Directorate for Public Governance
Infrastructure: guard affordability and value for money
OECD Framework for the Governance of Infrastructure
7. GUARD AFFORDABILITY AND VALUE FOR MONEY
Governments must ensure that infrastructure projects are affordable and the overall investment envelope is sustainable. The asset should represent value for money. This requires the use of dedicated processes, a capable organisation and relevant skills.
WHY IS IT IMPORTANT?
- It is the responsibility of the decision-maker to ensure public infrastructure is affordable. This requires a strong link between the project development phase and the fiscal framework of the country.
- A country’s overall infrastructure expenditure and the fiscal risks it carries in terms of guarantees should be based on medium and long-term fiscal projections and regularly updated.
- If the project is meant to be user-funded, a careful investigation of the ability and willingness of users to pay must be conducted.
- Overall value for money should be carefully assessed using a combination of quantitative and qualitative tools that soberly seek to establish the overall societal return on investment.
- This process should enable decision-makers to prioritise projects so that the maximum value is generated for society as a whole.
KEY POLICY QUESTIONS:
- Is the infrastructure procurement process integrated into the ordinary budget process?
- Is there a long-term infrastructure strategy and is it linked to long-term fiscal projections?
- Is there a process for prioritisation across sectors and within sectors?
- Is cost/benefit analysis carried out?
- Are various delivery modalities analysed so as to ensure value for money?
- Is affordability analysis carried out?
- Are there dedicated units and capacities available to decision-makers with respect to infrastructure strategy, procurement and performance monitoring?
IS THERE A LEGAL REQUIREMENT THAT ENSURES VALUE FOR MONEY FROM INFRASTRUCTURE PROJECTS?
- Presence of infrastructure strategy document
- PPP or Infrastructure Unit
- Central Budget Authority role in green-lighting infrastructure projects
- Supreme Audit Institution
- Formal requirement to account for contingent liabilities and running costs
- Accounting standards
GETTING INFRASTRUCTURE RIGHT
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