Whole life costing of infrastructure investment: Economic and social infrastructure projects in Australia

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Regan, M., Smith, J. & Love, P.E.D. (2016). Whole life costing of infrastructure investment: Economic and social infrastructure projects in Australia. In R. J. Mair, K. Soga, Y. Jin, A.K. Parlikad, & J. M. Schooling (Eds.), Transforming the future of infrastructure through smarter information: Proceedings of the International Conference on Smart Infrastructure and Construction Cambridge University (pp. 701-706). London, UK: Institute of Civil Engineers (ICE) Publishing.

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Public private partnerships (PPPs) commissioned by the Victorian State Government in Australia require life cycle costing of the public sector comparator, a risk-weighted and discounted model of traditional procurement as a benchmark for comparison of private bids. Value for money is a term used to measure procurement outcomes and is used widely in government as a proxy for ex ante assessment of the quantitative and qualitative performance of a specific procurement option. Value for money is also used by governments to select projects for delivery by public private partnerships. A public sector comparator for conventional delivery is used as a pricing benchmark (the quantitative evaluation) as well as an appraisal of the qualitative features of private proposals using project-specific criteria. A number of studies over the past decade show that public private partnerships may deliver value for money for projects in the built environment. However, less is known about the drivers of value for money. This study examines 13 PPPs delivered by the governments of the Northern Territory, New South Wales, and Victoria in Australia between 2005 and 2015. The major driver of value for money in PPPs is risk transfer of which life cycle costing and operating costs are a major component. These values are captured in the public sector comparator. The study also confirms that the qualitative attributes of bids received in a competitive market environment are contributing to greater asset utilisation, design and construction innovation and the delivery of improved services to or on behalf of government.

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