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Weekly Updates1. Individuals are capable at making decisions based on their own preferences, for example, individuals understand the value/quality and Value-for-Money aspects;
2. There are multiple options to act (choice) and results are related to choices made; and
3. Individuals are willing to make free choices from multiple options.
Establishing what rational consumers prefer as individuals or as a group of individuals is very difficult in the case of large topics, like public services. In this study, instead of naming detailed preferences, the foundation is laid to insure that the basic axioms can be fulfilled. The assessment of PPP service provision from the perspective of rational consumers with individual needs is founded on the following three presumptions, which fulfill the aforementioned axioms, through which a rational consumer maximises their benefits (Majamaa, 2005):
1. The "Value-for-Money" both in an individual's personal decisions and behaviour as a part of the community, as well as expectation that the representative leadership of the community also adheres to the principle;
2. Appreciation for diversity in selection and the resultant ability to make choices between different alternatives; and
3. Independent choices and expectation of having the possibility to make free choices based on personal preferences.
4. DATA COLLECTION
In order to devise the framework and test for appropriateness, five Finnish PPP projects were selected, where the public sector was the purchaser of the functions offered by the project (see Table 1, and "Service Provision" in it). The projects include:
--A real estate investment;
--A private body responsible for Design and Build and technical-maintenance; and
--Financing and/or ownership of the property.
The primary nature of all the selected projects was the Build-Own-Operate (BOO). For some projects, like Kaivomestari and Dynamicum, the public sector has an option to purchase the real estate asset from the private investor at reversion points during the service contract or at the end of the first service period.
The research relies on the material and information publicly available from the selected cases. By the law all the bidding material and the information and material related to the decision-making in public purchasing process should be publicly available. The purchasing processes for the cases have also been assessed according the Finnish Public Procurement Act (1505/1992).
5. DESCRIPTON OF THE SUGGESTED FRAMEWORK
Requirements, desirable characteristics and evaluation criteria used in the five PPP cases were analysed using the categories of Life cycle approach, Diversity, and Customer selection. Life Cycle approach criteria included economic features related to "Value-for-Money" (VFM), juridical (legal) features related to the concession agreement, quality and technical features related to the design and building, quality of required public core services, project management and certainty of service performance, and risk sharing and risk management. Under Diversity criteria were assorted requirements, desirable characteristics and evaluation criteria, which embodied added value in public core services, added value from networked service production, diversity of public core services and service development, and service and production innovations in public core services. Customer selection criteria included requirements, desirable characteristics and evaluation criteria which embodied end-users' potential to make free choices, and criteria related to services provided to third-parties (directly from the end-users--customers not incluted in the PPPcontract), outside or in addition to core public services. These kinds of elements were innovations in third-party services, extra cash flow from third-party services, increases of utilization rate, and increases of potential for people to make free choices related to public and private services. Using these three categories we studied whether the given requirements, desirable characteristics and evaluation criteria were used systematically through out the purchasing processes, and how these categories were emphasized in the selected cases. Purchasing processes were divided into four stages for categorisation:
1. Pre-qualification requirements and evaluation criteria for selecting tenders;
2. Requirements and desirable characteristics given in tendering material;
3. Itemised evaluation criteria given in tendering material; and
4. Evaluation criteria used for decision making.
The results of the categorisation process are represented in Table 2. For brevity, the cases are denoted as follows: K = Kaivomestari; P = Pyynikki; F = Frami; D = Dynamicum; and VP = Vantaan Point. These letters in Table 2 refer to the single features used in the original bids.
6. EVALUATION PROCESS ADOPTED IN THE PPP CASES
The suggested framework, based on end-users' opinion and perspective of a group of rational consumers, was useful for analysing the cases. The PPP projects and the evaluation features used in their purchasing processes accomplished three main criteria categories: Life Cycle approach, Diversity, and Customer selection. Each of the studied cases had features related to the first category--Life Cycle approach; four of five of them had features related to second category--Diversity; and three of five had features related to the third category--Customer selection. As the projects were designed mainly to fit the VFM principals, it was expected that most of the features would relate to the category of Life Cycle approach (Shen et al., 2006). As there where also many features related to the other two categories in the Kaivomestari and the Pyynikki projects, we discussed the findings with the owners of these projects. Accordingly, we can state that innovative and customer-orientated development of the required services, as proposed in the categories of Diversity and Customer selection, seemed to be important to the development of the projects, but where lost in the final stage of evaluation by the public sector agencies.
In the first stage of purchasing processes, pre-qualification, the aim was to choose the best companies for the tendering process. The criteria to do this should be related to the capability of the company, not to the suggested outcome of project (Laine, 2006). The Pre-qualification stage was used in the Kaivomestari and Pyynikki cases. In Kaivomestari it was called 'Pre-qualification round', and in Pyynikki it was the 'First round of the purchasing process'. In the other cases, the processes went directly to the tendering stage. Features given in tendering material were divided into two stages: requirements and desirable characteristics; and itemised evaluation criteria. All the criteria categories and all the cases were included in the stage of requirements and desirable characteristics. The Itemised evaluation stage was included in all the cases, but only Kaivomestari, Pyynikki and Frami had evaluation criteria related to Diversity features, and Kaivomestari also provided features related to Customer selection. In the fourth stage of the purchasing processes, evaluation criteria used for decision-making, there were only features from the Life Cycle approach category. Even in the Life Cycle approach category, the used criteria differed between evaluation stages, especially in the Pyynikki case, from itemised evaluation criteria given in tendering documents.
In Kaivomestari, there were possibilities for tenders to add value in public core services and also get added value from networked service production, which was also noted in three other cases--Pyynikki, Dynamicum, and Frami. In all the other projects except, Dynamicum and Vantaan Point, there was demand to expand the diversity of core public services, and requirements and desirable characteristics identified for service development, at the beginning and during the service period. In Kaivomestari, service and product innovations for teaching facilities and leisure centres were forward-looking. With the nature of Pyynikki, being a development project renovating an existing block of buildings with the possibility of constructing new ones, there was extra flexibility to create diversity to demand core public services, and room for new services and business ideas for third-party services.
Features related to Customer selection were demonstrated in the Kaivomestari and Pyynikki projects. Extra cash flow from third-party services and innovations in third-party services were important requirements and desirable characteristics related to them, and given in tendering material. In Kaivomestari, the benefits of using a PPP, instead of a traditional model, were identified as third-party use of facilities outside school times, and extra cash flow created by special business ideas based on that use. In Pyynikki, the development of the whole block, located in the city centre, was an essential issue, and several examples of how to develop it were given in the information to tenders. The existing swimming hall could be developed into a city-spa, existing hostel cganged to a hotel, and other existing industrial and commercial buildings in the block could be developed as residential housing. Other Customer selection features in Kaivomestari, like increases of utilization rate, and possibilities to make free choices related to public services, were mainly used to specify desirable characteristics of the project. To sum up, Kaivomestari had many possibilities to develop third-party services based on Customer selection by expanding the diversity of core public services and use of the facilities, and Pyynikki, with the whole block under development, had great possibilities to create new services directly for the end-users.
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