  1. 1.

    Esther Cheung, Albert Chan and Stephen Kajewski (2009) “Enhancing Value for Money in Public Private Partnership Projects: Findings from a Survey conducted in Hong Kong and Australia compared to Findings from Previous Research in the UK”, Journal of Financial Management of Property and Construction, 14(1): 7–20.

  2. 2.

    Bing Li, Akintola Akintoye and Cliff Hardcastle, “VFM and Risk Allocation Models in Construction PPP Projects”, Preliminary result of ongoing PhD research, School of Built and Natural Environment, Glasgow: Caledonia University. Available at: http://www.reading.ac.uk/AcaDepts/kc/ARCOM/eorkshop/04-Edinburgh/06-Li.pdf

  3. 3.

    Arthur Andersen (2000) “Value for Money Drivers in Private Finance Initiative”, Arthur Andersen and Enterprise LSE.

  4. 4.

    Kharizam Ismail, Roshana Takim and Abdul Hadi Nawawi (2011) “The Evaluation Criteria for Value for Money (VFM) of Public Private Partnership (PPP) Bids”, International Conference on Intelligent Building and Management Proc of CSIT, 15(5): 349–355; Akintola Akintoye (2003) “Achieving Best Value in Private Finance Initiative Project Procurement”, Construction Management and Economics, 21: 461–470.

  5. 5.

    Nigerian National Policy on Public Private Partnership (PPP) (2009) Infrastructure Concession Regulatory Commission, Nigeria.

  6. 6.

    HM Treasury (2006) “Value for Money Assessment Guide”, London: HM Treasury; Roshana Takim, Kharizam Ismail and Abdul Hadi Nawawi (2011) “A Value for Money Assessment Method for Public Private Partnership. A Lesson from Malaysian Approach”, International Conference on Economics and Finance Research IPEDR, vol. 4.

  7. 7.

    Darrin Grimsey and Mervyn Lewis (2005) “Are Public Private Partnerships Value For Money: Evaluating Alternative Approaches and Comparing Academic and Practitioner Views”, Accounting Forum, 29: 345–378.

  8. 8.

    Darrin Grimsey and Mervyn Lewis (2007) Public Private Partnerships: The Worldwide Revolution in Infrastructure Provision and Project Finance, Cheltenham, UK: Edward Elgar Publishing, p. 136.

  9. 9.

    Linda English and James Guthrie (2003) “Driving Privately Financed Projects in Australia: What Makes Them Tick?”, Accounting, Auditing and Accountability Journal, 16(3): 493–511; Darrin Grimsey and Mervyn Lewis (2005).

  10. 10.

    Roshana Takim, Kharizam Ismail, Abdul Hadi Nawawi and Aini Jaafar (2009) “The Malaysian Private Finance Initiative and Value For Money”, Asian Social Science, 5(3): 103.

  11. 11.

    Partnership South Australia Guidelines, available at http://www.treasury.sa.gov.au/public/download.jsp?id=513 (online), (Last accessed 22 January 2012).

  12. 12.

    Darrin Grimsey and Mervyn Lewis (2005).

  13. 13.

    Darrin Grimsey and Mervyn Lewis (2005).

  14. 14.

    Dorothy Morallos, Adjo Amekudzi, Catherine Ross and Michael Meyer (2009) “Value for Money Analysis in U.S. Transportation Public-Private Partnerships”, Journal of Transportation Research Board, 2115, Research Board of National Academics, Washington, DC: 27–36.

  15. 15.

    Dorothy Morallos, Adjo Amekudzi, Catherine Ross and Michael Meyer (2009).

  16. 16.

    Ibid.

  17. 17.

    Ibid.

  18. 18.

    Ibid.

  19. 19.

    National Treasury PPP Unit (2004) “Public Private Partnership Manual”, Pretoria, Republic of South Africa.

  20. 20.

    Central PPP Unit, Ireland (2007) “Value for Money and the Public Private Partnership Procurement Process”, Dublin, Ireland: National Development Finance Agency.

  21. 21.

    Darrin Grimsey and Mervyn Lewis (2007).

  22. 22.

    Partnership Victoria (2003) “Use of Discount Rates in the Partnership Victoria Process”, Technical note, Melbourne Department of Treasury and Finance, Australia.

  23. 23.

    Darrin Grimsey and Mervyn Lewis (2007).

  24. 24.

    Ibid.

  25. 25.

    Partnership Victoria (2003).

  26. 26.

    Ibid.

  27. 27.

    Ibid.

  28. 28.

    HM Treasury (2006) “Value for Money Assessment Guidance”, London: HM Treasury.

  29. 29.

    Tahir Nisaar (2011) “The Design and Implementation of Public Private Partnerships in the UK’s Social Sector”, Paper presented at Improving the Quality of Public Services: A Multinational Conference on Public Management, Moscow, Russia.

  30. 30.

    Esther Cheung, Albert Chan and Stephen Kajewski (2009) “Enhancing Value for Money in Public Private Partnership Projects: Findings from a Survey conducted in Hong Kong and Australia compared to Findings from Previous Research in the UK”, Journal of Financial Management of Property and Construction, 14(1): 7–20.

  31. 31.

    National Policy on Public-Private Partnership (PPP), a document of the Infrastructure Concession Regulatory Commission.

  32. 32.

    Ibid.

  33. 33.

    It is, however, claimed that VFM also helps the public sector understand how the project risks can be allocated between the public and private sectors, and also that the VFM tool helps give the government confidence about the use of PPPs and that scarce resources would be well spent. See, for example, Laurent J. Flores (2010) “The Value of the ‘Value for Money’ Approach When There’s No Money”, in IFC Advisory Services in Public-Private Partnerships: Smart Lessons from Infrastructure, Health and Education, International Finance Corporation, p. 7.

  34. 34.

    Jean, Shaoul (2005) “The Private Finance Initiative or the Public Funding of Private Profit?” in The Challenge of Public Private Partnerships: Learning from International Experience, ed. G. Hodge and C. Greve (eds.), London: Edward Elgar.

  35. 35.

    J. Broadbent, J. Gil and R. Laughlin (2003) “The Development of Contracting in the Context of Infrastructure Investment in the UK: The case of the Private Finance Initiative in the National Health Service”, International Public Management Journal, 6(2): 173–197.

  36. 36.

    National Audit Office (2003) Managing Resources to Deliver Better Public Services, HC 61-1, Session 2003–04, London.

  37. 37.

    Darrin Grimsey and Mervyn Lewis (2005).

  38. 38.

    Ibid.

  39. 39.

    Ibid.

  40. 40.

    Linda English and James Guthrie (2003.

  41. 41.

    Roshana Takim, Kharizam Ismail, Abdul Hadi Nawawi and Aini Jaafar (2009) : 103; see also Kharizam Ismail, Roshana Takim and Abdul Hadi Nwawi (2011).

  42. 42.

    Anne L. Schneider (1999) “Public Private Partnership in the U.S. Prison System”, Behavioural Scientist, 43(1): 192–208.

  43. 43.

    Darrin Grimsey and Mervyn Lewis (2005).

  44. 44.

    Ibid.

  45. 45.

    Nigerian National PPP Policy, ICRC, Abuja, Nigeria.

  46. 46.

    Daniel Heald (2003) “Value for Money Tests and Accounting Treatment in PFI Schemes”, Accounting, Auditing and Accountability Journal, 16(3): 342–371.

  47. 47.

    Joaquim M. Sarmento (2010) “Do Public Private Partnerships Create Value for Money in the Public Sector? The Portuguese Experience”, OECD Journal on Budgeting, 1: 93–119.

  48. 48.

    Darrin Grimsey and Mervyn Lewis (2005).

  49. 49.

    Darrin Grimsey and Mervyn Lewis (2005); Marcus Ahadzi and Graeme Bowles (2004) “Public-Private Partnerships and Contract Negotiations: An Empirical Study”, Construction Management and Economics, November, 22: 967–978; Ng and Loosemore (2007).

  50. 50.

    William B. Moore and Thomas Muller (1989) “Impacts of Development and Infrastructure Financing”, Journal of Urban Planning Development, 115(2), ASCE 95-108.

  51. 51.

    David Parker and Keith Harley (2003) “Transaction Costs, Relational Contracting and Public Private Partnerships: A Case Study of UK Defence”, Journal of Purchasing and Supply Management, 9(3): 97–108.

  52. 52.

    The National Audit Office (1997), The PFI Contracts For Bridgend and Fazakerley Prisons, HC 253, Sessions 1997–98, London,cited in David Parker and Keith Harley (2003).

  53. 53.

    David Parker and Keith Harley (2003).

  54. 54.

    Tahir Nisar (2007) “Risk Management in Public-Private Partnership Contracts”, Public Organization Review, 7: 1–19.

  55. 55.

    Darrin Grimsey and Mervyn Lewis (2005); Darrin Grimsey and Mervyn Lewis (2004).

  56. 56.

    Arthur Andersen and LSE Enterprises (2000) “Value for Money Drivers in Private Finance Initiative”, Report commissioned by the UK Treasury Task Force on Public-Private Partnerships; see also Darrin Grimsey and Mervyn Lewis (2005).

  57. 57.

    Ibid.

  58. 58.

    Arthur Andersen and LSE Enterprises (2000).

  59. 59.

    National Audit Office (1998) The Private Finance Initiative: The First Four Design, Build, Finance and Operate Roads Contracts, HC 476, London.

  60. 60.

    National Audit Report (2000) “Examining Value for Money Deals under the Private Finance Initiative”, London.

  61. 61.

    National Audit Report (2001) “Managing the Relations to Secure a Successful Partnership in PFI Projects”, A Report from the Comptroller and Auditor General, HC 375, London.

  62. 62.

    Tahir Nisar (2007) “Value for Money Drivers in Public Private Partnership Schemes”, International Journal of Public Sector Management, 20(2): 147–156.

  63. 63.

    The Institute of Public Policy Research (2001) “Building Better Partnerships: The Final Report of the Commission on Public Private Partnerships”. London: Institute for Public Policy Research.

  64. 64.

    David Parker and Keith Harley (2003).

  65. 65.

    Pam Edwards, Jean Shaoul, Anne Stafford and Lorna Arblaster (2004) “Evaluating Operations of PFI in Roads and Hospitals”, ACCA Research Report 84. London: Certified Accountants Educational Trust.

  66. 66.

    Ibid.

  67. 67.

    Linda English (2006) “Public Private Partnerships in Australia: An Overview of Their Nature, Purpose, Incidence and Oversight”, University of New South Wales Law Journal, 19(3).

  68. 68.

    Ibid.

  69. 69.

    Peter Fitzgerald (2004) “Review of Partnerships Victoria Provided Infrastructure”, Final report to the Treasurer, Melbourne: Growth Solutions Group.

  70. 70.

    Sean Keating (2004) “Public-Private Brinkmanship”, Project Finance, September: 27–29, cited in The Institute of Chartered Accountants of Scotland supra.

  71. 71.

    Bob Walker and Betty C. Walker (2000) Privatization: Sell Off or Sell Out? The Australian Experience. Sydney: ABC Books.

  72. 72.

    Linda English and James Guthrie(2003).

  73. 73.

    Ibid.

  74. 74.

    Dorothy Morallos, Adjo Amekudzi, Catherine Ross and Michael Meyer “Value for Money Analysis in U.S. Transportation Public-Private Partnerships”, (online), available at: http://people.ce.gatech.edu/~aa103/valueformoney.pdf (last accessed 12 October 2015).

  75. 75.

    National Council for Public Private Partnerships, “Testing Tradition: Assessing the Added Value of Public-Private Partnerships”, available at http://www.ncppp.org/wp-content/uploads/2013/03/WhitePaper2012-FinalWeb.pdf (last accessed 12 October 2015).

  76. 76.

    Pamela Bloomfield, David Westerling and Robert Carey (1998) “Innovation and Risks in a Public-Private Partnership Financing and Construction of a Capital Project in Massachusetts”, Public Productivity and Review, 21 (4): 460–471.

  77. 77.

    Aaron Toppston (2012) “Alternative Construction Delivery”, Paper presented at Aon DC Construction Forum, Washington, DC, 2 April 2012), cited in National Council For Public Private Partnerships, “Testing Tradition: Assessing the Added Value of Public-Private Partnerships”, available at http://www.ncppp.org/wp-content/uploads/2013/03/WhitePaper2012-FinalWeb.pdf.

  78. 78.

    Carsten Greve, (2003) “When Public–Private Partnership Fail. The Extreme Case of the NPM- inspired Local Government of the Forum in Denmark”, Paper for the EGPA conference 3–6 September, Oerias, Portugal, cited in Tahir Nisar (2007) “Risk Management in Public-Private Partnership Contracts”, Public Organization Review, 7: 1–19.

  79. 79.

    Ole Helby Petersen (2011) “Public-Private Partnerships as Converging or Diverging Trends in Public Management? A Comparative Analysis of PPP Policy and Regulation in Denmark and Ireland”, International Public Management Review, 12(2): 1–37.

  80. 80.

    Netherland Audit Office, cited in T. Nisar (2007).

  81. 81.

    Grimsey and Lewis (2005).

  82. 82.

    Bent Flyvbjerg, Mette S. Hol and Soren Buhl (2002) “Underestimating Costs in Public Works Projects: Error or Lie?”, Journal of the American Planning Association, 68(3):. 279–295.

  83. 83.

    Mott MacDonald (2002) Review of Large Public Procurement in the UK. London: HM Treasury.

  84. 84.

    IPPR (2001) Building Better Partnerships. London: Institute of Public Policy Research.

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  1. Ministry of Finance, Abuja, Nigeria

    George Nwangwu

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Nwangwu, G. (2016). The Value for Money Question. In: Public Private Partnerships in Nigeria. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-54242-7_5

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  • DOI: https://doi.org/10.1057/978-1-137-54242-7_5

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