Xu, J W; Jiang, L and Moon, S (2017) Determination of the optimal concession period for BOT contract projects based on a discrete stochastic process model. Journal of Construction Engineering and Management, 143(4): 04016119, ISSN 0733-9364
Abstract
The concession period is one of the most important issues in the contractual arrangement of build-operate-transfer (BOT) projects. When planning a BOT project, the government should aim for a trade-off between the concerned government's satisfaction and the private concessionaire's profit. The objective of this paper is to present a discrete stochastic process model to obtain an optimal concession period considering the trade-off. The process model is developed for a highway project by analyzing the actual traffic data. The net present value (NPV) is calculated for use as a constraint condition that indicates the boundary of risk preference in a utility function. Using a utility function, this paper estimates the duration of concession periods at which the government can both attract investments from private concessionaires and satisfy public opinion. A numerical simulation is applied to demonstrate the applicability of the methodology presented. The result of the simulation shows that the discrete stochastic process model contributes to a better understanding of trade-offs in determining the optimal concession period.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | build-operate-transfer project; concession period; contracting; discrete stochastic process; utility function |
| Index terms: | estimate, duration, build-operate-transfer, highway construction, net present value, numerical simulation, satisfaction, concession period, preference, methodology, profit, concessionaire |
| Subjects: | contract type, modelling and simulation, economic analysis, financial and cost management, project delivery, contractual arrangements, civil engineering, research methods, decision-making and reasoning, contract structure, project controls |
| Topics: | Procurement, Business Strategy, Cost Management, Research Practice, Project Management, Engineering Principles, Time Control |
| Descriptive scope: | 4 PCTA |
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