System Dynamics (SD) -based concession pricing model for PPP highway projects |
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Authors: | Yelin Xu Chengshuang Sun Miroslaw J. Skibniewski Albert P.C. Chan John F.Y. Yeung Hu Cheng |
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Affiliation: | 1. Department of Construction Management and Real Estate, Southeast University, Nanjing, China;2. Department of engineering management, Zhejiang Sci-tech University, Hangzhou, China;3. Department of Civil and Environmental Engineering, University of Maryland, College Park, Maryland, United States;4. Department of Construction and Real Estate, Harbin Institute of Technology, Harbin, China;5. Department of Building and Real Estate, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China;6. College of International Education, School of Continuing Education, Hong Kong Baptist University, Hong Kong, China |
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Abstract: | The design of concession price is essential to financial viability of Public–Private Partnership (PPP) highway projects. It is one of the most important variables that need to be determined during the negotiation period. However, there are few methods available for calculating the value of this variable. Research described in this paper aims to develop a reliable, objective, and systematic model for determining a rational concession price for PPP highway projects based on pro forma financial statements developed during the feasibility study period. The pricing parameters and price risk factors of PPP highway project were first identified and compiled through a comprehensive literature review. A concession pricing model using System Dynamics technique was then developed based on concession pricing parameters and the effectiveness of the proposed SD-based concession pricing model was verified by a real toll tunnel project located in China. The test result shows that the proposed model is reliable, accurate, and suitable for the application by practitioners for concession price determination. To overcome the effect of risk factors on concession price, a pricing adjustment model using Case-base Reasoning (CBR) technique was proposed to consider the unquantifiable risk factors. It is believed that a rational and practical concession pricing model can create a ‘win–win’ situation for both the private investor and the host government. This research framework can also be used as a reference to study other facilities' pricing models. |
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Keywords: | Concession pricing Public&ndash private partnership Highway System dynamics Case-base Reasoning |
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