Programming, optimal pricing and partnership contract for infrastructures in PPPs

The development of various forms of public-private partnerships for the financing, building and operating of public infrastructure has not fundamentally altered the economic calculations involved. This chapter examines to what extent it is necessary, however, to change the way that government uses socio-economic and financial evaluations, whether to optimise investment programming or pricing. Ensuring a coherent match between these two types of optimisation can provide a principle for determining the optimal programming price.We begin by showing that when projects are financed by both users (toll revenues) and taxpayers (subsidies), it is socially beneficial to plan these investments on the basis of the net present value (NPV) provided by each unit of public money invested. This NPV/subsidy ratio must obviously be higher than the public-funding scarcity coefficient or else the investment would destroy more wealth than it would produce.One of the ways of improving this ratio is also to optimise the toll level, since increasing it can lower the subsidy but has an adverse impact on the user surplus, it is essential to set the optimal toll.In the case of an approved project considered in isolation, we show that the optimal toll depends upon the public-funding scarcity coefficient. If there is no scarcity, the optimal toll is zero. As public-funding becomes scarcer, the optimal toll draws closer to the toll that optimises revenue.In the case of a programme of several projects subject to budget constraint, we show that the optimal toll no longer depends upon the public-funding scarcity coefficient and that there are several scenarios depending on the relative values of the maximum revenue and the total cost of the project:

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when, whatever the toll, revenue can no longer cover over half of the cost, it is socially beneficial to choose not to levy any toll;

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when there is a toll that covers the total cost, the operator may be left free to set it at the level he sees fit, with the issue of how the profits are to be shared between the franchisee and the franchisor being settled separately;

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when the maximum revenue of the project falls between half and all of the total cost, the value of the toll that maximises the welfare function is lower than the revenue-maximising toll and must therefore be set for the private operator by government.

Thus, the partnership contract must be given a different content in these three cases of optimal pricing.

Preamble

Most of the theoretical studies devoted to optimising public investment programming and infrastructure pricing have, since the work of Jules Dupuit (1844), focused on the salient issues of the transport sector, even though this work was relevant to all sorts of public infrastructure. The analysis presented in this paper deals with transport economics, but in line with this tradition, is also applicable to any field in which public-funding is combined with commercial revenue. For example, the question of determining how the financing of an opera should be shared between taxpayers and opera-goers raises the same type of issues as the optimal combination of tolls and subsidies for financing a motorway project. This report will be focused on these issues. We shall see that certain precautions are called for in investment programming together with some new thinking on pricing principles.     

The development of the TIGRIS XL model: A bottom-up approach to transport, land-use and the economy

The project appraisal method in the Netherlands distinguishes direct effects, indirect distribution effects and indirect generative effects. Transport models are generally available for calculating the benefits of transport projects to travellers as part of the direct effects. The TIGRIS XL model, a Land-Use and Transport Interaction model, adds indirect distribution effects for the housing and labour market, by modelling changes in the spatial distribution of jobs and residents. This paper describes the current TIGRIS XL model and how it can be applied in the evaluation of transport projects. It refers to work done with the TIGRIS XL model to improve the calculation of the direct benefits by applying the so-called ‘logsum’ method. Finally it discusses ideas on how to extend the TIGRIS XL model to address indirect generative effects as well.The current TIGRIS XL model, its integration with the National Model System (the standard tool for the Dutch government to analyse the effects on passenger transport) and basic design principles are the starting point of such an exploration. These design principles include:

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an emphasis on detail, both spatial as well as in socio-economic segments, to account for differences in the availability of choice alternatives and in choice behaviour, and to provide impacts by region and socio-economic group;

•

the requirement that the relationships used rest on an empirical foundation.

The post-processing methods proposed on this paper for the calculation of the direct benefits and indirect generative effects are consistent with these design principles. To calculate the indirect generative effects, a post-processing module is proposed which transforms changes in travel times and land-use into agglomeration effects. These agglomeration effects combine several of the generative effects, like scale economies, an increasing variety of products, labour market matches and knowledge spill-over. The effects of changes in the agglomeration indicator on productivity can be estimated with existing data sources, as was demonstrated in the UK (Graham, 2005).     

Study on the preciseness of hot spot stress of web-stiffened cruciform welded joints derived from shell finite element analyses

A new simple and accurate shell FE-based structural Hot Spot Stress (HSS) determination method for web-stiffened cruciform joints has been proposed. Local stress of welded joints in full-scale bulk carrier (BC)’s lower stool models subject to bending and pressure loadings are examined. HSSs determined by the proposed method are compared with those derived by Lotsberg’s method and the conventional 0.5t-1.5t extrapolation. As results, following are found:

(1)

The local stress of full-scale BC lower stool models with various stool angle and plate thickness can be calculated accurately solely from shell FE results by means of the proposed method.

(2)

HSSs of welded joints in full-scale BC lower stool models subject to bending and pressure loadings derived by the proposed method show good agreement with the target HSSs determined from fine solid models. This demonstrates the validity of the proposed method for actual ship structures under the real load.

(3)

The excessive safety allowance of HSS determined by the conventional 0.5t-1.5t extrapolation can be reduced substantially by adopting Lotsberg’s method or our proposal. The proposed HSS determination method gives more accurate estimates compared to Lotsberg’s method under the conditions chosen, and the application range of the proposed method is equal to or wider than Lotsberg’s method.

     

The regulatory function in public-private partnerships for the provision of transport infrastructure

A wide range of contractual arrangements are increasingly being used by the public sector to materialise the delegation of transport infrastructure provision tasks to the private sector, over long periods of time. This paper addresses the issue of transport infrastructure regulation in the specific context of public-private settings. Starting by the discussion on the concept of Public-Private Partnership (PPP) it is stressed that, despite the different meanings that can be found in the literature, it is possible to define a PPP by using a core group of characteristics, such as the bundling of services and the transference of a relevant part of the risks to the private sector on a long term basis. Regarding the action of the regulator, we look at three dimensions of efficiency that are expected to be pursued at the strategic level of regulatory action. However, it is acknowledged that the regulatory function is in practice rather complex since it requires balancing a multiplicity of other objectives or goals, which may vary according to specific economic conditions. In the domain of pricing, the review carried out suggests that since “first best” assumptions are not met in the “real world” it hardly seems possible that the short run marginal cost pricing “canon” could be directly used to shape pricing policies. Consequently, when considering the application of the standard neoclassical marginal cost pricing approach it is pertinent to ask whether the second best solutions can lead to efficient outcomes that might be accepted by the stakeholders. Bundling construction and maintenance tasks into a single long term contract, which is a typical characteristic of “standard” PPPs, could theoretically bring cost benefits since it allows for the possible internalization of any positive externalities that may be generated during the whole project life cycle. The economic rationale for the bundling of construction/maintenance with financing services is that it enhances the likelihood of submission of realistic bids at the procurement stage. In addition, the chances of the contractor sticking to the agreed contractual terms, after contract award, are potentially increased given the higher exposure to financial risk.     

The cost of second best pricing and the value of risk premium

Private provision of public infrastructure (PPP) is meant to give incentives to increased efficiency in construction as well in operation and maintenance of the infrastructure e.g. within the transport sector. Efficiency is not only (private) economic efficiency, but also social efficiency e.g. social marginal cost pricing of use of the infrastructure.Is it possible to design contracts concerning payment mechanisms and financial instruments for transport infrastructure that will stimulate social efficiency and optimal allocation of risks between parties? The paper discusses whether different targets can be met and whether compromises may lead to acceptable second best solutions.PPP implies an opportunity to let the user-payment give desired incentives in the form of Social Marginal Cost Pricing (SMCP). A PPP project is a set of contracts and agreements between several parties, including the Government, the private contractor, subcontractors, banks and infrastructure users. These contracts should be designed to give the right incentives to the parties to achieve optimal risk allocation and utilising of resources.Long contract-periods are a common feature of PPPs. The paper examines the way that financial solutions should be designed to achieve the goals for the PPP-projects concerning economic and social efficiency. The expected size and variation of the income stream from the project will influence the loan conditions offered by banks concerning interest rates, guarantees and repayment and also the ability to attract investors. The balance between equity and loans again influences the conditions of the loans. An additional problem is asymmetric information between parties. The private contractor usually knows more about the task than the Government (hidden knowledge), and the Government cannot have full knowledge of the efforts of the contractor (hidden actions).     

Part II: Policy instruments for sustainable road transport

Without questioning the fact that to achieve efficiency emitters should pay for the true costs of their actions (a core principle of economic policies such as pollution taxes), we find sufficient evidence in the literature to demonstrate that many other policy instruments can be used in combination with taxes and permits to ensure that the transport needs of the present generation can be met without compromising the ability of future generations to meet any needs of their own.The policies and policy aspects considered in this paper broadly fall into three categories: physical policies, soft policies, and knowledge policies. All three aim to bring about changes in consumers’ and firms’ behaviour, but in different ways. The first category includes policies with a physical infrastructure element: public transport, land use, walking and cycling, road construction, and freight transport. We also consider the particular challenges for mobility in developing countries, and how these may be addressed. Soft policies, on the other hand, are non-tangible aiming to bring about behavioural change by informing actors about the consequences of their transport choices, and potentially persuading them to change their behaviour. These measures include car sharing and car pooling, teleworking and teleshopping, eco-driving, as well as general information and advertising campaigns. Finally, knowledge policies emphasise the important role of investment in research and development for a sustainable model of mobility for the future.The main findings can be summarised as follows.

Physical policies

An increase in the use of public transport, combined with a decrease in the use of private cars, can reduce traffic congestion and, more importantly, carbon dioxide (CO₂) emissions, as public transport generally causes lower CO₂ emissions per passenger kilometre than private cars. Public transport fares are subsidised in most places, which can be justified by economies of scale and by the fact that public transport can reduce total road transport externalities. London, Singapore, Portland and Curitiba are all examples of good practice at government level, having achieved reliable, frequent and integrated public transport.Policies to increase public transport use must be part of an integrated policy. Integrated policy refers to integration across different modes of transport, different government objectives (such as the economy, health and the environment), considering the needs of different social groups, and coordinating action between the relevant government institutions. There is evidence that a lack of coordination can jeopardise the achievement of policy objectives.A sustainable model for transport policy also requires integration with land-use policies. These may be somewhat limited within the bounds of existing cities, but as cities grow and new cities are built, urban planners must put more emphasis on land use for sustainable transport in order to reduce congestion and CO₂ emissions. Sustainable land-use policy can direct urban development towards a form that allows public transport as well as walking and cycling to be at the core of urban mobility.Walking and cycling, which improve general health and produce no tailpipe emissions, constitute an excellent alternative to motorised transport on short-distance trips within towns and cities. The policies which can incentivise walking and cycling include crime reduction to make streets safer, well-maintained and clean pavements, attractive street furniture, safe crossings with shorter waiting times, dedicated cycle paths, showers in offices, and lower speed limits, to name but a few.Road construction and expansion used to be seen as one of the most promising ways to reduce traffic congestion. However, in the mid-1990s, the issue was reassessed and it was found that building and expanding roads, increased, rather than decreased, congestion, and ultimately induced higher levels of travel demand. The reason for this is that the extra capacity reduces the general cost of travelling and the less expensive the travel, the more it will be demanded. Regarding freight modal shift, road transport is much more polluting than rail per tonne-km of goods transported and therefore a shift towards greater use of rail in freight transport is desirable. Inadequate infrastructure is the main obstacle preventing this modal shift taking place.Developing countries face great mobility challenges: rural areas are often extremely poorly connected to transport infrastructure, such that, in contrast to the situation in developed countries, the benefits of road construction can strongly outweigh the total costs (including environmental ones). The main challenge, however, is to develop a solution to the problems arising from the combination of urbanisation and motorisation. Integration of transport and land-use policy will be key to rising to this challenge.

Soft policies

Car sharing and car clubs can also potentially reduce CO₂ emissions, although the aggregate reduction in congestion and emissions has not been measured with an adequate degree of precision in the literature. Teleworking and teleshopping can potentially reduce congestion and also CO₂ emissions. However, the evidence for this reduction is rather mixed, as it is unclear whether these measures lead to overall reductions in road transport.Eco-driving campaigns aim to inform and educate drivers in order to induce them to drive in a fuel-efficient and thus environmentally friendly way. There seems to be some consensus in the literature that eco-driving could lead to reductions in CO₂ emissions of around 10 per cent.Information and education policies have often been advocated as instruments which may affect behavioural change. We find in this paper that these types of measures are necessary, but not sufficient for behavioural change. Advertising and marketing may go a long way in changing peoples’ behaviour. In California, for example, Kahn (2007) finds the “Prius” effect: the Toyota Prius is preferred by consumers relative to other similarly green vehicles, probably due to extensive marketing and celebrity endorsements. Family life changes are also found to trigger changes in behaviour ( [Goodwin, 1989] and [106]). People whose lives are being changed by some important development (birth of a child, retirement, etc) tend to respond more to changes in the relative attractiveness of different transport modes. Advertising campaigns promoting a modal shift towards public transport, for instance, may thus be more successful if targeted at people in the process of important life transitions.

Knowledge policies

Research and Development is crucial for developing sustainable and low-carbon transport for the future, and it is essential that governments provide incentives to undertake R&D, so that new low-carbon technologies in the transport sector can be demonstrated and applied at a large scale.Finally, we consider the issue of policy combination and integration. There is evidence that the combination and integration of policies can lead to positive side-effects and synergies. Policy integration is crucial in order to rise to the challenges we face in moving towards a sustainable mobility model. We conclude that classical economic policies may be successfully combined with a number of policy measures discussed in this paper in order to achieve sustainability in transport.     

Does the political and economic context influence the success of a transport project? An analysis of transport public-private partnerships

The construction and provision of infrastructure services such as transport nowadays is often based on a partnership between three main actors: public sector, private sector and multilateral lenders, under a framework of Public-Private Partnerships (PPPs). This type of partnership has been employed in a wide range of projects in the transport sector and in various contexts in developing and developed countries. Given this observation, the objective of this paper is to examine how countries’ economic and political characteristics contribute to the success of PPPs in transport investments. Special focus in the analysis is given to how the perception of corruption and democratic accountability may influence the success of a PPP project in different transport sectors. We examine a database with 856 transport PPP projects using a generalized linear model in the form of a logit model in order to evaluate the transport database covering data from 72 countries, classified in six regions. The study highlights the importance of national experience. Not only does national macroeconomic experience appear to have a relevant role, but so also does its past experience (either positive or negative) of transport PPP projects. An interesting finding from the analysis is the importance of the rest of the world’s perception of a country’s level of corruption and democratic accountability for the final outcome of a PPP project.     

The distribution of the benefits of waterfront reform

In this paper we introduce, for the first time, a methodology from the most recent literature of finance to reveal the duration of shipping cycles and then show the benefit of the use of this information to make more successful shipping loans. This is so as banks are willing to finance, during boom periods, shipping loans for new buildings but by this way ‘create’ oversupply and thus depress the freight market by their own actions. The information about cycles, especially their forecasting, is mostly important as shipping loans are based on project financing/cash flow financing, which means that ship revenue is of utmost importance. The Rescaled Range Analysis is applied here to 379 monthly freight trips—made stationary—between 1971 and 2002 (July), due to Hurst 1 Hurst, HE. 1950. Long-term storage capacity of reservoirs. April1950. pp.770–808. American Society of Civil Engineers. Paper No. 2447 [Google Scholar] and elaborated and popularized by Mandelbrot 2 Mandelbrot, BB. 1975. Stochastic models for the earth's relief, the shape and the fractal dimensions of the coastlines, and the number-area rule for islands. Proceedings of the National Academy of Sciences. 1975, USA 72. pp.3825–3828. [Crossref] , [Google Scholar]. The most important effect, however, is that shipping freight series exhibit non-normality and long-run dependence rendering the use of random walk models such as GARCH (Generalized Autoregressive Conditional Heteroscedasticity) problematic. Thus an adequate literature review is carried out with criticism against the models used. The cycles have been calculated as equal to 4.5 years and 2.25 years. This is almost compatible with the most recent paper of Stopford 3 Stopford, M. 21 September 2001. “Forecasting the dry bulk, tanker and container markets”. In Maritime Cyprus 21 September,  [Google Scholar]. The Hurst exponent was found equal to 0.93, alternating over the periods examined (0.65, 0.73, 0.62, 0.59 and 0.55) and indicating long-term persistence but seriously away from normal/random walk domain. Most studies have said the same using the Jarque--Bera test for normality but provided no alternative.     

Influential factors in the design of port infrastructure tariffs

ABSTRACT

The main aim of this article is to examine the factors influential to the practical process of port infrastructure tariff design. The analysis is based on the survey data of 67 seaports representing the Australasian, East Asian, European, North American and South American regions. Exploratory factor analysis (EFA) was first carried out to identify the factors influential to the selection of the infrastructure tariff design model. Subsequently, confirmatory factor analysis (CFA) was used to confirm the relationship between the variables. The findings showed that demand, knowledge about pricing theories, the dynamics of port and shipping sectors (including competition and ship size), pricing objectives and port cost consideration are influential factors in infrastructure tariff design. Most ports use a mix of pricing approaches including price discrimination, cost-based pricing and market-based pricing. Ports are aware of the basic pricing approaches but have limited knowledge of their application. Based on the results of analysis, policy implications for port management in designing port infrastructure tariffs, limitations and recommendations for future research are discussed.     

Groups in DEA based cross-evaluation: An application to Asian container ports

In container port performance evaluation, a group of ports in one country is always significantly different from a group of ports in another country. This is noticed as the heterogeneity of port performance. It is therefore necessary to further investigate the impact of the different groups on efficiency evaluation of ports. The cross-evaluation method is a DEA extension tool to identify best performing DMUs and to rank DMUs using cross efficiency scores linked to all DMUs. A factor that possibly reduces the usefulness of the cross efficiency evaluation method is that cross efficiency scores may not be unique due to the presence of alternative optima. Doyle and Green 1 Doyle, J and Green, R. 1994. Efficiency and cross efficiency in DEA: Derivations, meanings and uses. Journal of the Operational Research Society, 45: 567–578. [Taylor & Francis Online], [Web of Science ®] , [Google Scholar] propose the use of secondary goals to deal with the non-uniqueness issue by the aggressive/benevolent model formulations. This article extends the model of Doyle and Green by considering the groups of DMUs in the determination of final cross efficiency. A new approach based on cross efficiency evaluation method is developed and applied to efficiency analysis of 28 container ports from 12 countries in Asia. A comparative study between traditional and newly proposed methods is conducted.     

Modelling the investment decision of the entrepreneur in the tanker sector: choosing between a second-hand vessel and a newly built one

It is often the case that the investor in the shipping sector faces the dilemma of investing in a second-hand vessel or building a new one. This happens because an active second-hand market for almost all kinds of vessels exists. We argue that one of the prime considerations for the investment decision should not be the price of the vessel per se, second-hand (SH) or newly built (NP) but

• ?(a)?the relative price ratio (SH/NP) second-hand price over the new building price and

• ?(b)?the movement of this ratio.

We investigate the determinants of this ratio across different vessel sizes in the tanker sector and show that it can be used as an effective tool in investment decision as well as in asset appraisal.

We employ monthly data between 1995 and 2006 for four different ship sizes–VLCC, Suezmax, Aframax and Handysize–and implement an error correction model.

The investment decision depends on a number of risk and return variables as well as the perceived speed of adjustment of the price ratio to its equilibrium level.

Overall we claim that the cyclicality of the shipping sector together with expectations formed by the agents operating in it (the entrepreneur, the ship-owner and the broker), determine the movement of the ratio and hence the decision of the entrepreneur.     

Hydrodynamic performance of multiple-row slotted breakwaters

This study examines the hydrodynamic performance of multiple-row vertical slotted breakwaters. We developed a mathematical model based on an eigenfunction expansion method and a least squares technique for Stokes second-order waves. The numerical results obtained for limiting cases of double-row and triple-row walls are in good agreement with results of previous studies and experimental results. Comparisons with experimental measurements of the reflection, transmission, and dissipation coefficients (C _R , C _T , and C _E ) for double-row walls show that the proposed mathematical model adequately reproduces most of the important features. We found that for double-row walls, the C _R increases with increasing wave number, kd, and with a decreasing permeable wall part, dm. The C _T follows the opposite trend. The C _E slowly increases with an increasing kd for lower kd values, reaches a maximum, and then decreases again. In addition, an increasing porosity of dm would significantly decrease the C _R , while increasing the C _T . At lower values of kd, a decreasing porosity increases the C _E , but for high values of kd, a decreasing porosity reduces the C _E . The numerical results indicate that, for triple-row walls, the effect of the arrangement of the chamber widths on hydrodynamic characteristics is not significant, except when kd<0.5. Double-row slotted breakwaters may exhibit a good wave-absorbing performance at kd>0.5, where by the horizontal wave force may be smaller than that of a single wall. On the other hand, the difference between double-row and triple-row vertical slotted breakwaters is marginal.     

The rationality of conference pricing and output policies. Part 2

In Part 1 ^{* *}Maritime Studies and Management (1975) Vol 3, No. 2, pp. 103–111. of this article a background to the economics of conference operation was provided, and conference fleet planning and single voyage costs were discussed. This part of the paper will analyse the economic objectives of conferences and will consider the implications of ending the conference princing structure. Some recommendations are also offered.     

Total oil spill costs and compensations

Although counteracting environmental programmes and policies have been strengthened, large oil spills still occur at irregular intervals. The total oil spill costs and their compensations have attracted much interest from various parties, such as local stakeholders, and state and federal governments. This paper addresses five major cost categories whose aggregations are expected to cover the overall direct and indirect costs after the release of an oil spill. Among them, research costs should not be neglected, since they tend to be high if public attention has been drawn to the case. Through an examination of the relationship between the total oil spill costs and their admissible claims, we found that:

1. admissible claims do not cover the overall costs of the oil spill, and

2. admissible claims cannot be compensated in full in the case of large spills.

Clearly, a sound oil spill contingency management aims to minimize both the environmental impacts of areas most at risk and the total oil spill costs. In this paper an economic model for measuring environmental damages following an oil spill is addressed and applied to the Prestige case which happened to be the worst oil pollution in the history of Spain. The model indicates how an ideally a priori economic evaluation may intuitively help managers to make informed as well as fast decisions in contingency cases.     

Barriers to progress or windows of opportunity? A study in career path mapping in the maritime industries

The objective of the study was to provide, through a series of interviews with key personnel from a range of European Member States, an overview of the following:

Designing Coastal Management Strategies for Populations with Distinct Needs: The Case of Learning Disabilities

The Disability Discrimination Act (1995, amended 2005), Equality Act (2010 Equality Act. 2010. Equality Act. http://www.legislation.gov.uk/ukpga/2010/15/contents#openingWholeMod (accessed May 17, 2012) [Google Scholar]), EU Disability Action Plan (2003 –2010), and EU Disability Strategy (2010–2020) were designed to make equal opportunities a “reality.” As 16% of the EU population, is statutorily disabled there are considerable implications for beach management. Research examples of beach users include swimmers, anglers, etc. - but rarely people with learning disabilities (LD). This paper considered beach users with LD and their appreciation of three different coastal classifications in South Wales. Because of their disabilities, the research applied a participatory photo interpretation methodology (photovoice). A comparison of the LD ranking of beach issues was made with rankings provided by the general public at the same beaches. Results demonstrated some similarities between LD and general public coastal needs, but identified the need for specific considerations to be made by beach managers for LD users, including informed self-advocacy, use/application of signage, instructive access and a requirement for baseline information gathering. The research proposes an integrated coastal access model from which coastal management/gatekeepers can consider LD needs within coastal strategies. Finally, findings highlight the use of photovoice in coastal research projects and the need for innovative methodological considerations when researching certain groups.     

Transport infrastructure provision and operations: Why should governments choose private–public partnership?

Recent transport sector liberalisation, as well as global economic crisis, is favouring the implementation of transport infrastructure projects through Public–Private Partnerships (PPP). However, there is a debate as to whether PPP schemes are a better option than conventional procurement. To this end, an evaluation framework is proposed, to assess which of these two alternative schemes for transport projects financing is preferable for the public. The proposed framework is complimentary to the Value for Money (VfM) approach and is based on a Multi Criteria Analysis (MCA). The first step is the estimation of the Public Sector Comparator (PSC) for the case of conventional procurement, dealing with construction, maintenance and operation costs revenues, as well as any costs associated with risks undertaken by the public. As for the PPP case, it includes any payments by the public sector and related risks costs. The MCA is then applied only if the PPP is found preferable for the public sector. The latter considers additional impacts, including among others the social attributes of a particular scheme, job creation, environmental impacts and safety and security aspects. The proposed framework was applied to a pilot Bus Rapid Transit (BRT) corridor infrastructure project in the city of Indore, India, in order to demonstrate its validity. The framework and its application could provide useful guidance when considering PPP for a transport project, since it demonstrates in a transparent way the society's attitude towards this project, something that is critical to its acceptance.