Abstract
Uncertainty in a contract for some BOT (Build-Operate-Transfer) projects may allow an opportunistic developer to take advantage of information asymmetrical factors, long-term external changes, and agency dilemma to request renegotiation and to alter the contact after it has been awarded. Such requests often entrap the government in hold-up problems and result in improper payments to the developers and may even create general public dissatisfaction with a project. In this paper, the Game Theory model is used to analyze the Taiwan High Speed Railroad project to examine how developers implement different strategies at the various stages of a project to alter the contract's conditions in order to continually creating competitive advantage after they have been awarded the contract. This project developer is now facing serious financial difficulties. In this study, the financial information on the Taiwan High Speed Railroad operations was used as the foundation for conducting a simulation to calculate the project's value after this project began operation. The results will serve as reference to the best decision-making strategy for renegotiating costs in competition and cooperation so that a developer can select the optimum project offering the maximum reward. Also, the result will be offered to industries involved in market competition or act as an approach to establish future BOT policies on renegotiation.
Highlights
BOT (Build-Operate-Transfer) is a concession company provides financing, construction, operation, and maintenance of an infrastructure based on the government grant (Tiong 1995)
The results show that the project’s Net Present Value (NPV) is $–21.6 billion dollars as shown in Table 3 that reaches the profound outthe-money indicating that the project is not worthy of further operation
What the operation of High Speed Rail (HR) can bring in is much less than that TH had expected, which has caused TH to fall in a financial crisis
Summary
BOT (Build-Operate-Transfer) is a concession company provides financing, construction, operation, and maintenance of an infrastructure based on the government grant (Tiong 1995). Periods and profits, the developer often presents overly optimistic dynamic data in the bid quotations. Using this bidding strategy, the developer may be successfully awarded the contract (Ginevičius, Čirba 2003; Ho 2009; Zavadskas et al 2004). The game becomes an important foundation for analyzing personal reason and speculative behavior; if the participants involved in the negotiation can establish “credible commitment” under “common knowledge”, a win-win situation can be achieved. HR case and verification In 1993, Taiwan’s government (G) decided to solicit private sector partners for a proposed BOT project for constructing a high speed railroad; the project was open to developers in 1996.
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