The term “business case” for infrastructure projects is being used for two very different types of analysis:
Infrastructure project proponents’ goals are usually to improve the area or region’s economic competitiveness, generate and maintain jobs, and enhance the quality of life. The VfM business cases ensures an efficient process, but not an efficient or optimal outcome and does not necessarily meet the overall goals. That is, VfM may support an efficient delivery but it does not directly support infrastructure projects that help the region meet its goals.
A distinction should therefore be make when talking about infrastructure business cases between public private partnership or alternative financing and procurement VfM and overall value for money.
At Impact Infrastructure we are interested in overall value for money. VfM in the P3 sense answers an interesting but rather limited question. VfM is a narrow concept that compares alternative procurement with traditional public sector build, own and operate. Overall value for money looks not just at the procurement but at the value of the project to the sponsors, the public, the environment, investors, etc.
Some seem to suggest that VfM can be used to determine overall value but a bad project under traditional government financing will only be a bit better under alternate procurement. And VfM is not going to make a project sustainable. Rather than answering the VfM question of “Is this the best procurement method for the project?”, the overall value for money analysis answers the questions “is this the right project?”, “is it done right”, and “what’s in it for me?”
Once overall value is determined then value for money can be determined. In fact VfM or P3 business cases assume a “full business case” has been done to establish the need.
We think that overall value for money, SIV, can be used to choose the right projects, provide the information to make them acceptable to stakeholders, and help ensure that they are designed and built in an optimal fashion.Back to blog