Infrastructure projects need to be cost-effective and affordable for both the government and users. When deciding which public infrastructure projects to undertake, governments should consider their value for money, examining the quality, features and costs of each project, calculated over its lifetime. To ensure this, many countries have criteria and methodologies for assessing projects’ value for money. The OECD Recommendation on the Governance of Infrastructure highlights several good practices, including ensuring decision making is informed by the need for value for money, ensuring the affordability of new infrastructure projects, disclosing total costs over the entire asset life cycle, and providing a transparent, independent and impartial expert assessment to test project costing and fiscal sustainability.
The four SEA countries for which data are available generally estimate the costs associated with construction, operation and maintenance to assess the affordability of new infrastructure projects (Table 4.3). However, only the Philippines and Singapore estimate costs related to adaptations and renovations. The Philippines and Thailand estimate the costs of possible decommissioning. A similar situation is observed in OECD Member countries: 30 of 31 estimate construction costs, 29 of 31 estimate operational costs, and 27 of 31 estimate maintenance costs; however, only 18 of 31 estimate adaptation and renovation costs, and 13 of 31 estimate decommissioning costs. It is important that countries accurately estimate the costs associated with adaptations and renovations to assess the affordability of projects and ensure the efficient allocation of their budget, which in turn ensures that assets perform optimally throughout their lifespan. This is important, for example, to take account of possible impacts of damaging weather events, which result in higher costs due to infrastructure damage and failure.
A requirement that the Ministry of Finance approve projects before they can proceed can help to ensure that projects undergo proper appraisal. Among SEA countries, the Philippines and Singapore both subject projects above a certain threshold to formal approval by the finance ministry (Figure 4.2). Thailand’s Ministry of Finance approval is required for public-private partnership projects. In Indonesia, the Ministry of Finance does not play a formal gatekeeping role but is involved in formal meetings with other related ministries to assess the alignment of projects with national priorities. Approval from the finance ministry is required for all new infrastructure projects in 9 of 32 OECD countries, and for projects exceeding a defined threshold in a further 14 of 32 countries. The criteria used by finance ministries for approving infrastructure projects generally focus on the projects’ affordability for both the national budget and users, as well as their value for money.
To ensure value for money and quality, it is crucial that the decision-making process for large infrastructure projects is impartial and free from political influence. Independent experts can aid this by monitoring the selection and prioritisation of projects and supporting clear and transparent decision making. Of the SEA countries, only Singapore implements an independent and impartial review of new infrastructure projects (Table 4.3), where projects above SGD 600 million (Singaporean dollars) (~USD 466 million) are subject to review by the Development Projects Advisory Panel, comprising senior public officers, academia, and industry practitioners. This is an area in which further development of governance processes would be beneficial in SEA countries. Six of 31 OECD countries require an independent assessment for all new infrastructure projects, 9 of 31 countries for projects above a defined threshold, and 8 of 31 countries for projects of “special significance”.
