Core Concepts and Principles Flashcards

Value for Money (VfM) in a PPP context is best defined as:

Answer: The optimal combination of whole-life cost, risk, and quality to meet user requirements

VfM considers whole-life cost, quality, and risk together rather than lowest upfront price.

What is a Public Sector Comparator (PSC)?

Answer: A benchmark estimating the risk-adjusted whole-life cost of delivering the project through traditional public procurement

The PSC is a hypothetical risk-adjusted cost of public delivery used to test whether a PPP offers better VfM.

A project passes the value-for-money test but the government cannot fit the payments into its budget. Which test has it failed?

Answer: Affordability

Affordability assesses whether the government's payment obligations fit within its budget constraints, separate from VfM.

Which of the following is generally a poor candidate for a PPP?

Answer: A small, short-term project with rapidly changing technical requirements

PPPs suit large, long-term projects with stable, specifiable outputs; small or fast-changing projects rarely justify the transaction costs.

What does 'whole-life costing' mean in a PPP?

Answer: Considering design, construction, operation, maintenance, and renewal costs over the contract term

Whole-life costing captures all costs over the asset's life so that upfront savings do not create higher later costs.

Why does private finance in a PPP help discipline project performance?

Answer: Lenders and equity investors have capital at risk and monitor delivery to protect returns

Private capital at risk creates strong incentives for on-time delivery and performance, with lenders conducting due diligence and oversight.

Which statement about PPPs and public responsibility is correct?

Answer: Government retains ultimate accountability for the public service even when delivery is outsourced

Even under a PPP, the public sector remains accountable to citizens for the service and must manage the contract.