Incorporating Social Benefits in Concession Price Negotiation for Public–Private Partnership Contracts

Jin, Hongyu; Liu, Chunlu

doi:10.1061/(asce)la.1943-4170.0000582

Cited by 3 publications

(3 citation statements)

References 31 publications

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“…PPP projects exhibit both positive and negative externalities, and private capital often leverages economies of scale to enhance positive externalities, thereby generating a favorable impact on the regional economy and society (Meduri Surya & Annamalai Thillai, 2013). However, little research has been conducted on internalizing the value of positive externalities to evaluate APO projects, despite the government's recognition of their significance when initiating such projects (Jin & Liu, 2023). In the fields of environmental eco- nomics and real estate economics, externalities are typically measured using methods like the CVM and bid-rent approaches, respectively (Adhikari, 2016;Oerlemans et al, 2016).…”

Section: Discussionmentioning

confidence: 99%

Determining Concessionary Items for “Availability Payment Only” PPP Projects: A Holistic Framework Integrating Value-for-Money and Social Values

Guo,

Chen,

Luo

et al. 2024

Journal of Civil Engineering and Management

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Public-private partnerships (PPPs) have been widely applied in infrastructure development around the world. However, reasonable concessionary items are critical to compromise interest conflicts between government agencies and sponsors to ensure project success. A broad literature review centering on PPP transaction structuring revealed two significant research gaps: (1) a lack of attention to the ‘availability payment only’ (APO) funding method and (2) negligence of the public side’s perspective in determining concessionary items. The research objective was to develop a methodological framework for determining concessionary items in APO PPP projects while considering the interests of the public side. This study proposed a value-for-money (VFM) and social values integrated framework which accommodates discounted cash flow (DCF) analysis, bargaining game modeling, and multi-objectives decision-making (MODM). This framework enables a decision-making process based on both an indifferent feasible interval of concessionary items under a discount rate agreed upon by both parties and an optimal set of concessionary items. Additionally, results of a sensitivity analysis indicated that project construction profit can significantly affect feasible and optimal concession items, and the optimal concession period is less sensitive to changes in risk allocation. The application of proposed model indicated that this paper successfully provides a methodology for determining a feasible interval and an optimal concession items group tailored to APO PPP projects. This study paves the way towards a platform for the public and private partners to jointly and quickly come up with sound PPP concessional items in light of the win-win principle, particularly under the APO funding mechanism.

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Section: Discussionmentioning

confidence: 99%

Determining Concessionary Items for “Availability Payment Only” PPP Projects: A Holistic Framework Integrating Value-for-Money and Social Values

Guo,

Chen,

Luo

et al. 2024

Journal of Civil Engineering and Management

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“…However, much remains unknown in respect of PPP project price. Certainly, concessionary items, such as concession price and the concession period, have been investigated (Jin and Liu, 2023). Nonetheless, other commonly used items have not been reported in research publications.…”

Section: Introductionmentioning

confidence: 99%

PPP project price mode typologies: a China-based comparative case study

Guo,

Liu,

Chen

et al. 2024

ECAM

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PurposePublic–Private Partnerships (PPPs) are crucial to the procurement of global infrastructure projects. Moreover, a price mode based on a cluster of core concessionary items is key to the delivery of value-for-money and successful project outcomes. However, existing research has yet to fully identify PPP concessionary items, nor yet described the range of practical price modes. This study provides taxonomy of core concessionary items impacting PPP projects, systematically classifies price modes, and assesses the applicability and risk impacts of those price modes on PPP projects.Design/methodology/approachThis study adopts a comparative case study method in analyzing core concessionary items and alternative price modes. China is taken as the context, as it is one of the world’s largest PPP markets. In ensuring research validity and reliability, diverse data sources are utilized, with a graphic content analysis tool developed to capture the structure of price modes.FindingsEight PPP price modes are identified. These are: (1) UP (Unit Price) mode, (2) ALS (Annual Lump Sum) mode, (3) IRR (Internal Rate of Return) mode, (4) RP (Return for Investing Capital (RIC) - Profit Rate of O&M (PROM)) mode, (5) RFP (RIC - Financing Interest Rate (FR) - PROM) mode, (6) RFPL (RIC - FR - PROM - Lower Limit of User Charge (LLoUC)) mode, (7) RFL (RIC - FR - Lump Sum/Fixed Unit Price O&M Contract (LSOM/FUP)) mode, and (8) RFLL (RIC - FR - LSOM/FUP - LLoUC) mode. Other main findings are as follows: (1) Five risk allocation configurations can be achieved via these price modes. Yet while different price modes enable the allocation of specific risks, these do not always align with contracting parties’ original intentions. (2) IRR and RP modes may be less applicable in general because of their vulnerability in allocating critical risks and capacity for spurring opportunistic behavior.Originality/valueBy depicting the paths by which concessionary items in price modes affect cash flow, a systematic analysis of price modes was conducted exposing structural characteristics, along with risk allocation choice implications. The study is unique in: (1) Providing a systematic classification of PPP price modes used in PPP projects, (2) Presenting a comprehensive identification and streamlining of concessionary items in PPP practice, and (3) Analyzing the risk effects of different price modes. Together, these outcomes offer a hitherto unavailable perspective on PPP project risk management. The value of the study lies in the following: (1) Existing studies employ diverse concessionary items, but their applicability varies. This study offers an overarching framework facilitating decision-making in selecting appropriate PPP price modes and in determining concessionary items. (2) This study adds to the understanding of PPP price modes in significant ways that will aid local governments and potential sponsors in crafting and administrating more workable contract designs.

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“…Shi et al [24] provided incentives for SPVs to adopt innovative investments to improve project performance through risk sharing. Unlike traditional PPP projects, most studies argue that social benefits should be reflected in the value of green PPP projects [25]. For example, Liu et al [26] suggest that VFM based on social benefits can reveal the true value creation capacity of green PPP projects.…”

Section: Introductionmentioning

confidence: 99%

Research on the Value Improvement Model of Private Parties as “Investor–Builder” Dual-Role Entity in Major River Green Public–Private Partnership Projects

Zhang,

Feng,

Zhang

et al. 2023

Buildings

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In Public–Private Partnership (PPP) projects, the structure of the Special Purpose Vehicle (SPV) significantly impacts the value enhancement of projects. This study conducted a quantitative analysis of value enhancement in green PPP projects under single- and Dual-Role entity models and examined existing SPV private party compositions. A quantitative model was developed to enhance the value in green PPP projects through a Dual-Role “investor–builder” entity approach, comparing it with the single-role entity model. The findings indicate that in the Dual-Role entity mode, the construction party demonstrates a greater willingness to effort, resulting in shorter construction timelines and improved economic benefits for the project company. The preferred equity range for private parties escalates with the total project investment and the extent of “political support”. Nevertheless, a disproportionately high government stake in the equity is detrimental to the value enhancement in PPPs, and excessive government regulation and control should be avoided. This quantitative model serves as a decision-making criterion for selecting the SPV mode and provides an alternative approach for evaluating PPP project performance.

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Incorporating Social Benefits in Concession Price Negotiation for Public–Private Partnership Contracts

Cited by 3 publications

References 31 publications

Determining Concessionary Items for “Availability Payment Only” PPP Projects: A Holistic Framework Integrating Value-for-Money and Social Values

Determining Concessionary Items for “Availability Payment Only” PPP Projects: A Holistic Framework Integrating Value-for-Money and Social Values

PPP project price mode typologies: a China-based comparative case study

Research on the Value Improvement Model of Private Parties as “Investor–Builder” Dual-Role Entity in Major River Green Public–Private Partnership Projects

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