Theoretical Considerations on Quantitative PPP Viability Analysis

Abstract

Public-private partnerships (PPPs) are an innovative procurement model that appeared as an alternative to traditional methods such as public work contracts. The public sector comparator (PSC) allows decision-makers to decide whether the project should be developed along one of two different paths: PPP or traditional procurement. This paper provides a theoretical base for PSC calculation and sheds some light on the main critical issues, particularly the choice of the discount rate through a real case—a hospital PPP. Alternative methodologies for calculating the discount rate and different assumptions can lead to completely different results, biasing the final decision.