Details
| Original language | English |
|---|---|
| Pages (from-to) | 676-692 |
| Number of pages | 17 |
| Journal | Construction Management and Economics |
| Volume | 35 |
| Issue number | 11-12 |
| Early online date | 16 May 2017 |
| Publication status | Published - 2 Dec 2017 |
Abstract
The success of public–private partnership (PPP)–build–operate–transfer (BOT) projects largely depends on effectively mitigating the impact of a variety of risks and uncertainties, especially those influencing the revenue over time. Revenue instability is one of the main obstacles of PPP form of procurement. Government support, which is established as a clause in the concession agreement, should be carefully designed and well formulated. Options which arise from certain clauses in the contract are more valuable for risky projects. The purpose of this paper’s proposed model is to evaluate early fund generation options and also to calculate equitable bounds for a guaranteed revenue for the project sponsor under uncertainty and risk. The model is specially designed to alleviate the concern of revenue risk. To illustrate its applicability the methodology is then applied to a freeway PPP project and a power plant PPP project in Iran. The results show that the value of these options can indeed be significant and by applying the proposed systematic negotiation mechanism both public and private sectors can take advantage of its flexibility at the negotiation table. The proposed mechanisms can facilitate negotiations on the verge of a break down as well as accelerating ongoing negotiations that have become moribund.
Keywords
- build–operate–transfer, negotiation, private finance, public–private partnerships, Real options
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Management Information Systems
- Engineering(all)
- Building and Construction
- Engineering(all)
- Industrial and Manufacturing Engineering
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In: Construction Management and Economics, Vol. 35, No. 11-12, 02.12.2017, p. 676-692.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Options-based negotiation management of PPP–BOT infrastructure projects
AU - Attarzadeh, Meghdad
AU - Chua, David K. H.
AU - Beer, Michael
AU - Abbott, Ernest L. S.
N1 - Publisher Copyright: © 2017 Informa UK Limited, trading as Taylor & Francis Group. Copyright: Copyright 2017 Elsevier B.V., All rights reserved.
PY - 2017/12/2
Y1 - 2017/12/2
N2 - The success of public–private partnership (PPP)–build–operate–transfer (BOT) projects largely depends on effectively mitigating the impact of a variety of risks and uncertainties, especially those influencing the revenue over time. Revenue instability is one of the main obstacles of PPP form of procurement. Government support, which is established as a clause in the concession agreement, should be carefully designed and well formulated. Options which arise from certain clauses in the contract are more valuable for risky projects. The purpose of this paper’s proposed model is to evaluate early fund generation options and also to calculate equitable bounds for a guaranteed revenue for the project sponsor under uncertainty and risk. The model is specially designed to alleviate the concern of revenue risk. To illustrate its applicability the methodology is then applied to a freeway PPP project and a power plant PPP project in Iran. The results show that the value of these options can indeed be significant and by applying the proposed systematic negotiation mechanism both public and private sectors can take advantage of its flexibility at the negotiation table. The proposed mechanisms can facilitate negotiations on the verge of a break down as well as accelerating ongoing negotiations that have become moribund.
AB - The success of public–private partnership (PPP)–build–operate–transfer (BOT) projects largely depends on effectively mitigating the impact of a variety of risks and uncertainties, especially those influencing the revenue over time. Revenue instability is one of the main obstacles of PPP form of procurement. Government support, which is established as a clause in the concession agreement, should be carefully designed and well formulated. Options which arise from certain clauses in the contract are more valuable for risky projects. The purpose of this paper’s proposed model is to evaluate early fund generation options and also to calculate equitable bounds for a guaranteed revenue for the project sponsor under uncertainty and risk. The model is specially designed to alleviate the concern of revenue risk. To illustrate its applicability the methodology is then applied to a freeway PPP project and a power plant PPP project in Iran. The results show that the value of these options can indeed be significant and by applying the proposed systematic negotiation mechanism both public and private sectors can take advantage of its flexibility at the negotiation table. The proposed mechanisms can facilitate negotiations on the verge of a break down as well as accelerating ongoing negotiations that have become moribund.
KW - build–operate–transfer
KW - negotiation
KW - private finance
KW - public–private partnerships
KW - Real options
UR - http://www.scopus.com/inward/record.url?scp=85019240317&partnerID=8YFLogxK
U2 - 10.1080/01446193.2017.1325962
DO - 10.1080/01446193.2017.1325962
M3 - Article
AN - SCOPUS:85019240317
VL - 35
SP - 676
EP - 692
JO - Construction Management and Economics
JF - Construction Management and Economics
SN - 0144-6193
IS - 11-12
ER -