Balancing public and private interests through optimization of concession agreement design for user-pay PPP projects
DOI: https://doi.org/10.3846/jcem.2018.455Abstract
In user-pay public private partnership (PPP) projects, private sectors collect user fees to cover cost and reap revenue. For projects that cannot be self-financed, public sectors usually invest public funds to make them financially feasible. The concession agreement allocates revenues and risks, and lies in the center of balancing public and private interests. However, stakeholders may have contrary opinions regarding the optimization of concession agreement. While private sectors are concerned about earning money, public sectors pay more attention to the efficient use of public funds. To address this challenge, this paper firstly identifies several key concessionary items, including concession period, concession price, capital structure and government subsidy. Then, a multi-objective optimization model is presented using discounted cash flow method, in which key concessionary items act as decision variables and public and private interests are represented by two sub-objectives. Subsequently, the model is solved using non-dominated sorting genetic algorithm-II (NSGA-II). Furthermore, a numerical case based on Beijing No. 4 Metro Line is provided to demonstrate the application of the model. Results show that the proposed model can produce a series of viable combinations of concessionary items that balance public and private interests, which provides practical references for relative decision making activities.
Keywords:
concession agreement, multi-objective, optimization, non-dominated sorting genetic algorithm-II (NSGA-II), user-pay, public-private partnership (PPP)How to Cite
Feng, K., Wang, S., Li, N., Wu, C., & Xiong, W. (2018). Balancing public and private interests through optimization of concession agreement design for user-pay PPP projects. Journal of Civil Engineering and Management, 24(2), 116-129. https://doi.org/10.3846/jcem.2018.455
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Copyright (c) 2018 The Author(s). Published by Vilnius Gediminas Technical University.
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Islam, M. M.; Mohamed, S. A. M.; Blumenstein, M. M. 2006. Towards an optimal financial investment decision in Build-Operate-Transfer projects using genetic algorithms, in Proceedings of Eleventh Joint International Conference on Computing and Decision Making in Civil and Building Engineering, 2006, Montreal, Canada, 14–16.
Iyer, K. C.; Sagheer, M. 2012. Optimization of bid-winning potential and capital structure for build-operate-transfer road projects in India, Journal of Management in Engineering 28(2): 104–113. <a href= "https://doi.org/10.1061/(ASCE)ME.1943-5479.0000071" target="_blank"> https://doi.org/10.1061/(ASCE)ME.1943-5479.0000071</a>
Kakimoto, R.; Seneviratne, P. N. 2000. Financial risk of port infrastructure development, Journal of Waterway Port Coastal & Ocean Engineering 126(6): 281–287. <a href= "https://doi.org/10.1061/(ASCE)0733-950X(2000)126:6(281)" target="_blank"> https://doi.org/10.1061/(ASCE)0733-950X(2000)126:6(281)</a>
Khanzadi, M.; Eshtehardian, E.; Chalekaee, A. 2016. A game theory approach for optimum strategy of the owner and contractor in delayed projects, Journal of Civil Engineering and Management 22(8): 1066–1077. <a href= "https://doi.org/10.3846/13923730.2016.1210222" target="_blank"> https://doi.org/10.3846/13923730.2016.1210222</a>
Li, Z.; Hensher, D. A. 2010. Toll roads in Australia: an overview of characteristics and accuracy of demand forecasts, Transport Reviews 30(5): 541–569. <a href= "https://doi.org/10.1080/01441640903211173" target="_blank"> https://doi.org/10.1080/01441640903211173</a>
Liou, F. M.; Huang, C. P.; Chen, B. 2012. Modeling government subsidies and project risk for financially non-viable build-operate-transfer (BOT) projects, Engineering Management Journal 24(1): 58–64. <a href= "https://doi.org/10.1080/10429247.2012.11431929" target="_blank"> https://doi.org/10.1080/10429247.2012.11431929</a>
Man, Q.; Sun, C.; Fei, Y.; Skitmore, M.; Bai, Y.; Lu, W. 2016. Government motivation-embedded return guarantee for urban infrastructure projects based on real options, Journal of Civil Engineering and Management 22(7): 954–966. <a href= "https://doi.org/10.3846/13923730.2016.1204362" target="_blank"> https://doi.org/10.3846/13923730.2016.1204362</a>
Marco, A. D.; Mangano, G.; Cagliano, A. C.; Grimaldi, S. 2012a. Public financing into build-operate-transfer hospital projects in Italy, Journal of Construction Engineering and Management 138(11): 1294–1302. <a href= "https://doi.org/10.1061/(ASCE)CO.1943-7862.0000545" target="_blank"> https://doi.org/10.1061/(ASCE)CO.1943-7862.0000545</a>
Marco, A. D.; Mangano, G.; Zou, X. Y. 2012b. Factors influencing the equity share of build-operate-transfer projects, Built Environment Project and Asset Management 2(1): 70–85. <a href= "https://doi.org/10.1108/20441241211235062" target="_blank"> https://doi.org/10.1108/20441241211235062</a>
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2018-03-30
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Copyright (c) 2018 The Author(s). Published by Vilnius Gediminas Technical University.
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Feng, K., Wang, S., Li, N., Wu, C., & Xiong, W. (2018). Balancing public and private interests through optimization of concession agreement design for user-pay PPP projects. Journal of Civil Engineering and Management, 24(2), 116-129. https://doi.org/10.3846/jcem.2018.455