Selection of performance objectives and key performance indicators in public–private partnership projects to achieve value for money

Abstract

Public-private partnerships (PPPs) have been applied widely in the global construction market. During the life cycle of PPP projects, their performance could be affected by a number of factors and their interactions, which might cause the inefficiency and ineffectiveness of the projects. Previous researches on PPPs mainly concentrated on the procurement, success measurement and risk management of PPPs, but paid little attention to the process factors that can strongly influence the performance of PPPs. In order to improve process and performance management in PPPs, the performance objectives and key performance indicators (KPIs) are identified to improve the partnership outcomes. Based on the goal-setting theory, 15 performance objectives are selected. The relative significance and difference of performance objectives for different stakeholders are presented based on a structured questionnaire survey. The survey results show that all identified objectives are important. In spite of stakeholders' common opinions on the objectives of quality, costs, time and the services provided by PPPs, there are evident differences in the objectives of budget constraints of the public sector, risks, revenue and guarantees. According to the survey results, a conceptual KPIs framework is established. Furthermore, the KPIs are identified to assess PPP projects' performance. The performance objectives and the KPIs, which can be used to identify the strengths and weaknesses of PPP projects, are useful tools for effective project performance management in PPPs.

The Implementation of Key Performance Indicators in the Malaysian Private Finance Initiative Projects

“…The results illustrate that the occurrence of performance issues in PFI projects requires thorough improvement, as it may contribute to the poor project performance and can affect the payment process to the concessionaire. This is supported by UKAS (2009); Yuan et al (2009);Ernst & Young (2008), who described PFI's characteristics is that the payment for the services is based on pre-determined standards and performance. Therefore, the private concessionaire is paid to deliver the services according to the required quality and performance level.…”

“…However, the service delivery aspects of PFI projects cannot be examined until the projects become operational (Yuan et al, 2009). During the operational phase, services delivery can frequently be measured to determine its compliance with the output specification and payment deductions for the performance failures in accordance with the payment mechanism (Akbiyikli, 2013).…”

“…In order to measure the performance of PFI projects, determination of appropriate KPI is important to be emphasised (Yuan et al, 2009). The used of KPIs as a performance measurement tool can be used to identify the strengths and weaknesses of PFI projects and can be applied effectively in the performance management of PFI projects .…”

“…According to Akbiyikli (2013) in their study stated that during the O&M phase, services delivery could frequently be measured to determine its compliance with the output specification and payment deductions for the performance failures in accordance with the payment mechanism. This PFI project performance can be measured using KPIs as perceived by Yuan et al (2009). It is supported by Kagioglou et al (2001); and Cox et al (2003) which mentioning the KPIs as one of the popular tools used in measuring the performance of PFI projects.…”

“…In order to measure the performances of the projects and for applying a benchmarking approach, the establishment of suitable KPIs in PFI is essential in determining the overall success of the projects. However, lack of an effective performance measurement in PFI will be reflected from the depreciation of standards below optimum service quality of infrastructures and will contribute to the failures delivery of PPP projects (Yuan et al, 2009;Liu et al, 2013;Liu et al, 2015;Regan et al, 2011;Hodge, 2004;Yong, 2010;VAGO, 2002;House of Commons, 2003;. According to Robinson & Scott (2009), VFM in the PFI project crucially depends on performance monitoring to provide certain incentives for improvement and to ensure that the service delivery is in accordance with the client's requirement, as was set out in the output specification.…”