Transportation Public-private Partnerships Research Articles

Addressing the elephant in the room: How do we understand value for money in transport Public Private Partnerships?

Value for Money (VfM) is often considered the criterion for assessing whether Public Private Partnerships (PPPs), or the traditional procurement should be adopted to deliver infrastructure projects and their services. Yet, this decision is mostly focussed on whichever approach that embodies a lower cost while neglecting the value it can bring to projects. Addressing this elephant in the room, a set of interviews with highly experienced professionals (with an average of 23-year working experience in infrastructure procurement) were conducted to engender an in-depth understanding of VfM. Through the lens of sensemaking, our results empirically demonstrated the duality of VfM in the context of transport projects instead of the previous foci on cost, time, and quality (i.e., traditional VfM), and further unearthed the nuances when considering them. As such, this research contributes to the PPP body of knowledge by providing a more meaningful concept of VfM. For practitioners and decision makers, it proposes a framework to benchmark their VfM assessments of infrastructure interventions.

Government subsidy and benefit distribution mechanisms for transportation PPP projects: An evolutionary game perspective

Public-private partnerships (PPP), as an important model for collaboration between the public and private sectors, is an urgent and critical topic due to the serious financial losses of governments involved in transportation PPP projects in recent years. Current research focuses on the government subsidy model, in which the effective implementation of government subsidies relies on the design of incentives for stakeholder behavior. Although the positive externalities are strong, they are prone to the problem of “free riding,” which leads to low project performance and challenges in compensating for the government's financial losses. Therefore, this study proposes a novel dynamic subsidy mechanism that can be adjusted based on actual changes in transportation demand and that is linked to project performance. We use evolutionary game theory to construct a two-party evolutionary game model of the government and social capital, focusing on the stability and influencing factors of these interactions. Our research unveils that reaching specific thresholds in both the incentive coefficient and benefit distribution ratio induces an “positive management–negative management” shift in the behavior of involved parties, leading to enhanced project outcomes. Notably, fluctuations in operational quality substantially enhance the efficiency of the active management of private sector, with no discernible impact on the subsidy efficiency of the government. Therefore, our study provides a theoretical framework for improving the revenue allocation and government subsidy mechanism, which has theoretical and practical implications for enhancing the effect of government incentives and improving the quality of operational social capital.

Towards a green transportation system in Mexico: The role of renewable energy and transport public-private partnership to curb emissions

Given the substantial financial requirements, greening the capital-intensive based infrastructure like transport requires pondering upon new innovative strategies. As the public sector has demonstrated a lack of sufficient funds in numerous instances, promoting the Public-Private Partnership (PPP) has become a promising pathway toward green transportation. However, the role that PPP investments in the transportation sector in reducing transport CO2 emissions (TCO2e) on the road to meeting the sustainable development goals (SDGs) has received minimal attention. In this context, this study investigates the impact of PPP in the transportation sector and renewable energy on TCO2e for Mexico from 1990 to 2022, while controlling economic and urban settlement growth. For a novel attempt, this study leverages several modern econometric methodologies, such as the Augmented and Dynamic ARDL which allows estimating long-run and short-run elasticities vis-à-vis future scenario analysis. Results divulge that the PPP in transport curbs TCO2e over the short term, but the long-term effect is insignificant. Moreover, findings uncover that while the usage of renewable energy strengthens environmental circumstances, a rise in the urban population has a short-term negative impact on TCO2e. Moreover, the economic progress boosts Mexico's TCO2e and has a more devastating long-term effect, which is contradictory to the Environmental Kuznets Curve (EKC) hypothesis. The current study suggests that in order to advance the nation's green transportation system, authorities in Mexico should implement several measures to increase the pie of renewable energy and effective public-private partnership investment in the transportation sector.

Sustainable Operations: A Systematic Operational Performance Evaluation Framework for Public–Private Partnership Transportation Infrastructure Projects

With the application of public–private partnership (PPP) model in urban transportation infrastructure projects, various participants have put forward multi-dimensional demands to the operation and maintenance of infrastructures. This study aims to establish a systematic operational performance evaluation framework for PPP transportation infrastructure projects. Based on a literature review, the balanced scorecard was improved, and a conceptual model of multidimensional performance assessment was constructed. The structure of the qualitative performance assessment system was quantified and analyzed by combining structural equation modeling with questionnaires to obtain causal relationships among the indicators. Subsequently, a system dynamics model was constructed to assess the performance dynamically, and a validation analysis was conducted. It finds that maintaining a low level of operational quality over an extended period can significantly reduce stakeholder satisfaction, consequently exacerbating the decline in project performance. In contrast, an improvement in the level of informatization is found to positively contribute to enhancing operational quality and facilitating the long-term sustainability of project operations. It innovatively integrates four dimensions of financial, multi-stakeholder satisfaction, operation and maintenance quality, and sustainability performance to enrich the theoretical system of PPP transportation infrastructure performance assessment. At the same time, it analyzes the influence mechanism among the indicators and its long-term dynamic performance, which provides an effective decision-making tool for operational performance management.

Effect of public–private partnership features on contractual complexity: evidence from China

PurposeA public–private partnership (PPP) is an agreement between the government and private investors to deliver long-term public services. The efficiency of PPP projects depends on PPP contracts stipulating contractual parties' corresponding responsibilities and rights to deal with relational and performance risks. Although more complex contracts provide more remedies for mitigating ex-post transaction costs, they also result in the increased ex ante transaction costs associated with contract writing. Thus, contractual complexity is a design choice that can reduce the overall contract transaction costs.Design/methodology/approachUsing 365 transportation PPP projects in China from 2010 to 2019, this study applies the Poisson regression model to examine the effects of payment mechanisms, ownership by investors and equity structure on contractual complexity.FindingsPPP contracts have control and coordination functions with unique determinants. Parties in the government-pay mechanism are more likely to negotiate coordination provisions, which results in greater contractual complexity. PPP projects with state-owned enterprises (SOEs) have less contractual complexity in terms of both two functions of provisions, whereas the equity structure has no impact on contractual complexity.Originality/valueThese findings provide a nuanced understanding of how various contractual provisions are combined to perform control or coordination functions and make managerial recommendations to parties involved in PPP projects.

Factors Affecting the Success of PPP Transport Projects in Vietnam

Transport infrastructure plays an important role in the development of each country, especially for developing countries like Vietnam. To promote the development of transport infrastructure as well as to deal with some challenges such as budget and project efficiency, the Public Private Partnership (PPP) model is a very proper choice. The factors that determine the success of PPP transport projects are important issues to be analyzed in different countries. The article aims at identifying the factors and the extent of their influence on the success of PPP transport project in Vietnam. Research data are collected from surveys with questionnaire to capture related partners' perceptions of success factors. The influence level of the factors is assessed on a 5-point Likert scale (from 1 -very low to 5 -very high). A total of 92 questionnaires were collected and analyzed using Statistical Package for the Social Sciences (SPSS) software to rank the influence of success factors. Research results show that “Adequate and transparent legal framework”, “State and private commitments and responsibilities”, “Transparency in bidding”, “State support policy” and “Good governance” are the top five factors determining the success of a PPP transport project in Vietnam. The new findings of the study help the State and investors better understand the factors determining the success of PPP transport projects in Vietnam in order to make appropriate decisions on policies.

The state of South Africa’s public–private partnership practices in transport projects: Problems and potential

Background: Despite growing calls for public–private partnerships (PPPs) to supplement diminishing investment in South Africa’s transport sector, the uptake of transport PPPs in the country was low over the past 15 years compared with Brazil, Russia, India and China which performed well in this regard. This low uptake poses several consequences in light of the positive correlation between transport capital investment and economic growth. Objectives: The study aimed to describe the problems faced in the South African PPP process, firstly by comparing and contrasting PPP practices of South Africa to its counterparts in the Brazil, Russia, India, China and South Africa (BRICS) multilateral forum in view of understanding the reasons for the low uptake of transport PPPs in the country and, secondly, by interviewing transport PPP experts on their opinions on constraints and possible solutions for PPPs in the country. Method: In light of the limited research on transport PPPs in South Africa, as well as the low level of PPP implementation, secondary data analysis was followed by an exploratory qualitative research design used to obtain rich data from subject experts on the topic at hand. Results: The main findings reveal that the politicisation of infrastructure through party politics, political risk and domination of the state in the delivery of strategic infrastructure contributes to the low uptake of PPPs. Conclusion: A need exists to strengthen political commitment for PPPs by centralising and coordinating planning across different tiers of government, while easing the regulatory burden, making them simpler to implement and more attractive to investors and promoting inclusivity. Policymakers can utilise these findings to improve areas of practice requiring intervention.

Structuring Public–Private Partnerships for Public Value: Analysis of Two Transportation Infrastructure Case Studies

This study examines public–private partnerships (PPPs) in terms of providing public value and analyzes the structuring of PPP contractual agreements to achieve public values of accountability, transparency, responsibility, responsiveness, and quality. We focus on transportation PPP projects utilizing case studies of the I-495 and I-95 PPP projects in northern Virginia. Review of contractual documents governing the PPPs and analysis of supplemental data related to PPP outcomes is conducted. We examine the creation and maintenance of public value through the process and performance elements of the contractual agreement. Study findings provide insight into how the roles, relationships, and interactions of the public and private partners, reflected in process and performance elements, are incorporated into agreements to ensure public value.

Managing Participants’ Behaviors: A Framework to Improve the Process Efficiency of Transport Public-Private Partnerships

AbstractPublic-private partnerships (PPPs) are critical for delivering infrastructure assets worldwide. They encompass a variety of public and private organizations, and therefore, participants’ be...

Public–Private Partnership Infrastructure Investment and Sustainable Economic Development: An Empirical Study Based on Efficiency Evaluation and Spatial Spillover in China

Public–private partnership (PPP), an innovative mode of infrastructure investment, has been widely applied in China and has become an essential policy tool with which to promote sustainable economic development. In order to comprehensively evaluate the economic consequences, using 31 provinces in China from 2003 to 2018 as samples, first, stochastic frontier analysis was performed to measure the input–output efficiency of infrastructure investment to evaluate the economic sustainability and efficiency of PPP compared to single government-led investment mode. Next, the overall economic growth effect of PPP was verified. Further, from the perspective of sustainable development of regional economies, the double-fixed effect spatial Durbin model was adopted to empirically test the spatial spillover effect of PPP and clarify its industrial heterogeneity. The results show the following. (1) The average input–output efficiency of infrastructure is 0.449, revealing a distribution law of decreasing from east to west and remarkable regional variation. However, a good trend of improvement emerged, reflecting the economic sustainability of infrastructure investment, and PPP has played a positive role in promoting it. (2) PPP has significant and positive economic growth and spatial spillover effects, which can promote regional economic integration, embodying its economic sustainability function. (3) The economic impact of PPP has significant industrial heterogeneity. Transportation PPP can bring greater economic benefits, confirming the vital position of transportation infrastructure in the sustainable development of regional economies. Energy and water PPP have positive externalities. All of this provides powerful and reliable proof of the realization of sustainable economic development under the regional virtuous circle driven by infrastructure investment through PPP.

Governance of Public–private partnerships in transportation infrastructure projects based on Thailand’s experiences

Public–private partnership (PPP) has been extensively applied in transportation infrastructure projects. The specific characteristics of PPP projects cause the allocation of risks and benefits among the public and private sectors, and in practice, multiple decision making processes based on public interest resulting governance problems. The need for private investment in transportation infrastructure projects urges governments to apply good governance practices to attract private investment. The purpose of this study is to examine PPP governance problems and applied practices so as to investigate the governance improvement of PPP transportation projects in Thailand. The findings represent the governance problems and practices applied in PPP transportation projects in Thailand. The discussion of the findings, in relation to the international PPP governance practices, reveals the gaps for further governance improvement in terms of policy, regulation, institution, and stakeholder. This study extends the investigation of PPP problems in transportation project implementation through the lens of governance little shown in previous studies. It contributes to government and local government a more in-depth understanding of governance problems and good practices to better govern the PPP transportation projects to achieve the project goals.

How PPP Renegotiation Behaviors Evolve with Traffic Changes: Evolutionary Game Approach

High risk in actual traffic demand often causes a serious imbalance in interests between the public and private sectors in transportation public–private partnership (PPP) projects. The party who suffers has the incentive to breach the contract and hopes to make up for their loss by renegotiating the PPP concessions. The high frequency of such concession renegotiations has raised questions about the viability of the PPP approach. To study how concession renegotiation behaviors evolve when actual traffic volume is lower or higher than expected, this study introduces traffic changes as a quantitative financial indicator. Moreover, it develops two evolutionary game models in which the private and public sectors initiate the renegotiation. The thresholds for renegotiation by the private and public sectors can be defined based on the models and provide decision support for the governance of concession renegotiation behaviors in transportation PPP projects to reduce the incidence and incentives to renegotiate PPP contracts.

Monte-Carlo optimization model for dynamic capital structure adjustment in Chinese public-private partnerships under revenue uncertainty

In the case of revenue uncertainty, the static capital structure predefined in the feasibility stage of Public-Private Partnership (PPP) cannot satisfy the need of dynamic adjustment in the capital structure of Chinese PPPs during project operation, thus deteriorating project financial viability in the long run. Therefore, this paper aims to propose a Monte-Carlo optimization model that can enhance the requirement of the dynamic capital structure of PPPs in the uncertain environment regarding the Chinese bridge sector. By quantifying the adjustment cost derived from changes in equity and debt, the proposed model can make a comparison analysis of dynamic capital structures of a specific project in different scenarios with three capital structure adjustment strategies adopted, respectively. In particular, the before-and-after effects and effectiveness derived from the use of government subsidies, capital market financing, and debt financing in adjusting capital structures of a PPP project, respectively, can be compared and evaluated. Based on historic data of the Hangzhou Bay Bridge (HBB) case, the imbalanced roles of the three strategies are unveiled that the strategy of government subsidies has a stronger effect as compared with the other two strategies, thereby enhancing project financial viability and sustainability. The simulation results of the HBB case further indicate that the debt financing strategy, which is the actual strategy applied to HBB can alleviate the short-term project operation pressure, but it may affect the project revenue in the long term, and aggravate the repayment risk of the project. These analyses have uncovered the strategic role of dynamic capital structure in maintaining financial viability and avoiding project bankruptcy. This model fills a gap when we need to deal with changes through dynamic capital structures in PPP projects. Several policy implications are provided in the end for transport PPP projects to improve the survival of PPPs during project operation under revenue uncertainty.

Socioeconomic and Political Issues in Transportation Public–Private Partnership Failures

Transportation public–private partnership (PPP) projects are long-term projects that usually break the status quo of public ownership. In fact, opposition to PPP projects stems from a variety of factors, such as political influence to favor certain interest groups and high toll prices. Close examination reveals that vulnerability to societal and political domains originates at certain individual points and creates a complex web of problems as it propagates through different socioeconomic and political levels and project stages. This article attempts to unveil such complex and problematic trends by analyzing ten failed transportation PPP projects to identify critical socioeconomic and political failure factors. Employing questionnaire surveys and path analysis, a failure-mechanism model is developed to depict all possible transportation PPP project vulnerabilities to the socioeconomic and political domains. This article's failure-mechanism model could act as a vulnerability-prediction model for transportation PPP practitioners in the public and private sectors, and it can help better understand socioeconomic and political issues’ impacts to transportation PPP projects.

Option Value of Contingent Finance Support in Transportation Public–Private Partnership Projects

Uncertainties about construction cost and operational revenues are two major risks in transportation public–private partnership (P3) projects. These uncertainties put projects at risk of being unable to fulfill annual debt repayment obligations. When a project generates insufficient cash flow to service the debt in a certain year, it normally has to go for short-term financing by borrowing short-term loans. With the help of revenue risk-sharing mechanisms, supported projects may be able to get rid of unexpected interest disbursement. The objectives of this paper are twofold: ( 1 ) evaluate the refinancing cost of P3 highway projects caused by cash flow shortage; and ( 2 ) critically examine the option value of contingent finance support and compare it with the option value of minimum revenue guarantee on saving refinancing cost for debt repayment. An integrated real options valuation model is created that utilizes utility method for pricing the technical project risk (e.g., construction cost overruns), and utilizes a risk-neutral option pricing method for pricing the market risk (e.g., future traffic). The proposed model has good transferability in relation to involving various risk factors, no matter technical risks or market risks, random variables or random processes. The proposed model helps stakeholders better understand and measure the burden of assuring annual debt repayment under uncertain cash flow. The stakeholders can use the proposed model to evaluate the value of the revenue risk-sharing mechanisms on reducing refinancing cost.

Measuring the success level of public-private partnership transportation infrastructure projects in vietnam using fuzzy topsis method

Public–Private Partnership (PPP) has emerged as an effective procurement in delivering infrastructure and public service in many countries over the world since last few decades. It brought more benefits for sustainable development compared to traditional procurement in many developing countries. However, in order to determine whether a project is successful or not has still remained an ambiguous perception. Therefore, this study will rank the successful level for PPP transportation infrastructure projects in Vietnam via case studies. Fifteen success criteria were identified by the comprehensive review. The fuzzy TOPSIS method was then applied to evaluate and rank the success level for case studies. The result showed that project 2 is considered as the most successful until this recent time with a satisfactory degree of 0.489. Project 1 and project 3 are ranked second and third with a satisfactory degree of 0.482 and 0.435, respectively. Although the projects were judged as effective. Nevertheless, the success index of these expressway project still lower than 0.5. Therefore, project managers need to propose effective solutions to improve the success of these projects in the future. This result can help participants to be a good insight into the PPP project success in developing countries in general and Vietnam in particular.

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.

Cost and Schedule Performance Analysis of Transportation Public–Private Partnership Projects

AbstractA public–private partnership (PPP) is a contractual agreement between public-sector and private-sector partners allowing more private-sector participation than is traditional. The literatur...

An algorithm to evaluate the performance of public-private partnership transport projects

An algorithm to evaluate the performance of public-private partnership transport projects

Optimizing the concession period of PPP projects for fair allocation of financial risk

Purpose Targeting public–private partnership (PPP) projects, the purpose of this paper is to help decision makers fairly allocate financial risk between governments and private investors through a properly designed length of concession period. Design/methodology/approach On the one hand, the length of the concession period should be long enough to help private investors to achieve their expected profits. On the other hand, the length of a concession period cannot be decided without agreeing on an upper limit, since an overlong concession period takes too much time for governments to recover their investment and leads to an overly lucrative condition for private investors. Following this logic, the concession period decision range is decided, which defines the lower and upper limits for the length of the concession period. The net present values (NPVs) for governments and private investors are estimated via Monte Carlo simulation to better reflect the uncertainties. To further decide on the optimal length of the concession period, the principle of fair risk allocation between governments and private investors is adopted. The concession period, as an important project parameter, should help to minimize the financial risk gap between governments and private investors. Findings The developed concession period determination process is validated using a numerical example of a PPP transportation project. The analysis outcomes show that the proposed methodology is capable of determining the length of the concession period so as to control private investors’ profit within a reasonable range while achieving a fair allocation of financial risk between governments and private investors. The outcomes also indicate that, before determining the optimal length for the concession period, governments may need to make a choice between better financial risk allocation or stringent profit control for private investors. Research limitations/implications The determination process developed here may be inapplicable to social infrastructure PPPs where the income stream is less predictable. In addition, the data analysis targets a highway project with a capital subsidy provided by the government. To strengthen the effectiveness of the proposed determination process, further research should apply the model to PPPs with other kinds of government support. Originality/value The concession period for a PPP project is an important parameter and it is a common practice for governments to predetermine the length of the concession period before inviting tenders. The existing models for determining the concession period focus too much on the simulation of NPVs for project parties and neglect the importance of risk allocation in signing and maintaining a long-term contract. There is also a lack of research to evaluate the influence of governments’ preferences on the length of the concession period. To overcome the limitations of the existing models and enrich the methodology for concession period determination, this paper contributes to the body of knowledge by developing a concession period determination process which can help governments to make better decisions. The financial risk is expected to be more evenly shared between governments and private investors with the concession period derived from the proposed process. This determination process is also capable of evaluating the influence of governments’ preferences on the length of the concession period.