Financial/Value for Money Overview
The fundamental objective of PPPs is to maximise efficiency and value for money. PPP procurement has the potential to offer better value for money through:
- Allocation of risk to the party that can manage it best;
- Performance based payments;
- Capturing private sector innovation, commercial and management expertise by involving the private sector more centrally in the provision of assets and services;
- Use of long-term contracts whereby bidders focus on the whole life cycle cost of projects and not just on the upfront capital costs. This can lead to more innovative designs with lower life-cycle costs and higher maintenance and operational standards; and
- Faster project delivery.
The PPP approach, in addition to leveraging additional funding for the programme, also secures significant risk transfer to the private sector and brings private sector expertise to bear on the design, construction and operation of the facility. The key-determining factor in deciding whether to develop a project as a PPP is value for money. Each project is evaluated on its own merits and if it does not offer VFM, it will not be undertaken on a PPP basis.
The contractual obligations within the PPP contracts which the Authority has entered into as part of the PPP roads programme have been devised with the objective of ensuring value for money to the public sector. In respect of each PPP tender competition the Authority:
- Undertakes a competitive tendering process in accordance with national and EU tendering procedures;
- Carries out an assessment of potential profits associated with tenders;
- Reserves the right NRA right to reject a super-profit tender, and
- Avails of specialist traffic and financial advice in the assessment of tenders.
The financial terms of the PPP contracts have been scrutinised by the NRA’s financial advisers. This included sensitivity analyses and an assessment of equity returns to the PPP company at traffic volumes in excess of both the PPP company's forecasts and NRA forecasts. The assessments of the financial adviser have concluded that the contracts entered into represent value for money for the public sector and that the revenue sharing arrangement included in the contracts is such that the PPP company will not earn super profits from these schemes.