Risk Cost Measurement of Value for Money Evaluation Based on Case-Based Reasoning and Ontology: A Case Study of the Urban Rail Transit Public-Private Partnership Projects in China

Abstract

Risk is demonstrated as one of the most crucial drivers of value for money (VFM) in public–private partnerships (PPP), but in previous studies, the risk cost estimation of the quantitative evaluation of VFM was still a dilemma that strongly depended on specialist discretion or had low methodological operability. This paper establishes a prediction model for estimating the risk cost in the phase of VFM evaluation through a combination of case-based reasoning (CBR) and ontology technology. PPP information ontology was established to provide the technical basis of knowledge representation for the CBR cycle. Then, according to whether the information data were quantitative or qualitative, similarity calculation methods were used for the retrieval of similar cases. The conceptual semantic similarity algorithm based on the ontology tree structure was well implemented to compare abstract information. After the most similar cases were extracted, a revision mechanism was followed when there were deviations in the similar cases. Finally, the risk costs of the target case were obtained by weighting the extracted similar cases based on the similarity. An empirical analysis was performed with 18 historical projects from the China Public–Private Partnerships Center. The results showed that the relative errors between the estimated and actual costs of total risk and retained risk were 11.05% and 2.41%, respectively. This indicates that the estimation model could achieve a better risk cost prediction with small errors, which validates the availability of the model. Based on the proposed model, this research establishes an extensible PPP information ontology model. It promotes the integration and interoperability of information knowledge in the PPP domain, which can be further expanded according to the requirements. Coherent accuracy is provided by the whole CBR-based measurement process, which has offered a systematic and objective method for the risk costs measurement of PPP projects.

Value for money (VFM) in private finance initiative (PFI) implementation in Malaysia

“…While mobilising the VFM idea seems to add credibility to the existence of PFI, questions arise on the assumptions behind VFM measures used, such as Public Sector Comparator (Broadbent et al, 2001;Demirag and Khadaroo, 2008;Froud and Shaoul, 2001;Grimsey and Lewis, 2005;Grout, 2000), the choice of an appropriate discount rate (Wynne, 2002) and the quantification of risks (Tallaki and Bracci, 2021;Wang et al, 2022). Furthermore, the subjectivity involved in selecting non-financial measures (Asenova et al, 2010;Ismail et al, 2011;Takim et al, 2009) and the absence of a competitive bidding process (Hall, 1998;Pitt et al, 2006) have added to the complexity of determining VFM.…”

Sustainable Real Estate and Resilient Cities: Management, Assessment and Innovations

“…Reasoning (CBR) and ontology technology. The analysis intends to improve the efficiency of risk cost assessment, by promoting the accuracy and feasibility of the risk cost measurement of VFM evaluation and by proposing several suggestions for risk data accumulation in the process of project management [4].…”