Directorate for Public Governance
Choosing how to deliver infrastructure
OECD Framework for the Governance of Infrastructure
3. CHOOSING HOW TO DELIVER INFRASTRUCTURE
When choosing how to deliver an infrastructure service, i.e. delivery modality, government should balance the political, sectoral, economic, and strategic aspects.
Legitimacy, affordability and value for money should guide this balancing.
WHY IS IT IMPORTANT?
The choice of how infrastructure is delivered and who should be in charge of its development has implications for public sector discretionary control, value-for-money and affordability.
- The framework presented offers a three-step process based on sectoral criteria, country criteria (national/sub-national levels) and project criteria. It suggests that countries:
- Set a preferred sectoral approach by assessing objectives and the characteristics of the sector;
- Choose a delivery model based on the project characteristics and overall approach.
KEY POLICY QUESTIONS:
- What is the extent of market failures?
- How politically sensitive is the sector?
- What characterises the enabling public, private and legal environment?
- What is the size and financing profile of the investment?
- What is the potential for cost recovery?
- What is the level of control government want to retain?
- Is it possible to identify, assess and allocate risk appropriately?
GETTING INFRASTRUCTURE RIGHT
CHECKLIST FOR INVESTIGATING DELIVERY MODES
Project size & profile
- Large initial capital outlay and long payback period?
- Is the project large enough to justify the additional legal, technical and financial costs of a PPP?
- Can quality enhancements in the design and construction phase generate savings during the operating phase of the project?
- Do these savings justify the additional transaction costs involved in bundling construction,
- Operation and maintenance in a single contract?
Revenues and usage
- Can user fees be charged, are they affordable for the majority of users, and are they politically acceptable?
- Are user fees sufficient to cover the majority of capital and operating costs?
- Can usage be monitored?
- Can the quantity and quality of project inputs be specified and measured efficiently?
- Will design innovation be required to achieve improvements in efficiency and value-for-money?
- What is the level of uncertainty relating to future technological or societal conditions?
- How are risks allocated?
- Is demand relatively predictable over the lifetime of the project?
- Who is best placed to influence demand for the infrastructure-based service?
- Is the private sector willing to and capable of bearing some or all of the demand risk?
- Are there particular integrity risks in terms of corruption and undue influence that merit attention?
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