A new first-order decision-making model for the procurement of public sector infrastructure: Procedures and Testing

Given global demand for new infrastructure, governments face substantial challenges in funding new infrastructure and delivering Value for Money (VfM). As part of the background to this challenge, a critique is given of current practice in the selection of the approach to procure major public sector infrastructure in Australia and which is akin to the Multi-Attribute Utility Approach (MAUA). To contribute towards addressing the key weaknesses of MAUA, a new first-order procurement decision-making model is presented. The model addresses the make-or-buy decision (risk allocation); the bundling decision (property rights incentives), as well as the exchange relationship decision (relational to arms-length exchange) in its novel approach to articulating a procurement strategy designed to yield superior VfM across the whole life of the asset. The aim of this paper is report on the development of this decisionmaking model in terms of the procedural tasks to be followed and the method being used to test the model. The planned approach to testing the model uses a sample of 87 Australian major infrastructure projects in the sum of AUD32 billion and deploys a key proxy for VfM comprising expressions of interest, as an indicator of competition.