Search

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 part...

Public-private partnership (PPP) is an alternative and efficient method to financing infrastructure provisions such as sewage treatment and water facilities. The long-term contract and dynamic uncertainty lead to inevitable and high-incidence renegotiation to PPP. However, renegotiation has been recognized as the Achilles' heel of concessions. The renegotiation initiated by the concessionaire in the construction phase usually occurs when the actual construction costs are higher than predicted. To explore when the concessionaire initiates renegotiation and the dynamic evolution tendency of his/her renegotiation behavior when actual construction costs overrun in the PPP sewage treatment project, this paper introduces the fluctuation of construction costs as a quantitative index and establishes an evolutionary game model to analyze the best strategic choice of the concessionaire under different circumstances. The not-renegotiating and renegotiating thresholds of the concessionaire can be drawn based on the model. According to these two thresholds, the fluctuation range of construction costs can be divided into three intervals. This article further discusses the evolution of the concessionaire's renegotiation behavior when the fluctuation of construction costs lies in these three different intervals. The findings indicate that when the actual construction costs overrun in the PPP sewage treatment, the best strategic choice of the concessionaire in the cooperation dilemma is related to the fluctuation of the construction costs. The results reveal the nonlinear relationships between renegotiation behavior and fluctuation in construction costs and provide a reference for regulating PPP renegotiation behavior in the construction stage to reduce its incidence.

The concession period is one of the most crucial variables influencing the success of a transportation project under the build-operate-transfer (BOT) procurement model. Since BOT transportation projects are characterized by irreversibility and uncertainty, project values tend to be underestimated by ignoring the value of the option to defer in the evaluation process, and thereby a long concession period is required by the concessionaire and a high subsidy is invariably paid by the government concerned when a project is financially nonviable. However, the existing net present value (NPV) method for making a concession period decision cannot properly capture the managerial flexibility value in BOT projects. In addition, the existing Nash bargaining model used in the concession period negotiation process cannot define an optimal concession period but can only narrow the interval of the concession period. This paper presents an alternative method for determining the optimal concession period by considering the investment in BOT-type transportation projects under dynamic uncertainty. In the proposed model, real options theory is used to identify an effective interval of concession period for a BOT transportation project, and Nash negotiation theory is applied to find the optimal value of the concession period. An actual transportation project in China is referred to as demonstrating the effectiveness of the proposed model.