Road Public-private Partnerships Research Articles

Financial risk analysis of Public-Private Partnership (PPP) projects case study on Pandaan - Malang Toll Road

This study aims to analyze the financial risks faced by the Pandaan-Malang Toll Road PPP (Public-Private Partnership) project in Indonesia. Data collection techniques include semi-structured in-depth interviews with parties related to the PPP project, including the Directorate General of Infrastructure Financing, the Tolling Road Management Agency (government), and Business Entities (PT Jasamarga Pandaan Malang). The collected data will be analyzed to determine the financial risk factors faced by PPP projects and the financial controls carried out to overcome financial risks in PPP. The results show that the risk of errors in forecasting in the calculation of demand, cost, and revenue projections is a risk that almost often occurs. The Government emphasizes the importance of optimizing the role of PII (Persero) or Indonesia Infrastructure Guarantee Fund (IIGF) as an Infrastructure Guarantee Business Entity (BUPI) to ensure financial sustainability and minimize the impact of sudden shocks on the State Budget due to the provision of Government Guarantees for cooperation projects. This study provides insights or frameworks that can be applied to similar projects, helping to improve risk assessment and decision-making processes in future infrastructure developments.

Public-Private Partnership in Indonesia: Solutions and corruption loopholes

We need to better understand Public-Private Partnership (PPP), since most people perceive PPP as a riskless solution for government, as it involves private sector funding. In Indonesia, infrastructure development is one of the top priority sectors for Joko Widodo’s administration, and PPP has become a viable option due to budgetary constraints. However, PPP is not an impeccable solution, as there are weaknesses and loopholes for corruption to be aware of. In this literature review, we combine our previous study on Indonesia’s toll road PPP with other PPP studies to identify the weaknesses and corruption loopholes in PPP practices in Indonesia. There is clear evidence that PPP projects could end up as “white elephants”, indicating misallocation of resources and poor planning. PPP could also be used to create “fiscal illusion” to deceive public by the government. We also discovered that toll road PPP contracts in Indonesia remain vulnerable, potentially creating room for loopholes and corruption.

Critical Success Factor (CSF) of Implementing PPP Road Sector in Indonesia

The MPWH of Indonesia has a role in the development of road projects. Road projects require a large number of funds. One of the funding schemes currently being pursued by the government to overcome this funding gap is Public Private Partnership (PPP). The implementation of the PPP requires a lot of attention from various parties so that the project runs well. The purpose of this study is to examine the priorities of CSF in the implementation of PPP in the Road Sector in Indonesia. This study used questionnaires and analysis used mean score & RII. There are 45 samples of private sectors and 5 governments. The results of the study show that strong commitment from the government during the PPP implementation, clear PPP regulations, transparent and competitive procurement process are the top three success factors of the PPP road sector in Indonesia. CSF can provide an overview to governments and private sectors in the implementation of the PPP Road Sector in Indonesia. A strong commitment from governments and private sectors is expected to minimize the risk of project failure.

Political Influences of Stakeholders on Early Termination of Public-Private Partnerships: A Study on China’s Toll Road Projects

As a policy innovation for public goods delivery, public-private partnership (PPP) faces great risks in developing countries, and many projects have been terminated before the contract expiry date. This study explores how key stakeholders of the government that is responsible for PPP development, including the upper-tier government, the public, and business partner, can exert political influences through institutional ways over the fate of PPP projects. It argues that political pressures from the upper-tier government and the public, together with political relationship between the government and its business partner, determine whether the government would terminate its PPPs ahead of schedule. Empirically, this study investigates toll road PPP experiences in China. A qualitative comparative analysis (QCA) of 57 toll projects suggests the complexity of causal effect of political factors. In total, the factors of political pressures and political relationship form three pathways to PPP early termination.

Avoiding Disputes in PPP Road Contracts: Quantifying Impacts of Increased Allowable Truck Loads

Dealing with changes is one major concern in long-term public-private partnerships (PPP) concessions, especially during the implementation phase, as some changes might lead to disputes between PPP partners and disrupt the successful execution of the project. In the transport sector, a change in the law regulating truck loading standards inevitably influences the financial stability of road projects procured through PPP. That is, the government’s decision of increasing the permissible truck load can lead to an accelerated deterioration of the pavement, and accordingly imposes additional expenditures that are borne by the concessionaire for maintaining the road condition at a satisfactory level, as required by the PPP contract terms. Given the fact that PPP concessions allow for additional compensations to the concessionaires in the case of modifications in the legislative and regulatory conditions, this study proposes two remuneration strategies for consideration by the concerned government to mitigate the adverse implications of increasing truck load limit on the concessionaire’s financial status and consequently to avoid the occurrence of disputes with the concessionaire. The work presented herein is twofold, as it quantifies the impact of the change in truck load regulations on two main contract terms: the toll regime and the concession period. Under the first approach, the government would provide direct compensation to the concessionaire through a shadow toll paid per overloaded truck. The value of the shadow toll was found to be largely influenced by the truck class, truck load, pavement structure, climatic conditions and traffic volumes. Moreover, it was found that the highest values of shadow tolls would apply to projects with relatively thin pavements and high traffic volumes. Under the second approach, an extension of the concession period was considered, which allows the concessionaire to recover the increased pavement maintenance costs. It was found that the length of the extended term depends, to a great extent, on the project’s characteristics in terms of the pavement structure, climatic conditions, traffic volumes, and more importantly on the toll revenues generated during the extended period. The two proposed alternative compensation techniques were devised and demonstrated through a methodology that involved flexible pavements performance prediction under varying loading conditions, using AASHTOWare Pavement ME. The proposed methodologies represent a framework that helps the two main parties involved in a PPP road project (i.e., the concessionaire and the highway agency) to accurately assess the effect of any increase in truck loading on the pavement performance and to decide on a fair compensation to be offered by the highway agency to the concessionaire, thereby contributing to the avoidance of dispute occurrence.

Environmental Impact Assessment Effectiveness in Public–Private Partnerships: Study on the Colombian Toll Road Program

Public–private partnership (PPP) has been positioned as a relevant contracting method for developing large-scale infrastructure projects that entails potentially high-magnitude negative impacts on the environment. The effectiveness of the environmental impact assessment (EIA) is crucial to achieving sustainable development of these large-scale infrastructure projects. To unravel the drivers for the EIA effectiveness and the multiple combinations built by the complexity of these drivers, this paper analyzes 28 road PPP projects from Colombia employing a fuzzy-set qualitative comparative analysis (fsQCA) approach. This paper decodes conjectural causal links between specific conditions grouped in superordinate clusters (i.e., consultants’ capability, project features, and communities’ participation) and EIA effectiveness dimensions (i.e., normative, procedural, substantive, and transactive). Findings revealed that no single combination of causal conditions ensures multidimensional EIA effectiveness. This study demonstrated that EIA effectiveness relies significantly on the integration of specific features of three external stakeholders: consultants, nonpreferred proponents, and communities. This study constitutes the first empirical multidimensional identification of the combination of conditions that generate EIA effectiveness in road PPPs.

The attraction of public-private partnerships for road construction in India, as affected by both positive and negative factors

The paper aims to pinpoint and assess the perceived advantages and disadvantages of the Public-Private Partnership (PPP) for road development in India. Main PPP project contributors in Indian PPP road projects were polled via questionnaire. A literature review was used to select fifteen favourable characteristics and thirteen unfavourable factors for the questionnaire. Descriptive statistical analysis is used to analyze the data that was collected. The elimination of government financial restraints, project cost and time management, the reduction of government funds committed to capital investment, improved maintainability and accelerated project development are the key positive characteristics that draw PPP in Indian road projects. Excessive participation restrictions, protracted negotiating delays, ambiguity surrounding government objectives and evaluation standards, a lack of employment possibilities, and a lack of experience and the necessary skills make PPP undesirable. Both the public and private sectors can benefit from PPP in various ways. All sectors must make decisions based on proper assessment criteria during the project development stage. The decision-makers of PPP projects benefit early on from thoroughly understanding both positive and negative elements.

Innovative PPP models in urban mobility sector: A case study of three Indian cities: Amritsar, Kochi and Surat

Developing an economy requires evolving infrastructure needs and investments. Public Private Partnerships (PPPs) have been critical and have eased the government stress of investments in infrastructure by bringing in economic development with improved efficiencies and cost optimisations. The private sector participation in India's transport sector has been majorly focusing on capital intensive transport infrastructure developments like highways, airports or ports. It is still at an early learning curve of PPP in terms of less capital heavy projects or service delivery-oriented contracts. The lessons and learnings of decades of doing road PPPs is now being expanded to other sectors like water, solid waste, as well as urban transit. The paper discusses the innovative PPP models in the mobility sector for the case cities of Amritsar, Kochi, and Surat in India. The E-Auto shift from diesel autos in Amritsar, private bus aggregation of individual operators to company in Kochi, and the women owned operator CNG auto in Surat; and the innovations undertaken by government entities by assuming the role of a facilitator, regulatory and contract manager to support private sector in filling the service gaps is documented in the paper. The paper also documents the need for a more demand responsive operation planning, better risk allocation, and balanced contract conditions to make the sector lucrative for the private sector players.

Case Study on National Highway Construction Using Bot

Abstract: The public-private partnership (PPP) models that have been used in procuring the National Highways projects include Build- Operate-Transfer (BOT) (Toll) and BOT (Annuity) models.... This paper focuses on the various approaches that have been used for financing of PPP road projects in India. To assess the risks involved in BOT PROJECT by studying a specific case of Implementation of integrated road development program me (IRDP) in the city on built, operate & transport (BOT) basis. To Study the individualistic approach of the involved parties. BOT has been one of the recent innovations in project finance. The Build-Operate Transfer (BOT) scheme is a limited recourse financing technique. Many have adopted this approach as an alternative to traditional public financing for infrastructure development projects. This study examines the type of SOCIAL risk due to, force shutdown of toll booths due to public riots. This paper mainly representing the risk in BOT due to political & public pressure. A case study of IRDP project implemented in municipal corporation area through BOT is studied in details. Keywords: BOT, Public private partnership, lumpsum, concessionaire's

The attractiveness of public-private partnership for road projects in India

The objective of this paper was to have a study on the perceptions of stakeholders of Public-Private Partnership (PPP) projects for factors affecting the attractiveness of road projects in India. A questionnaire survey was conducted among major PPP project participants of Indian PPP road projects. Fifteen attractive factors were shortlisted through a literature survey for designing the questionnaire. Collected data was analyzed with factor analysis and descriptive statistical analysis. The findings resulted in three components: effectiveness of the private sector, effective time and cost management, and the public sector’s economic benefit. Eight factors were identified as highly affecting the attractiveness of PPP in Indian road projects. PPP provides ample diversity of net benefits to both the public and private sectors. During the project development stage, both sectors have to formulate decisions based on appropriate assessment criteria. Therefore, the reflection of attractive factors will assist the public-sector to select PPP in the road sector. It also helps to establish the strategy for road projects using PPP.

Comparison of toll and annuity PPPs: a case study of highway projects in India

PurposeThe use of public–private partnership (PPP) approaches for developing infrastructure has been well recognized. The allocation of risk between public authority and private sector differs among the different types of PPP projects. The objective of the paper is to analyze the factors that influence the type of PPP and the performance of different types of PPP contracts.Design/methodology/approachA unique data set of 202 national highway PPP projects from India, comprising 154 toll and 48 annuity projects formed the basis of the study.FindingsThere are significant differences between toll and annuity PPP projects. The former are longer, are implemented in better developed states but are also characterized by higher cost over-runs. The latter are characterized by higher debt–equity ratio.Practical implicationsMitigating revenue risk can significantly enhance the debt capacity of the projects, thereby reducing the overall cost of capital. To make toll roads attractive for bidders, they have to be developed as longer stretches. Toll projects that are immediately ready for development at the time of award would reduce cost overruns of toll projects and sustain the interest of private developers.Originality/valueComparison of toll and annuity PPP road projects has never been done previously. The unique data set used in this study highlights the differences in characterization and performance for both the project types. The study provides evidence support to “intuition” and enables policymakers to choose the right form of PPP to realize their objectives.

Stochastic modelling of maintenance flexibility in Value for Money assessment of PPP road projects

Maintenance flexibility has been promoted as a value driver for long-term public–private partnerships (PPPs). However, the value and risk associated with this value driver have not been properly quantified in the Value for Money (VfM) assessment literature. To bridge the gap, a novel stochastic modelling methodology is proposed to characterize the complex interactions among the lifecycle cost (LCC), performance deterioration and maintenance strategies. Four different maintenance strategies are designed to emulate the practice in the traditional and PPP delivery methods. The LCC includes the direct maintenance cost, user cost, residual value, and payment deduction, the last three often being neglected in VfM assessments. Simulation-based optimization and dynamic programming analysis are used to determine the probability distributions of the LCC and the VfM. A hypothetical highway PPP project under an availability payment model is selected as a case study. The results show that maintenance flexibility is indeed able to reduce the LCC for the private party. However, this private efficiency, if not properly regulated, could cause a reduced asset residual value and an increased user cost, making the public party worse off. In addition, for all potential maintenance strategies, the public sector is found to retain significant lifecycle cost risk, largely in the form of user cost.

Negative factors in implementing public–private partnership in Indian road projects

For the Government projects, Public–Private Partnership (PPP) is an important parameter based on which the project is procured through a private-sector. The objective of this paper was to identify and evaluate the perception of respondents for negative factors affecting Indian road projects undertaken by PPP. Thirteen negative factors were identified through a literature survey and validated with experienced professionals from the public-sector, private-sector and researcher. A questionnaire survey was conducted among major PPP project participants and researchers of Indian PPP road projects to investigate the most important negative factors. Identified factors were grouped into four categories: lack of experience, high cost, project's effectiveness and high risk using factor analysis. The four most important negative factors of Indian PPP Road Projects were identified using the Importance Index Method, which is: excessive restriction on participation, lengthy delays in negotiation, confusion over government objectives and evolution criteria, and fewer employment opportunities. The perception was analyzed with various statistical tools. This paper gives recognition of very important negative factors in the PPP road sector in the Indian context which will help consider road projects under PPP during the development phase itself.

Paving Way for Road Infrastructure Development in Public Private Partnership Emerging Economies: Lessons from Global Experiences and Policy Practices

Mismanagement of financing, tolling and project processes have been at the centre of the slow development of road infrastructure. Using a global outlook approach, this study synthesizes the public private partnership (PPP) financial challenges, tolling practices and PPP roads project experiences. Case studies were purposively selected to identify successes, failures, and reasons why such happened, as well as measures that have been taken to improve the PPP operating environment across the globe. This paper provides broad lessons upon which PPP emerging economies, especially those in Africa can improve road infrastructure for sustainable development. Keywords: road infrastructure, financial challenges, PPP road cases, tolling, lessons, PPP emerging economies DOI: 10.7176/PPAR/10-10-07 Publication date: October 31 st 2020

Social Network Analysis of Road PPP Equity Markets in Canada, Chile, and the United States

AbstractFor several decades, governments around the world have increasingly used public–private partnerships (PPPs) to improve the road infrastructure sectors in their jurisdictions. In response, r...

Research on Government Compensation for Toll Road Public-Private Partnerships (PPP) Projects

With the continuous implementation of the PPP projects, due to the imperfection of relevant policies, the blindness of government subsidy is constantly emerging. Thus, it is important to put forward a practical approach for valuing the subsidies and risk. In this paper, the revenue subsidies model and traffic subsidies model are established. Then combined with practical cases, Monte Carlo simulation is used to get the value and probability of government subsidies under different compensation ways. On this basis, the influence of initial traffic volume and traffic growth rate on government subsidies and net present value of investors is analyzed. The research findings can provide theoretical guidance for the government to choose a reasonable way of subsidies, balance the risk of compensation, and formulate subsidies policies.

Risk Allocation in Unsolicited and Solicited Road Public-Private Partnerships: Sustainability and Management Implications

Risk allocation plays a crucial role in the successful development of public-private partnership (PPP) projects. However, despite being an important topic for scholars and practitioners, the existing literature does not provide sufficient evidence on how managing risks in solicited (SP) and unsolicited (USP) road PPP projects, and subsequently, on what the sustainability implications are for such managerial processes. This study aims to extend risk allocation studies by analyzing contracts in Chilean highway PPPs over the last decade based on a systematic content analysis framework and case study data. The framework was developed through line-by-line coding of contract provisions associated with risk-related issues, and data were collected from semi-structured interviews with Chilean PPP practitioners. Results show that, although the majority of risks are either shared or transferred to the private party in most contracts, there are important variations in the way allocation procedures are implemented for SPs and USPs. Contracts analyzed revealed that risk arrangement mechanisms have usually focused on the economic dimension of sustainability without fully incorporating social and environmental considerations, increasing protests in the long-term. Conclusions indicate that risk allocation procedures and sustainability considerations are highly dependent on project-specific features and contextual factors. Overall, the analysis uncovers that the level of autonomy given to the private sector in both SPs and USPs has contributed to properly manage technical and economic risks, but has failed to successfully allocate social and environmental concerns.

Marginalization of end-user stakeholder’s in public private partnership road projects in Nigeria

The operational phase of public private partnership (PPP) projects in Nigeria has consistently witnessed serious challenges. Researches by various authors suggest that the major factors militating against the successful growth and development of PPP projects in Nigeria and other developing countries of the world is the marginalization of end-user stakeholder in PPP projects. As such, this study set out to reveal factors affecting the successful management of the diverse interests of end-user stakeholders of the PPP road projects in Nigeria. Using factors from related literature, a questionnaire was developed and distributed to users of two major PPP road in operation in Nigeria: Lekki/Epe Toll and Apakun Murtala Mohammed PPP toll road. A total of 282 questionnaires were returned representing 70.5% response rate. Cronbach’s alpha test was used to check reliability levels of the questionnaire variables (i.e., Likert scale questions) while factor analysis was used to establish the underlying factors affecting the successful participation of end-users stakeholders in PPP road in Nigeria. These underlying factors were fully discussed. It was concluded that active involvement of end-users stakeholders in decision-making from inception to conclusion will solve the problem of marginalization of end-user stakeholder’s in Nigeria PPP road projects.

Evaluation of success and risk factors for highway project performance through integrated analytical hierarchy process and fuzzy interpretive structural modelling

Public Private Partnership (PPP) models for highway projects in India face huge uncertainties throughout all phases of the project. This paper aims to identify and evaluate the different success and risk factors that play an important role in determining the success and failure of PPP projects in the western part of India. In this paper, the authors evaluate 73 success and risk factors, using two multi-criteria decision making methods. Based on literature and authors personal experience, these 73 factors have been identified from five different phases of the project under study. Analytical Hierarchy Process has been used for evaluation of the identified factors, and ranking has been done accordingly. After that, Fuzzy Interpretive Structural Modelling has been applied to 16 factors which have been identified through authors personal experience to quantify the level of risk involved in all those factors. Problem pertaining to land acquisition (F10) is evaluated as the most critical factor due to its very high risk level. Similarly, the other two factors are resettlement and rehabilitation problems (F11) and delay in approval of detailed project report (F4). These issues should be considered by the authorities for formulation of model concession agreements of future PPP road projects.

Has the latest global financial crisis changed the way road public-private partnerships are funded? A comparison of Europe and Latin America

A financial/economic crisis may have an adverse effect on transport public-private partnerships (PPPs) as both traffic demand is negatively influenced, and governments are further under pressure. However, research on awarded road PPP contracts over a 20-year period in the European Union (EU) and Latin America and the Caribbean (LAC) showed that the market slowdown is brief and followed by a re-bounce leading to an overall upward trend. The LAC region has experienced multiple financial setbacks with no significant change in the PPP market structure as opposed to the EU, where significant changes were observed concerning a shift in the remuneration schemes employed.