Quantifying Mega-Project Value for Money: Design-Build Versus Public Private Partnership Delivery Methods

Abstract

<p>Public agencies must justify the decisions they make to their constituents by demonstrating each project delivery decision’s value for money (VfM). In the traditional low bid procurement VfM is assured to the public via free and open competition to obtain the best price. Public private partnership (P3) project delivery challenges the idea that value is totally defined by minimizing project capital cost and permits public agencies to extend the value calculus beyond construction completion to the development, design, operations and maintenance phases of a project. P3 also furnishes access to private financing, which decreases the burden to the taxpayer and serves to cover current public funding shortfalls. This study compares the VfM of a P3 mega-project in Pennsylvania to that of a comparable design-build (DB) mega-project in Missouri. The paper seeks to determine the change in VfM when private financing and post-construction maintenance are added to the equation. The paper finds that additional VfM is realized through P3 delivery due to being able to build the infrastructure earlier because of the availability of private financing. The paper also finds putting the concessionaire at risk for maintenance costs influenced the concessionaire to implement higher standard design criteria as measured by an increased bridge design life to minimize life cycle cost risk. The paper’s primary contribution is the development of an approach to quantify VfM using comparative value analysis.</p>