Incentive mechanism for inhibiting investors' opportunistic behavior in PPP projects

Liu, Ji-Cai; Gao, Ruiling; Cheah, Charles Y. J.; Luo, Jian

doi:10.1016/j.ijproman.2016.05.013

Cited by 127 publications

(99 citation statements)

References 19 publications

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“…The principal-agent theory is a way to analyze the opportunistic behaviors of the private sector and the incentive behavior of the public sector [61,62]. It addresses the principal relationship to maximize the benefits of stakeholders, which is not in line with the objectives of this study.…”

Section: Multi-objective Programming Modelmentioning

confidence: 97%

Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective

Jing

Jin

2019

Sustainability

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Capital is key to achieve the standardized operation of public–private partnership (PPP) projects. The capital structure of PPP projects stresses the structure of equity and debt funds, which are important for securing life-cycle ample funds and achieving the expected outcomes of projects. By incorporating sustainability into PPP projects, the capital structure not only secures current needs of funds, it also focuses on life-cycle stable operations and achieves economic, social, and environmental benefits. This study first set the equity–debt ratio and equity investment ratio of the private sector as the dependent variables and built a selection model of the capital structure of PPP projects from a sustainability perspective using the benefit, cost, and project conditions as core factors based on multi-objective programming and a discounted cash-flow model. Then, the qualitative analysis could be achieved according to the analysis of critical factors that had not been calculated. Afterwards, a selection process which combined the multi-objective programming model with qualitative analysis was proposed to achieve a comprehensive selection of the capital structure of PPP projects from the sustainability perspective. Finally, the process was applied to a real project to verify its rationality and usability. This study not only enriches the theoretical research of PPP projects and provides a new idea on which to build the capital structure selection model, it also proposes a selection process that can provide scientific references for the selection and optimization of the capital structure of PPP projects in practice.

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Section: Multi-objective Programming Modelmentioning

confidence: 97%

Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective

Jing

Jin

2019

Sustainability

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“…While both project contractor and client may partner to deliver a project outcome, the collaboration may not be an equal one. One side may be more powerful than the other; in terms of knowledge, skills, influence or finances [40]. Moreover, they may retain competing interests, and may even take on parasitic roles-syphoning off benefits from the project, while allowing the project to survive healthily enough to ensure the on-going flow of those benefits.…”

Section: Application Of the Principal Agent Theory (Pat)mentioning

confidence: 99%

A Principal-Agent Theory Perspective on PPP Risk Allocation

et al. 2019

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This study proposes a framework for the allocation of risk in public private partnerships (PPP) projects. Its contribution lies in the recognition and incorporation of risks introduced by project stakeholders, and as articulated by the principal-agent theory (PAT). The framework assesses risks and routes these risks to those parties best equipped to mitigate their impact on the project. This allocation of risk is facilitated by a thirteen-step process. The practical benefit of this study lies in outlining a clear, systematic method for allocating risk efficiently to both the government and private enterprise parties of the project. In so doing, risk mitigation can be expected to improve project performance, optimize stakeholder goals, and enhance sustainability objectives, including improved operational life-cycle efficiency and elevated social and community benefits.

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“…Furthermore, to find out the crucial factors influencing the decision result, we first re-analyzed the original data using the same MARA frame without consideration of sustainability. Following the main process of determining a winner in MARAs, we had a new ranking order (A 3 A 4 A 2 A 1 ) using the expert's bid evaluation information and the interdependent information among bid evaluation attributes only in both technical and business dimensions. It was clear that the ranking was changed from…”

Section: An Illustrative Casementioning

confidence: 99%

“…The public-private partnership (PPP) is an innovative procurement model in which the projects are executed with a contractual relationship between public and private sectors to provide services or assets [1,2]. Also known as a cooperation between the public sectors, especially the governments, and private enterprises, which is a project financing measure for building public services such as civil infrastructures [3,4]. In essence, PPP projects are typically characterized as a contractual relationship among the stakeholders, which clarifies rights, responsibilities, and benefits allocations of all participants, as well as the division of the surplus from the project [5].…”

Section: Introductionmentioning

confidence: 99%

Sustainable Winner Determination for Public-Private Partnership Infrastructure Projects in Multi-Attribute Reverse Auctions

Gao

2018

Sustainability

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Selection of a sustainable private partner (contractor) is significant to ensure the success of public-private partnership (PPP) projects. In recent years, multi-attribute reverse auctions (MARAs) are widely used in public procurement to select the desirable contractor. However, the MARA mechanism is neglected in the existing studies. The purpose of this paper is to present a MARA framework for selecting a sustainable contractor in PPP infrastructure projects, in which the MARA rules and an integrated winner determination method are involved. In particular, the sustainability considerations are incorporated in the MARA rules, which can make the potential contractors have incentives to improve their sustainable performance. Within the MARA rules, based on the trapezoidal fuzzy linguistic representation model and the classical two-additive Choquet (TAC) integral operator, a winner determination method is developed to evaluate and rank potential contractors, in which both the bid evaluation and the interrelationships among bid evaluation attributes are considered. Finally, the potential of the proposed method is shown through an illustrative case of a PPP project of a subway construction in China. The MARA framework investigated helps governments make reliable decisions in sustainable procurement and thereby facilitates successful project delivery.Sustainability 2018, 10, 4129 2 of 20 guarantees to attract social capital and to prevent competition between similar projects [12]. When the projects are going well, the vast majority of investors have the tendency to carry out opportunism in their pursuit of monopoly profits by increasing prices, such as charging more fees in sewage treatment or highway projects, which is an overall detrimental to public interest [13]. As another example, there is less compensation for multiple government-sponsored infrastructure projects with the aim to serve the public rather than profit such as with a subway in Singapore [13], which results in investors facing the risk of high inputs with low returns. Consequently, investors may have no incentive or confidence to participate in the projects. Such PPP infrastructure projects have the potential risk of failure incurred by private investors Selecting the right partner is considered as a solution to ensure the success of the PPP projects from the origin [14,15]. It is essential for public sector, hereinafter referred to as the government, to evaluate the potential private sector, hereinafter referred to as the contractor, in PPP infrastructure projects. In government procurement, infrastructure projects cannot be allocated solely to the cheapest contractor.The key parameters considered include, but are not limited to, the technical attributes, such as the quality of the materials and the workmanship; the business attributes, such as the creditworthiness and the experience of the potential contractors; and the sustainability attributes, such as the design and impact of the project on local communities and the environment, solid waste manag...

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Incentive mechanism for inhibiting investors' opportunistic behavior in PPP projects

Cited by 127 publications

References 19 publications

Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective

Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective

A Principal-Agent Theory Perspective on PPP Risk Allocation

Sustainable Winner Determination for Public-Private Partnership Infrastructure Projects in Multi-Attribute Reverse Auctions

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