Options-based negotiation management of PPP-BOT infrastructure projects

Attarzadeh, Meghdad, Chua, David KH, Beer, Michael ORCID: 0000-0002-0611-0345 and Abbott, Ernest LS
(2017) Options-based negotiation management of PPP-BOT infrastructure projects. CONSTRUCTION MANAGEMENT AND ECONOMICS, 35 (11-12). pp. 676-692.

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The success of public–private partnership (PPP)–build–operate–transfer (BOT) projects largely depends on effectively mitigating the impact of a variety of risks and uncertainties, especially those influencing the revenue over time. Revenue instability is one of the main obstacles of PPP form of procurement. Government support, which is established as a clause in the concession agreement, should be carefully designed and well formulated. Options which arise from certain clauses in the contract are more valuable for risky projects. The purpose of this paper’s proposed model is to evaluate early fund generation options and also to calculate equitable bounds for a guaranteed revenue for the project sponsor under uncertainty and risk. The model is specially designed to alleviate the concern of revenue risk. To illustrate its applicability the methodology is then applied to a freeway PPP project and a power plant PPP project in Iran. The results show that the value of these options can indeed be significant and by applying the proposed systematic negotiation mechanism both public and private sectors can take advantage of its flexibility at the negotiation table. The proposed mechanisms can facilitate negotiations on the verge of a break down as well as accelerating ongoing negotiations that have become moribund.

Item Type: Article
Additional Information: peerreview_statement: The publishing and review policy for this title is described in its Aims & Scope. aims_and_scope_url: http://www.tandfonline.com/action/journalInformation?show=aimsScope&journalCode=rcme20
Uncontrolled Keywords: Real options, private finance, public-private partnerships, build-operate-transfer, negotiation
Depositing User: Symplectic Admin
Date Deposited: 13 Jun 2017 07:15
Last Modified: 19 Jan 2023 07:03
DOI: 10.1080/01446193.2017.1325962
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/3007955