Guo, Y; Liu, J; Chen, C; Luo, X and Martek, I (2024) PPP project price mode typologies: A China-based comparative case study. Engineering, Construction and Architectural Management, 31(5), pp. 2034-2052. ISSN 0969-9988
Abstract
Purpose: Public–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/approach: This 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. Findings: Eight 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/value: By 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.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | China; comparative case study; concessionary items; price mode; public-private partnerships |
| Index terms: | case study, project risk management, contracting party, validity, project outcome, partnership, streamlining, risk allocation, opportunistic behaviour, markets, infrastructure project, taxonomy, cash flow, local government, risk impact, profit, content analysis, vulnerability, configuration, interest rate, decision-making, methodology, financing, value-for-money, China |
| Subjects: | decision analysis, partnership management, systems engineering, environmental hazards, infrastructure and transport systems, administrative law, research methods, management, financial management, financial risk, evaluation, Geography, economic analysis, data analysis and analytics, project completion, business, evaluation and assessment methods, data collection methods, practitioner |
| Topics: | Organizational Design, Value Management, Legal Issues, Sustainability, Stakeholder Management, Roles and Professions, Risk Management, Engineering Principles, Project Management, Geographical Context, Research Practice, Cost Management, Business Strategy |
| Descriptive scope: | 5 PCTEA |
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