Government Projects

 

At Watson & Noble, we provide consulting services that assist Public Investment Management decisions. We focus on the creation of value that Governments make through:

- public procurement of goods and services;

- the development of a stable environment for private investment;

- privatization of public assets.

 

Public procurement of goods ought to be treated as an investment decision and traditional methods may misvalue projects, prescribing disadvantageous solutions. The contribution of Real Options Valuation concerns the timing, scale, and scope of projects, extending the analysis of traditional methods to incorporate the value options.

 

The development of a stable environment for investment is necessary to avoid underinvestment of private funds. This phenomenon of underinvestment is justified by unprofitable prospects of private investors and/or high degrees of uncertainty, which cause private investors to postpone investments that Governments may consider of public interest. In these cases, Governments create incentives, such as guaranties, which severely alter payoffs and uncertainty for private investors. The stimulation of private investment may be treated as an incentive problem, in which the Government designs a contract advantageous to both private firms and taxpayers.

 

At Watson & Noble, we offer contract design of financial mechanisms to support the definition of the incentives framework. The design of financial mechanisms is specific to each contract of public investment, ranging from outsourcing of private services to different typologies of Public-Private Partnerships, such as BOT's. We determine the fair value of guarantees and other contract components, such as to create incentives for private firms at a smaller cost for tax payers.

 

We also create value for government institutions when valuating privatizations. We create value by accurately determining the value of a firm, which is composed by far more than standard methods suggest: it also includes the value of the options of the firm. We further create value by assisting government institutions in determining the best timing of a privatization and the scale of divestiture of public assets.

 

Our analysis is dynamic: it contemplates the need of a government to privatize assets in case of financial distress to determine the best privatization timing and the value of public assets.