The application of whole life costing in PFI/PPP projects

The concept of private finance initiative (PFI), later known as public-private partnership (PPP), was introduced into the UK in the early 1990s. Under the PFI/PPP scheme, a special purpose vehicle (SPV) from the private sector is generally responsible to design, build, finance and operate a public project for 20-30 years. For this reason, an emphasis is placed on the use of whole life approaches, such as whole life costing (WLC) or life cycle costing (LCC). However, few studies to date have investigated the application of WLC/LCC in PFI/PPP projects. Therefore, there is a knowledge gap in this particular field. To bridge the gap, an empirical investigation was made in the UK. The aim of this study was to explore PFI/PPP practice in terms of WLC/LCC. This study adopted a combination of a literature review, two case studies and a questionnaire survey. Qualitative data collected from the case studies and quantitative data collected from the questionnaire survey are analysed in this paper. The analysis of empirical data shows a wide embrace of WLC/LCC in PFI/PPP projects due to full control over lifetime expenditure and long-term value for money. Although WLC/LCC has been widely applied in PFI/PPP projects today, there are still some factors that affect its successful application. In order to overcome the barriers, efforts are needed from both public clients and private companies. The success of WLC/LCC in PFI/PPP practice depends on client driven optimisation, good awareness of WLC/LCC, encouragement of WLC/LCC through competitive bidding, integration of all key stakeholders into WLC/LCC, early involvement of construction and facilities management (FM) teams in design, well-established procedures and methodologies, reliability and accuracy of data, and regular monitoring the implementation of WLC/LCC.