A framework for value for money assessment on public private partnership mega-projects

Barutha, Philip
Major Professor
Douglas D. Gransberg
Committee Member
Journal Title
Journal ISSN
Volume Title
Research Projects
Organizational Units
Journal Issue
Civil, Construction, and Environmental Engineering

Much of the transportation infrastructure was built in the middle of the 20th century using traditional design-bid-build (DBB) procurement method. Public agencies advertised prescriptive construction documents composed of project plan sets and specifications to be competitively bid by private contractors where the low bidders would then build the infrastructure to the specified design. The award of the contract was based on the lowest price to complete the project to the specified design. Throughout the nation, much of the infrastructure has reached or exceeded its design life. Aging infrastructure in the United States has drawn attention from national politicians to local agencies to the public users themselves. Public transportation demands have increased since those measured in the mid-20th century and used to design the national transportation network. Hence, public agencies are now looking at ways to more effectively maintain, replace, and expand the existing road network to support local economy and road user demands. As agencies attempt to keep pace with these increasing demands, they find themselves challenged to find the necessary resources to accommodate the demand. The constraints range from identifying the necessary public funding to obtaining the required number of qualified public employees.

The private sector offers many resources that are needed by public agencies as they work to find solutions to the aforementioned challenges, including providing access to private financing. Public agencies can partner with a private organization through the use of a public private partnership (P3). P3s are contractual arrangements between the public and private to where some of the public service is provided by the private sector. P3s are becoming an attractive option for public agencies. Public agencies are stewards of public dollars and must assess the use of these public dollars are being spent bringing the best value to the communities they serve. The traditional low bid procurement method for construction of an infrastructure project is one method of demonstrating value for money (VfM) to the public as it relies on competition to ensure the best price. P3 project delivery challenges the idea that value is totally defined by minimizing project cost. P3 projects permit public agencies to extend the value calculus beyond construction completion to the development, design, operations and maintenance phases of a project as well as to gain access to private finance to cover the gaps in public funding shortfalls. Quantifying VfM across a project's life cycle requires a much more robust assessment and doing so in a manner that is both fair and transparent to both the public and potential private industry partners demands a rigorous framework that combines the qualitative and quantitative evaluation in a manner that balances project risks between the agency and the P3 concessionaire. This research detailed in this thesis proposes just such a framework for agencies to assess whether or not P3 project delivery provides better Vfm than other available project delivery options.