Public Sector Comparator

A Public Sector Comparator (PSC) is a hypothetical risk-adjusted, whole-of-life cost estimate of delivering a specific infrastructure or service project through traditional public procurement. Governments compare this figure against bids from private consortia in a public-private partnership (PPP) tender to determine whether the PPP route offers better value for money (VfM) than in-house delivery.

A typical PSC combines several elements:

• Raw PSC: base capital and operating costs the public sector would incur, discounted to net present value.
• Competitive neutrality adjustments: stripping out advantages the public sector enjoys, such as tax exemptions or cheaper borrowing, so the comparison is fair.
• Transferable risk: the value of risks (construction overruns, demand shortfalls, maintenance) that would shift to the private partner under a PPP.
• Retained risk: risks the government keeps under either model.

The PSC originated in the United Kingdom's Private Finance Initiative in the 1990s and was subsequently codified in guidance by HM Treasury, Australia's Partnerships Victoria, Infrastructure Australia, and adopted in varying forms by the World Bank, the OECD, and national PPP units across Canada, South Africa, and South Korea.

The methodology is contested. Critics — including the UK's National Audit Office in several reports — have argued that PSCs can be manipulated by adjusting discount rates or inflating risk premia to make PPPs look favourable. Supporters counter that a disciplined PSC imposes transparency on procurement choices that would otherwise rely on intuition.

In 2012 the UK Treasury overhauled PFI into "PF2," partly in response to PSC criticisms, and in 2018 the Chancellor announced the end of PF2 for new central-government projects, citing poor value evidence. Despite these reversals, the PSC remains a standard tool in PPP frameworks globally and is frequently referenced in Model UN committees dealing with sustainable infrastructure finance, such as UNCTAD and ECOSOC simulations.