Conceptual Differences Between Delivery Methods
There are two key variables which account for the bulk of the variation between delivery methods:
- The extent of the integration of the various service providers.
- The extent to which the owner is directly financing the project.
When the various service providers are segmented, the owner has the most amount of control, but this control is costly and doesn't give each provider an incentive to optimize its contribution for the next service. When there is tight integration amongst providers, each step of the delivery is undertaken with future activities in mind, resulting in cost savings, but limiting the owner's influence throughout the project.
The owner's direct financing of a project simply means that the owner directly pays the providers for their services. In the case of a facility with a consistent revenue stream, indirect financing becomes possible: rather than be paid by the owner, the providers are paid with the revenue collected from the facility's operation.
Indirect financing risks being mistaken for privatization. Though the providers do have a concession to operate and collect revenue from a facility that they built and financed, the structure itself remains the property of the owner (usually a government agency in the case of public infrastructure).
Read more about this topic: Project Delivery Method
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