Risk evaluation in public-private partnership projects in the transport sector in Vietnam.

Nguyen, Nhat
Risk evaluation in public-private partnership projects in the transport sector in Vietnam. PhD thesis, University of Liverpool.

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Many Public-Private Partnership Projects (PPPs) have failed because of risks occurring during operation and earlier studies have demonstrated a need for risk assessment and allocation methods for PPPs. Although researchers have been working in this area for years, the amount of empirical work is limited, especially when applied to developing countries, particularly to Vietnamese PPPs. This research attempts to design a framework using quantitative methods. Besides, qualitative methods are also used as supportive methods. The framework is proposed to identify risks, allocate risks, evaluate the project’s riskiness and return, and optimize concession parameters. The proposed framework is based on two fundamental theories which are Analytical Hierarchy Process (AHP) and Risk Adjusted Decoupled Net Present Value (Risk Adjusted DNPV). In AHP, the subjective evaluations are converted into numerical values and analysed to rank each alternative on a numerical scale. A pairwise comparison is then applied to the alternatives regarding specific criteria. Mathematical analysis is then used to create a comprehensive comparison of alternatives. Therefore, in this framework, first, critical risks are identified and evaluated based on their probability of occurrence and the degree of impact. After that, AHP is used to evaluate alternatives’ (projects) riskiness. In addition, AHP is used to allocate critical identified risks with regards to the ability criteria of each party. Risk adjusted DNPV in this framework is used to evaluate returns of the projects and to optimize the concession parameters. Currently, Net Present Value method (NPV) is being widely used to evaluate projects’ returns because of its simplicity to investors. In the NPV method, risks are accounted for by adjusting a “risk-free rate” to form a risk-adjusted discount rate (RADR), and then the RADR is used to devalue cash flow with time. However, it has been argued that time and risk are different variables, and they should be separated in evaluating projects, otherwise evaluation errors can be generated, especially for projects which require long-term investment. PPPs typically demand long-term investments. Consequently, PPPs should be an environment in which the limitations of NPV are exposed. To minimize the limitations of NPV, Risk Adjusted Decoupled Net Present Value method (Risk Adjusted DNVP) has been developed as a new tool to assess projects. In Risk Adjusted DNVP, risks are decoupled from the time value, and they are quantified and treated as a cost to the project. Nevertheless, Risk Adjusted DNVP has not been applied to the area of PPPs. Therefore, this research attempts to use DNPV to evaluate projects’ returns, and to optimize concession parameters. This research also clarifies how the public and private sector can use the proposed framework. Case studies from five Vietnamese PPPs will be shown in the thesis to demonstrate the proposed framework.

Item Type: Thesis (PhD)
Additional Information: Date: 2015-09 (completed)
Subjects: ?? TA ??
Depositing User: Symplectic Admin
Date Deposited: 22 Jan 2016 11:53
Last Modified: 17 Dec 2022 00:48
DOI: 10.17638/02037959
URI: https://livrepository.liverpool.ac.uk/id/eprint/2037959