Remuneration models and revenue risk mitigation in road public–private partnership projects – a case study from Serbia

As a consequence of renewed interest in attracting private financing for infrastructure investments, public–private partnership (PPP) arrangements are mostly seen as a suitable mechanism for ensuring sound and quicker delivery of transport infrastructure projects. However, a general concern is that expectations of mobilizing private-sector funds have been overestimated in a number of cases. The purpose of this paper is to contribute to the risk analysis of transport PPP projects with substantial exogenous demand risk which could serve as a rationale for choosing the appropriate PPP model. The objective of this paper is to construct an analytical cash flow-based project model to facilitate the choice of the remuneration mechanism suitable for both private investors and public sector. The model provides an indication whether the project should be implemented as a ‘users pay’, a hybrid or an ‘annuity’ PPP model. The proposed methodology is illustrated using a case study from Serbia.     

Risk Management in Motorway PPP Projects: Empirical-based Guidelines

Abstract

This paper deals with the topic of risk management in Public Private Partnership (PPP). The analysis of the related literature reveals that risks must be analyzed and managed on a context-specific approach, and that there is a lack of a comprehensive study on the appropriate risk mitigation strategies for each risk embedded in PPP projects. Focusing on the transport sector, based on the results of a Delphi survey, the paper provides guidelines for both public and private parties in defining a list of significant risks in PPP motorway projects, and identifying for them both the effective allocation and the suitable mitigation strategies. Results of the Delphi survey have been compared with the common practices on risk management applied in eight real motorway PPP projects.     

Renegotiating PPP Contracts: Reinforcing the ‘P' in Partnership

Abstract

The issue of renegotiation is becoming increasingly important as a tool to address uncertainty of public private partnership (PPP) projects and as a mechanism to restore its economic and financial equilibrium. This paper aims to understand how and why renegotiations occur in long-lasting PPP projects and what are the pros and cons of the renegotiation. We depart from a literature review on contract incompleteness and on the determinant factors for the renegotiation of infrastructure concessions. To illustrate the discussion, the case studies of nine European PPP projects are analysed by examining the specific exogenous and endogenous determinant factors that conduce to renegotiating contracts. The implications of contractual renegotiations are explained and summarized through a comparison of our case studies with literature. Although renegotiation, per se, is not a solution for the successful implementation of PPP projects, our findings reinforce the idea of contractual flexibility as a tool that allows adapting to uncertainty. Moreover, effective communication mechanisms allow a better response to unforeseen events, reinforcing the partners’ commitment to deliver a win–win project.     

Transaction Costs in Transport Public–Private Partnerships: Comparing Procurement Procedures

Abstract

In recent years, concern has grown over good practices in the procurement process in public–private partnerships (PPPs). The consensus view is that PPPs are prone to higher transaction costs than traditional public provision. In this paper, we contrast the hypothesis that transaction costs in transport PPPs depend, to a large extent, on the procurement mechanism used in each case, comparing the Negotiated and the Open procedures. Given that PPPs may offer considerable benefits and significant savings over the entire life cycle of the project, it is essential for PPPs to minimize those costs that undermine efficiency gains and that deter private involvement. The quantitative analysis undertaken in this paper highlights that there is room for important savings in the tendering of PPP transport infrastructure projects, using an Open procedure.     

Developing Transport Infrastructure in Sub-Saharan Africa through Public–Private Partnerships: Policy Practice and Implications

In contemporary times, Public–Private Partnership (PPP) in transport infrastructure has gained considerable attention in developing regions following its success in the developed countries. However, Sub-Saharan Africa (SSA) is among the developing regions with few transport PPP projects and among the regions with high number of failed projects. Meanwhile the region's transport infrastructure need far exceeds it current provision. This paper therefore aims to examine the project experiences (success and failure factors) of three highly profiled transport PPP projects, namely the Lekki toll road concession project (Nigeria), N4 toll road (South Africa/Mozambique) and Port of Maputo (Mozambique) in order to develop policy measures for effective future implementation. The experiences of the three projects show that transport PPP policy is indeed feasible in SSA. However, to realise its full applicability, proper policy actions and measures must be carefully observed and these include effective and efficient stakeholder management, transparent and competitive tendering process, high participation of local investors, stable macro-economic conditions and strong government commitment and regulatory framework. The projects experiences and policy actions developed are impactful in accelerating transport infrastructure development through PPP approach in SSA. Hence it is hoped that policy-makers and practitioners would be informed on the key strategies to employ in implementing future projects.     

Risk pricing inefficiency in public–private partnerships*

There is a drive towards delivering and operating public infrastructure through public–private partnership (PPP) rather than traditional public procurement. The assessment of the value for money achieved by the two alternative approaches rests in the cost of financing and their efficiency in delivery and operation. This paper focuses on the cost of financing, in particular the cost associated with transferring risk from the public to private sphere. If capital markets were efficient and complete, the cost of public (government) and private financing should be the same, with the relative delivery and operational efficiency remaining as the primary determinant of value-for-money. Evidence suggests, however, that the risk transfer to a PPP entails an inefficient risk pricing premium which goes beyond the direct cost of financing. We argue that a high price for PPPs results from large risk transfers, risk treatment within the private sector, and uncertainty around the past and future performance of public–private consortia. The corollary is that the efficiency gains from a PPP must be much higher than commonly expected to deliver a greater value for the money than under a traditional approach.     

Measuring Success of PPP Transport Projects: A Cross-Case Analysis of Toll Roads

Abstract

The aim of this paper is to measure ‘overall’ success of a public private partnership (PPP) transport projects using four case studies. All four case studies are PPP toll roads from four different EU countries (UK, Spain, Portugal and Greece). The case studies have been analysed using a manual Qualitative Comparative Analysis approach. According to the paper, three different perspectives have been used to measure the success of a project, that is, project management perspective, stakeholder perspective and contract management perspective. The ‘overall’ success has then been deduced by bringing these three perspectives together as a holistic approach. The findings are presented in the form of a matrix and the final outcome of the paper shows a simple methodological approach that can be used to measure success of a PPP transport project. Since the study takes more of a qualitative approach, researcher bias and perceptions have a major role to play in the final outcome. However, to reduce ‘biasness’, quantitative measures have also been used to quantify the Key Performance Indicators and performance measures in the case studies. It is hoped that the study makes a valid contribution to the areas of transport PPPs and performance measurement.     

How Do Governments Support the Development of Public Private Partnerships? Measuring and Comparing PPP Governmental Support in 20 European Countries

Abstract

Taking an institutional perspective, in this article we develop an index of the governmental support for public private partnership (PPP) — a ‘PPP Governmental Support Index’ (GSI) — which aims to measure the extent to which national governments provide an institutional framework that is either conducive or preventive for the introduction and diffusion of PPPs within transport infrastructure and other sectors. First, based on a substantive review of the literature, we define the elements of the PPP GSI, including the policy and political commitment regarding PPPs, the legal and regulatory framework, and the presence/absence of dedicated PPP-supporting arrangements. Second, we calculate the PPP GSI for 20 European countries, cluster them and compare similarities and differences in national governmental support of infrastructure PPPs. Third, we explore the potential link between national institutional index scores and infrastructure PPP activity in the 20 countries. Lastly, we discuss the potential and usefulness of the presented PPP GSI, as well as methodological limitations, and elaborate on how this index might be utilised to strengthen future comparative research on PPP in transport and other sectors.     

Quality of institutions and private participation in transport infrastructure investment: Evidence from developing countries

In recent decades, owing to a series of public debt crises and constraints on government expenditure, infrastructure investment has dropped significantly in both developed and developing countries. To counterbalance this trend, Public–Private Partnerships (PPPs) schemes have been increasingly adopted. In this paper, we explore the determinants of the degree of private participation in transport infrastructure projects in a large sample of developing countries. By using a large sample of transport projects included in the World Bank Private Participation in Infrastructure Projects database, we document that greater participation by private parties in PPP contracts is associated with better institutions in terms of lower corruption, civil freedom, and a better regulatory framework.     

Indirect Effects to Include in Strategic Environmental Assessments of Transport Infrastructure Investments

Abstract

Indirect effects are important considerations when making consequence analyses in general and in strategic environmental assessments in particular of potential transport solutions and infrastructure plans. The primary objective of this paper is to emphasize the need for a deeper understanding of the long‐term system effects of investments in transport infrastructure with a focus on the structuring effects that roads and railways have on society, e.g. altered transport patterns, altered settlement structures and changes in use of the built environment. Special attention is given to the following potential indirect effects: increased total transport volume, increased share of private motorists and truck transport, increased urban sprawl, and increased energy use in buildings. The conditions that determine the power of the effects are discussed and a number of key factors to be considered in transport infrastructure planning, especially in strategic environmental assessments, are suggested. Since many indirect effects emerge over time, an extended time perspective is of essence. Therefore, scenario techniques may be useful when analysing indirect effects in transport planning processes.     

Using risk analysis to determine the potential range of lifecycle costs for urban transit systems

Intense competition for limited public funding for urban transport projects can often result in proponents of individual schemes presenting minimized costs and maximized benefits to funding bodies to try to ensure that their scheme is chosen above others for funding. This presents public bodies with a problem, especially in an era when they are keen to attract private contributions for transit schemes. Risk modelling techniques can be of great assistance in ascertaining ranges of costs and benefits for individual submissions and deciding upon which projects should receive priority-not only those with greatest cost-benefit indices, but also those whose indices have low levels of associated risk to allay the fears of the traditionally risk averse private sector.     

Mapping minibuses in Maputo and Nairobi: engaging paratransit in transportation planning in African cities

ABSTRACT

Often called paratransit because of their flexible stops, schedules and routes, minibuses make up the bulk of public transport in African cities. Despite their ubiquity and importance, these systems are poorly understood by transportation planners who tend to focus on large-scale urban infrastructure projects such as highways, commuter rail or bus rapid transit systems. The assumption within much of this planning is that these minibus systems are barriers to change and will become at most secondary “feeder” buses within large-scale projects, but structured plans detailing this vision are lacking. This paper argues that frequent failure to collect data and value important paratransit systems as a critical part of transportation in their own right is deeply problematic from the point of view of equity, access and inclusive and effective planning. We ask whether the growing number of bottom up mapping projects of minibus systems can disrupt this status quo. By comparing two mapping projects, Digital Matatus in Nairobi and the Mapa Dos Chapas in Maputo, we find that inclusive, collaborative mapping can help render these minibuses more visible in planning and provoke more grounded and inclusive “planning conversations” on multi-modal integration, passenger information and minibus upgrading, all key but relatively marginalised aspects of creating accessible, low emission, high quality and safe public transport in African cities.     

The effect of institutional factors on public–private partnership success in ports

Port public–private partnerships (PPPs) are considered to be an important emerging mechanism for port development and improvement in port performance especially for developing countries. This paper empirically investigates the effect of institutional factors in the success of port’s PPPs; the latter defined as the attractiveness of the PPP project for private bidders and the market competitiveness of the facility. The empirical investigation of a large sample of ports finds that ‘regulatory quality’, ‘market openness’, ‘ease to start a business’ and ‘enforcing contracts’ are important institutional determinants of port PPP success and may ultimately contribute to port development and economic growth. The results are consistent with and add to the theoretical literature whereas practical implications for port authorities, managers and investors are discussed.     

Contract Design,Financing Arrangements and Public Ownership—An Assessment of the US Airport Governance Model

Abstract

US airports negotiate legally binding contracts with airlines and finance large investment projects with revenue bonds. Applying insights from transaction cost economics, we argue that the observed variation in contractual and financing arrangements at US airports corresponds to the parties' needs for safeguarding and coordination. The case evidence presented reveals that public owners set the framework for private investments and contracting. We suggest that airline contracts and capital market control result in comparative efficient investments and act as a check on the cost inefficiency typically linked to public ownership.     

Experiences with Competitive Tendering of Bus Services in Germany

Abstract

After a long transition period with only a few isolated procedures for competitive tendering, the market for German public transport bus services has seen numerous such tenders in recent years. The results are complex. From the public transport authorities’ point of view, the main effects are a decrease in subsidy payments, with relatively low expenses relating to the tendering process (allocation, contract management). The overall level of competition is high, with five to seven bidders on average, although this has been declining in recent years. Entry barriers have been identified at significant levels for several parameters, especially with respect to the volume tendered and the revenue risk to be borne by the operator out of net‐cost contracts. Demonstrably small‐ and medium‐sized transport operators have been able to increase their market share in the starting phase of introducing tendering, with diminishing success rates in recent years. Due to the increased quality requirements in competitive tendering, the quality of public transport available has improved considerably, and environmental standards have been better implemented and sustained. As far as employees are concerned, a trend towards wages below the wage rate of private operators cannot be observed. However, their level is well below the level of public incumbent operators.     

Simulation-based dynamic adjustments of prices and subsidies for transportation PPP projects based on stakeholders’ satisfaction

Transportation - Public–private partnership (PPP) has been well acknowledged by many as an innovative approach to the procurement of public projects. In their long-term concession periods,...     

Congestion relief toll tunnels

Changing urban land-use patterns have reduced the importance of traditional downtowns as the origin and destination of numerous vehicular trips. Much traffic on downtown-area freeways seeks merely to get past downtown, thereby worsening the level of congestion for those seeking access to downtown.A number of European cities have begun to develop a new type of transportation facility: congestion-relief toll tunnels in downtown areas. These projects appear to be economically feasible largely or entirely from premium-price tolls paid by users. Hence, they are being developed by private consortia, operating under long-term franchises from government. Other keys to the feasibility of such projects are peak/off-peak pricing structures (congestion pricing), nonstop electronic toll collection, and restriction of use to auto-size vehicles only (to reduce tunnel dimensions and therefore capital investment).Preliminary analysis indicates that congestion-telief bypass runnels for downtown Los Angeles and San Francisco would be economically feasible as private business ventures, if developed along European lines. Similar approaches might be applied to other controversial freeway projects in both cities, and to restructuring Boston's huge and controversial Central Artery/Tunnel project.Congress has already authorized public-private partnerships of this type, permitting private capital and private owner/operation to be used, both for new projects and to rebuild existing highway, bridge, and tunnel facilities. Six states and Puerto Rico have enacted private-tollway legislation under which such projects could be developed and operated.This type of project should be politically feasible, since it offers a way to make significant transportation improvements in impacted downtowns with little or no public funding. While transit proponents may oppose the construction of toll tunnels, highway users are likely to support such projects, and some environmental groups may support this method of implementing congestion pricing in urban areas, because of its potential for reducing air emissions.     

Opportunities for collaboration between infrastructure agencies and conservation groups: Road-stream crossings in Oklahoma

Rivers and streams worldwide are highly fragmented by dams and road crossings, and there is a pressing need to retrofit the most problematic structures to ensure aquatic organism passage. At the same time, a majority of the transportation infrastructure within developed nations is beyond its projected lifespan and significant investments will be needed to ensure that this transportation infrastructure remains safe and functional. Historically, these two problems have been addressed separately. Here, we use a rapid survey methodology to identify road-stream crossings that are likely high-priority projects for both conservation and infrastructure agencies. We conducted a field assessment of more than 700 road-stream crossings across Oklahoma to determine if they blocked fish movements and to determine their physical condition. We then developed an index of ecological impact, and an index of infrastructure condition, based on physical variables measured at each crossing. This survey revealed a subset of crossings that are both fragmenting the river network and in poor physical condition. These crossings are high-priority locations where culvert replacement may have both high ecosystem benefit and would eliminate a piece of transportation infrastructure with a high risk of failure. We discuss opportunities for cost-sharing between conservation and transportation agencies.     

Impact of Everyday Weather on Individual Daily Travel Behaviours in Perspective: A Literature Review

Despite the hundreds of billions of dollars being spent on infrastructure development -- from roads, rail and airports to energy extraction and power networks to the Internet -- surprisingly little reliable knowledge exists about the performance of these investments in terms of actual costs, benefits and risks. This paper presents results from the first statistically significant study of cost performance in transport infrastructure projects. The sample used is the largest of its kind, covering 258 projects in 20 nations worth approximately US$90 billion (constant 1995 prices). The paper shows with overwhelming statistical significance that in terms of costs transport infrastructure projects do not perform as promised. The conclusion is tested for different project types, different geographical regions and different historical periods. Substantial cost escalation is the rule rather than the exception. For rail, average cost escalation is 45% (SD=38), for fixed links (tunnels and bridges) it is 34% (62) and for roads 20% (30). Cost escalation appears a global phenomenon, existing across 20 nations on five continents. Cost estimates have not improved and cost escalation not decreased over the past 70 years. Cost estimates used in decision-making for transport infrastructure development are highly, systematically and significantly misleading. Large cost escalations combined with large standard deviations translate into large financial risks. However, such risks are typically ignored or underplayed in decision-making, to the detriment of social and economic welfare.     

PPP模式下高速公路项目施工期环境保护与水土保持管理探讨

PPP工程总承包是国家现阶段正在推行的建设项目组织模式,以专业投资公司联合专业施工单位及设计院为主进行PPP工程总承包是新兴的一种探索模式。在国内环水保形势日益严峻的情况下,如何做好PPP模式下高速公路项目环水保管理工作成为新的挑战。通过张扁高速公路PPP模式的应用,从公路工程建设过程中产生环、水保问题的原因与危害着手,分别从建设单位、监理单位、施工方简单阐述了各自的环、水保管理责任以及具体的控制措施;建设单位作为环、水保工作的总组织者、总协调者的作用不容忽视,在建设单位统一布局与领导下,通过有效管理可将环、水保问题控制在可控范围,使我国的高速公路建设向着生态公路的方向发展。