Girmscheid, G (2009) NPV model for evaluating the economic efficiency of municipal street maintenance by private providers. Journal of Construction Engineering and Management, 135(8), pp. 701-709. ISSN 0733-9364
Abstract
Municipal street maintenance can be either performed by a local authority or by a private provider through public-private partnership (PPP) or outsourcing. The choice of either alternative requires proof of economic efficiency at the planning phase of these services. The economic model presented in this paper outlines the basis for the comprehensive probabilistic comparison of the economic efficiency of two approaches: (1) self-performance (public sector delivery) and (2) performance by a private provider (PPP delivery). Based on clear system boundaries, the net present values of the two alternatives are addressed, including possible risk costs. The results of the efficiency comparison are then evaluated using the net present value difference axiom and the net present value efficiency axiom. To ensure that the short-term effects of privatizing or outsourcing street maintenance services are not overrated and the long-term economic efficiency is maintained, the analysis must cover at least two long-term periods.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | economic factors; maintenance; partnership; private sector; streets |
| Index terms: | net present value, public sector, partnership, private sector, economic model, outsourcing, efficiency, economic factor, local authority, boundaries |
| Subjects: | sociology, partnership management, administrative law, industry analysis, performance management, economic concepts, modelling and simulation, economic analysis, property law, business |
| Topics: | Stakeholder Management, Procurement, Business Strategy, Research Practice, Legal Issues, Quality Management |
| Descriptive scope: | 3 PCA |
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