Public-Private Partnership Highway Projects Research Articles

Public–Private Partnership Highway Projects: Identifying Project Selection Factors

Among various project delivery methods, there is a growing tendency to deliver transportation infrastructure projects, particularly highway projects, through public–private partnerships (PPPs). This necessitates further investigations on PPP arrangements. Despite previous research efforts, a question remains unanswered: What are the contributing criteria for selecting projects that fit the PPP method, and of these, which factors play key roles? This study aims to address such a question through a Delphi study approach. To meet this objective, experts at state DOTs participated in interviews and questionnaire surveys during two rounds of a Delphi study. After achieving a consensus among responses, this study identified factors: the PPP project’s screening factors and characteristics, requirements for an evaluation panel to assess a potential project, common risks, risks needed to provide appropriate incentives to private parties, requirements for involved staff, specializations required in PPP units to facilitate project phases, roles of the public sector or federal government or state, associated factors to enabling legislation, economic analysis, and suitable project size. Some of the major findings are that PPPs are suitable for large projects, the value of money should be a mandatory study, an economic analysis must be performed by comparing different delivery methods, and it should be determined whether PPPs are legal (and allowed) in the state. The primary contribution of this research to the body of knowledge is to focus academicians’ and industry professionals’ attention on PPP highway project selection criteria and the factors that are required to maximize project performance and benefits.

Effect of transparency on the development phase of public-private partnership: Analysis of highway projects

The impact of transparency on large Public-Private Partnership (PPP) projects has been a topic of interest for scholars and policymakers. However, empirical evidence of its impact has been limited. Governments from more than 100 countries across the globe have enacted transparency laws in the recent past. The development phase of PPP projects is critical for the success of the subsequent two phases- construction and operation. The objective of this study was to determine the influencing characteristics of projects and the environment in which they operate, as well as the impact of transparency laws on the duration of the development phase. Regression analysis using data of 469 PPP highway projects implemented in India revealed that concession period, length of the road, nodal authority implementing the project, duration of the construction phase, and road density in the region significantly impact the duration of the development phase. Mean comparison and regression analysis showed that the projects implemented after the enactment of the transparency law had a longer development phase. However, the projects with a longer development phase had a shorter construction phase. Understanding the factors affecting the duration of the development phase will help the nodal authority and the concessionaire to develop strategies to complete the project in a reasonably time-bound manner.

Combinatorial versus sequential auctions to allocate PPP highway projects

This article models a procurement process for allocating multiple related public-private partnership (PPP) highway projects. Traditionally, public infrastructure procurement processes have used a sequential allocation mechanism, despite the potential benefits of allocating all projects at once. The main contribution of this research is to address the question whether these projects should be auctioned individually, in sequential auctions, or at the same time, in a combinatorial auction. Our goal is to understand the impact of the allocation process in terms of efficiency and social welfare. In sequential auctions, bidders submit their offers for each project independently. However, in combinatorial auctions, contractors have the ability to bid for their preferred packages (combinations of projects), reflecting synergies or entry costs, if any, in their valuations. We have compared the impact in terms of efficient allocation and social welfare of both mechanisms in order to help policymakers to take future decisions when facing these processes. The methodology used to address these core questions in the multidisciplinary environment described is based on social simulations, which involves conducting analysis by means of computational simulations. For this work we have created a sophisticated valuation model adapted to the public infrastructure sector and we have developed a simulator which includes multiple types of bidders, projects and several scenarios. The experimental setup is based on the second wave of the Colombian 4G program, a case involving the allocation of 9 highway construction projects across the country. We have also included references to multiple examples of real markets in which these mechanisms could be implemented. Therefore, this research provides a valuable reference for policymakers chasing to enhance market design that could be applied in many real-world scenarios. The results reveal that the combinatorial mechanism improves the process in terms of optimal allocation and efficiency, yielding significant savings for all parties.

Funding and Finance Analysis of Public–Private Partnership Highway Projects: Exploratory Study

AbstractPublic–private partnership (PPP) agreement as a response to funding shortage and population increase has been adopted and employed slowly in the United States with its aging infrastructure....

A DYNAMIC SIMULATION MODEL FOR FINANCING STRATEGY MANAGEMENT OF INFRASTRUCTURE PPP PROJECTS

Strategic management is vital for significant infrastructure public-private partnership (PPP) projects characterised by a heavy and irreversible investment over a long period. In PPP projects, the financing strategy relates to the capital structure of the project and the coordination of the participants’ requirements. In this paper, a system dynamics (SD) model is described to analyse the impacts of two types of financing strategies on the needs of creditors, the government, and private investors, considering the dynamic and complex characteristics of infrastructure PPP projects. The proposed model has been implemented on a PPP highway project. A number of experiments were conducted over a 33-year strategic planning horizon as a means of assessing the long-term effects of different financing strategies. The experimental results reveal that the model is a useful tool that could support decision-makers in identifying the intervals with different management focus of financing risk and comparing different financing strategies to choose the optimal one. It is especially helpful for the government to select a financing strategy for infrastructure PPP projects with capital limitations.

Analysis of the risk-sharing ratio in PPP projects based on government minimum revenue guarantees

Public-private partnership (PPP) projects have been widely applied in infrastructure construction. A suitable risk distribution strategy is crucial for promoting negotiations between the government and investors. The government usually provides guarantees to investors to distribute risk. However, an excessive guarantee increases the government's financial burden, whereas an insufficient guarantee reduces the confidence of the investors participating in the project. In a minimum revenue guarantee (MRG), the government subsidizes the investors the difference between the actual revenue and the government guarantee line if there is a loss. In PPP power plant and highway projects, investors' revenues come from two sources: government guarantees and the project company's self-sale. To support project companies and to optimize the projects' benefits, the government should set a reasonable benchmark for purchase amounts. Based on the traditional principal-agent model, this paper introduces the reciprocal preference theory to analyze the risk-sharing ratio most suitable for the government. Then, an optimal incentive mechanism is established to guarantee the project's income. The results indicate that by setting a different guarantee strategy for different participants, the government can utilize reciprocal preference to incentivize investors to exert more effort during a partnership and avoid moral hazard.

Traffic Allocation Mode of PPP Highway Project: A Risk Management Approach

Highway projects are the favorites of public‐private partnership (PPP) investors because of their stable cash flow. However, there are high uncertainties in terms of traffic volume, resulting in unpredictable revenues, which has drawn major concern of PPP investors. For a road in a network, the traffic volume is determined by the traffic allocation rate, which is affected not only by the total traffic volume in the region but also by other traffic risk factors, such as travel time, toll rates, and travelling comfort. The conventional traffic allocation forecasting technique predominantly depends on the travel time, overlooking other risk factors. Consequently, traffic allocation forecasting is usually inaccurate. To improve the accuracy of traffic allocation forecasting in PPP road projects, this paper proposes to consider the effect of traffic risks together with traffic time by using the mean utility. Multinomial logit (MNL) model based on mean utility is used to predict the traffic allocation rate. To validate the proposed model, the system dynamic (SD) modeling is established to forecast the traffic volume of a case highway using the proposed traffic allocation forecasting model. The simulated result shows that the simulated traffic volume of past years from the proposed model is highly consistent with the actual one, evidencing that the proposed model can greatly improve the accuracy of the traffic forecasting.

Critical success factors in a public–private partnership highway project in Malaysia: Ampang–Kuala Lumpur Elevated Highway

The Ampang–Kuala Lumpur Elevated Highway, which is also known as Akleh, is the first elevated highway-infrastructure project that has been procured in Malaysia through the public–private partnership approach. Even though the construction stage of the project has taken 5 years to complete, which is much longer than what is required for a normal construction project, Akleh was successfully commissioned for operation in 2001. This paper identifies and ranks the critical success factors of the first elevated highway-infrastructure project in Malaysia. All the key contributing factors that have been identified can be grouped into five critical success factors. All factors are ranked from the most critical factor that has the most impact on the success of the project. Extensive interviews with key personnel from both the project’s clients and the project concessionaire were carried out to establish what those involved in the project considered to be the critical success factors, and produce a ranking of those factors. As a result, project implementability, judiciary government control and transparent procurement process are among the most prioritised critical success factors. Effective management control, good communication between project parties and stable political situation are identified as the top three contributing factors.

System Dynamics (SD) -based concession pricing model for PPP highway projects

The design of concession price is essential to financial viability of Public–Private Partnership (PPP) highway projects. It is one of the most important variables that need to be determined during the negotiation period. However, there are few methods available for calculating the value of this variable. Research described in this paper aims to develop a reliable, objective, and systematic model for determining a rational concession price for PPP highway projects based on pro forma financial statements developed during the feasibility study period. The pricing parameters and price risk factors of PPP highway project were first identified and compiled through a comprehensive literature review. A concession pricing model using System Dynamics technique was then developed based on concession pricing parameters and the effectiveness of the proposed SD-based concession pricing model was verified by a real toll tunnel project located in China. The test result shows that the proposed model is reliable, accurate, and suitable for the application by practitioners for concession price determination. To overcome the effect of risk factors on concession price, a pricing adjustment model using Case-base Reasoning (CBR) technique was proposed to consider the unquantifiable risk factors. It is believed that a rational and practical concession pricing model can create a ‘win–win’ situation for both the private investor and the host government. This research framework can also be used as a reference to study other facilities' pricing models.