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Article: A simulation model for optimizing the concession period of public-private partnerships schemes
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TitleA simulation model for optimizing the concession period of public-private partnerships schemes
 
AuthorsNg, ST1
Xie, J1
Cheung, YK1
Jefferies, M2
 
KeywordsConcession period
Public-private partnership
Simulation
Toll/tariff regime
 
Issue Date2007
 
PublisherPergamon. The Journal's web site is located at http://www.elsevier.com/locate/ijproman
 
CitationInternational Journal Of Project Management, 2007, v. 25 n. 8, p. 791-798 [How to Cite?]
DOI: http://dx.doi.org/10.1016/j.ijproman.2007.05.004
 
AbstractPublic-private partnerships (PPP) are becoming an increasingly popular option of project delivery. Under the concession-based PPP arrangement, the private partner is responsible for funding the scheme, while their capital investment will be recovered through the operation revenue over the concession period. Therefore, calculating an appropriate investment return over the concession period becomes a very important aspect that influences success of the PPP project, particularly so as the concessionaire may be tempted to increase their toll/tariff should the revenue fall short of their expected. However, due to the difficulties in estimating the long-term uncertainties and wider-risk profiles at the tendering stage, the government would conduct the traditional net present value and payback period analyses to determine the concession period. In this paper, a simulation model which aims to assist the public partner to determine an optimal concession period is proposed. A hypothetical example is worked through to illustrate the concept of the simulation model. The results show that the risks and uncertainties, such as a change in inflation rate, traffic flow and operation cost, could influence the decision on the concession period. With the help of the simulation model, the impact of risk can be taken into account when establishing an ideal concession period. © 2007 Elsevier Ltd and IPMA.
 
ISSN0263-7863
2013 Impact Factor: 1.758
2013 SCImago Journal Rankings: 1.092
 
DOIhttp://dx.doi.org/10.1016/j.ijproman.2007.05.004
 
ReferencesReferences in Scopus
 
DC FieldValue
dc.contributor.authorNg, ST
 
dc.contributor.authorXie, J
 
dc.contributor.authorCheung, YK
 
dc.contributor.authorJefferies, M
 
dc.date.accessioned2010-09-06T06:26:52Z
 
dc.date.available2010-09-06T06:26:52Z
 
dc.date.issued2007
 
dc.description.abstractPublic-private partnerships (PPP) are becoming an increasingly popular option of project delivery. Under the concession-based PPP arrangement, the private partner is responsible for funding the scheme, while their capital investment will be recovered through the operation revenue over the concession period. Therefore, calculating an appropriate investment return over the concession period becomes a very important aspect that influences success of the PPP project, particularly so as the concessionaire may be tempted to increase their toll/tariff should the revenue fall short of their expected. However, due to the difficulties in estimating the long-term uncertainties and wider-risk profiles at the tendering stage, the government would conduct the traditional net present value and payback period analyses to determine the concession period. In this paper, a simulation model which aims to assist the public partner to determine an optimal concession period is proposed. A hypothetical example is worked through to illustrate the concept of the simulation model. The results show that the risks and uncertainties, such as a change in inflation rate, traffic flow and operation cost, could influence the decision on the concession period. With the help of the simulation model, the impact of risk can be taken into account when establishing an ideal concession period. © 2007 Elsevier Ltd and IPMA.
 
dc.description.naturelink_to_subscribed_fulltext
 
dc.identifier.citationInternational Journal Of Project Management, 2007, v. 25 n. 8, p. 791-798 [How to Cite?]
DOI: http://dx.doi.org/10.1016/j.ijproman.2007.05.004
 
dc.identifier.doihttp://dx.doi.org/10.1016/j.ijproman.2007.05.004
 
dc.identifier.epage798
 
dc.identifier.hkuros142793
 
dc.identifier.issn0263-7863
2013 Impact Factor: 1.758
2013 SCImago Journal Rankings: 1.092
 
dc.identifier.issue8
 
dc.identifier.openurl
 
dc.identifier.scopuseid_2-s2.0-36049036883
 
dc.identifier.spage791
 
dc.identifier.urihttp://hdl.handle.net/10722/70872
 
dc.identifier.volume25
 
dc.languageeng
 
dc.publisherPergamon. The Journal's web site is located at http://www.elsevier.com/locate/ijproman
 
dc.publisher.placeUnited Kingdom
 
dc.relation.ispartofInternational Journal of Project Management
 
dc.relation.referencesReferences in Scopus
 
dc.subjectConcession period
 
dc.subjectPublic-private partnership
 
dc.subjectSimulation
 
dc.subjectToll/tariff regime
 
dc.titleA simulation model for optimizing the concession period of public-private partnerships schemes
 
dc.typeArticle
 
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Author Affiliations
  1. The University of Hong Kong
  2. University of Newcastle, Australia