Abstract
Optimizing the cost and benefit allocation among multiple players in a public-private partnership (PPP) project is recognized to be a multi-objective optimization problem (MOP). When the least present value of revenue (LPVR) mechanism is adopted in the competitive procurement of PPPs, the MOP presents asymmetry in objective levels, control variables and action orders. This paper characterizes this asymmetrical MOP in Stackelberg theory and builds a bi-level programing model to solve it in order to support the decision-making activities of both the public and private sectors in negotiation. An intuitive algorithm based on the non-dominated sorting genetic algorithm III (NSGA III) framework is designed to generate Pareto solutions that allow decision-makers to choose optimal strategies from their own criteria. The effectiveness of the model and algorithm is validated via a real case of a highway PPP project. The results reveal that the PPP project will be financially infeasible without the transfer of certain amounts of exterior benefits into supplementary income for the private sector. Besides, the strategy of transferring minimum exterior benefits is more beneficial to the public sector than to users.
Highlights
Public-private partnerships (PPP) have been applied worldwide as a financing instrument to provide public infrastructures and services
In a PPP project, the private sector is usually responsible for the operation of the project and for providing part of the initial investments, with a return on governmental subsidies, user payments or extraneous earnings derived from exterior benefits generated by the project [1]
The general form of the bi-level programing (BLP) model consists of an upper programing (UP) problem and programing (LP) problem, which could be expressed as Equations (3)–(6), as shown in [21]
Summary
Public-private partnerships (PPP) have been applied worldwide as a financing instrument to provide public infrastructures and services. This paper studies the asymmetrical MOP in PPPs under the LPVR mechanism to provide references for bidding strategies for decision-makers from both the public and private sectors.
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