Value for money: To what extent does discount rate matter?
2014; University of Zaragoza; Volume: 22; Issue: 66 Linguagem: Inglês
ISSN
1133-455X
AutoresCarlos Alberto Contreras Pedraza,
Tópico(s)Local Government Finance and Decentralization
ResumoThis paper proposes a Value for Money test to assess the appropriateness of using public-private partnerships (PPPs), and performs a numerical analysis to verify to what extent the outcomes are sensitive to the discount rates being used. The test is applied to two projects which differ in the length of the concession contract and the level of capital intensity. The paper finds that the higher the discount rate being used, the larger the advantage of using a PPP as the supply method. This conclusion is more visible in the case of projects with longer concession terms. Moreover, using one single discount rate for very different project profiles seems to be inadequate.
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