Nasir Bedewi Siraj, Aminah Robinson Fayek and Mohamed M. G. Elbarkouky
Most decision-making problems in construction are complex and difficult to solve, as they involve multiple criteria and multiple decision makers in addition to subjective…
Abstract
Most decision-making problems in construction are complex and difficult to solve, as they involve multiple criteria and multiple decision makers in addition to subjective uncertainties, imprecisions and vagueness surrounding the decision-making process. In many instances, the decision-making process is based on linguistic terms rather than numerical values. Hence, structured fuzzy consensus-reaching processes and fuzzy aggregation methods are instrumental in multi-criteria group decision-making (MCGDM) problems for capturing the point of view of a group of experts. This chapter outlines different fuzzy consensus-reaching processes and fuzzy aggregation methods. It presents the background of the basic theory and formulation of these processes and methods, as well as numerical examples that illustrate their theory and formulation. Application areas of fuzzy consensus reaching and fuzzy aggregation in the construction domain are identified, and an overview of previously developed frameworks for fuzzy consensus reaching and fuzzy aggregation is provided. Finally, areas for future work are presented that highlight emerging trends and the imminent needs of fuzzy consensus reaching and fuzzy aggregation in the construction domain.
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ROBERT L.K. TIONG and JAHIDUL ALUM
The Build‐Operate‐Transfer (BOT) model of development of privatized infrastructure projects is implemented through the award of a concession to a private sector consortium which…
Abstract
The Build‐Operate‐Transfer (BOT) model of development of privatized infrastructure projects is implemented through the award of a concession to a private sector consortium which will finance, build and operate the facility. In a competitive BOT tender, the selection of the successful consortium does not depend on the lowest tolls offered by the tenderer. Rather, it is dependent on the ability of the promoter to provide the most competitive package of distinctive winning elements in its proposal during the final negotiations. The promoter must fully understand the government's needs and concerns and be able to address them through the right package of the winning elements. In this paper, these elements are developed from sub‐factors of the critical success factors of technical solution advantage, financial package differentiation and differentiation in guarantees.
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S. YE and R.K.L. TIONG
Government support plays an important part in risk‐return trade‐off of participants in privately financed infrastructure projects. Depending on the level of government support…
Abstract
Government support plays an important part in risk‐return trade‐off of participants in privately financed infrastructure projects. Depending on the level of government support, risk‐return trade‐off of the private sponsor varies from project to project. Case studies on two of China's build‐operate‐transfer (BOT) power projects that were developed at different time periods illustrate that government support has a significant effect on both risk and return of the private sponsor. It is hoped that such understanding would help the private sponsor strike a desirable risk‐return trade‐off in structuring a BOT deal.
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W.R. ZHANG, S.Q. WANG, R.L.K. TIONG, S.K. TING and D. ASHLEY
The build‐operate‐transfer (BOT) arrangement is becoming one of the prevailing ways for infrastructure development in China to meet the needs of China's future economic growth and…
Abstract
The build‐operate‐transfer (BOT) arrangement is becoming one of the prevailing ways for infrastructure development in China to meet the needs of China's future economic growth and development. Despite tremendous opportunities, the undertaking of infrastructure business in China involves many risks and problems which are mainly caused by China's embryonic legal structure and immature economic market. Further strategies in risk allocation and management are especially important for successful investments in China. Choosing the right path for a BOT project investment is crucial since each project involves different legal rights, different obligations and different risk implications. The present paper describes the structuring and risk allocation, as well as the Government guarantees in a China BOT transport project, the Shanghai Yan'an Donglu Second Tunnel (YD2nd Tunnel). It is also the first BOT project implemented in Shanghai. The project features and the guarantees provided by the Government are described in the present paper.
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MARCUS JEFFERIES, ROD GAMESON and STEVE ROWLINSON
Recent trends in the provision of infrastructure development indicate that the private sector is playing an increasingly important role in the procurement process. This trend has…
Abstract
Recent trends in the provision of infrastructure development indicate that the private sector is playing an increasingly important role in the procurement process. This trend has partly arisen out of a necessity for the development of infrastructure to be undertaken at a rate that maintains and allows growth. This has become a major challenge for many countries where it is evident that these provisions cannot be met by government alone. The emergence of Build‐Own‐Operate‐Transfer (BOOT) schemes as a response to this challenge provides a means for developing the infrastructure of a country without directly impacting upon the government's budgetary constraints. The concepts of BOOT are without doubt extremely complex arrangements, which bring to the construction sector risks not experienced previously. This paper examines perceptions of BOOT schemes in order to develop a framework of critical success factors. The developed framework is then tested against a case study of Stadium Australia, and the outcomes of the comparison are discussed.
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Jian Guo, Junlin Chen and Yujie Xie
This paper explores the impact of both government subsidies and decision makers' loss-averse behavior on the determination of transportation build-operate-transfer (BOT…
Abstract
Purpose
This paper explores the impact of both government subsidies and decision makers' loss-averse behavior on the determination of transportation build-operate-transfer (BOT) concession periods based on cumulative prospect theory (CPT). The prospect value of a transportation project under traffic risk can be formulated according to the value function for gains and losses and the decision weight for gains and losses. As an extra income for investors, government subsidy is designed for highly risky aspects of BOT transportation projects: uncertain initial traffic volumes and fluctuating growth rates.
Design/methodology/approach
A decision-making model determining the concession period of a transportation BOT project is proposed by using the Monte-Carlo simulation method based on CPT, and the effects of risky behaviors of private investors on concession period decision making are analyzed. A subsidy method related to the internal rate-of-return (IRR) corresponding to a specific initial traffic volume and growth rate is proposed. The case of an actual BOT highway project is examined to illustrate how the method proposed can be used to determine the concession period of a transportation BOT project considering decision makers' loss-averse behavior and government subsidy. Contingency analysis is discussed to cope with possible misestimating of key factors such as initial traffic volume and cost coefficients. Sensitivity analysis is employed to investigate the impact of CPT parameters on the concession period decisions. An actual BOT case which failed to attract private capital is introduced to show the practical application. The results are then interpreted to conclude this paper.
Findings
Based on comparisons drawn between a concession period decision-making model considering the psychological behaviors of decision makers and a model not considering them, the authors conclude that the concession period based on CPT is distinctly different from that of the loss-neutral model. The concession period based on CPT is longer than the loss-neutral concession period. That is, loss-averse private investors tend to ask for long concession periods to make up for losses they will face in the future. Government subsidies serve as extra income for investors, allowing appointed profits to be secured sooner. For the benefit side of contingency variables, the normal state of initial traffic volume, average annual traffic growth rate and bias degree and the government subsidy need to be paid close attention during the project life span. For the cost side of contingency variables, the annual operating cost variable has a significant impact on the length of predicted concession period, while the large-scale cost variable has minor impact.
Originality/value
With an actual BOT highway project, the determination of transportation BOT concession periods based on the psychological behaviors of decision makers is analyzed in this paper. As the psychological behaviors of decision makers heavily impact the decision-making process, the authors analyze their impacts on concession period decision making. Government subsidy is specifically designed for various states of initial traffic volume and fluctuating growth rates to cope with corresponding high risks and mitigate private investors' loss-averse behaviors. Contingency analysis and sensitivity analysis are discussed as the estimated values of parameters may not be authentic in actual situations.
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Ernest Effah Ameyaw and Albert P. C. Chan
Allocating risk in public–private partnership (PPP) projects based on public–private parties’ risk management (RM) capabilities is a condition for success of these projects. In…
Abstract
Allocating risk in public–private partnership (PPP) projects based on public–private parties’ risk management (RM) capabilities is a condition for success of these projects. In practice, however, risks are allocated to these parties beyond their respective RM capabilities. Too much risk is often assigned to the private or public party, resulting in poor RM and costly contract renegotiations and terminations. This chapter proposes a methodology based on fuzzy set theory (FST) in which decision makers (DMs) use linguistic variables to assess and calculate RM capability values of public–private parties for risk events and to arrive at risk allocation (RA) decisions. The proposed methodology is based on integrating RA decision criteria, the Delphi method and the fuzzy synthetic evaluation (FSE) technique. The application of FSE allows for the introduction of linguistic variables that express DMs’ evaluations of RM capabilities. This provides a means to deal with the problems of qualitative, multi-criteria analysis, subjectivity and uncertainty that characterise decision-making in the construction domain. The methodology is outlined and demonstrated based on empirical data collected through a three-round Delphi survey. The public–private parties’ RM capability values for land acquisition risk are calculated using the proposed methodology. The methodology is helpful for performing fuzzy-based analysis in PPP projects, even in the event of limited or no data. This chapter makes the contribution of presenting a RA decision-making methodology that is easy to understand and use in PPP contracting and that enables DMs to track calculations of RM capability values.
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Liyang Wang, Yanfang Sun and Robert L.K. Tiong
This study aims to explore how institutional quality impacts private capital participation in large-scale infrastructure development, particularly in public–private partnership…
Abstract
Purpose
This study aims to explore how institutional quality impacts private capital participation in large-scale infrastructure development, particularly in public–private partnership (PPP) projects, aiming to enhance incentives for private sector involvement.
Design/methodology/approach
Building on new institutional theory, a triangular theoretical framework was constructed to analyze the high participation of private capital in PPP projects, focusing on seven key institutional factors. Data from 1,319 PPP projects across 36 Belt and Road Initiative (BRI) countries from 2015 to 2020 were then analyzed using a combination of necessary condition analysis (NCA) and fuzzy set qualitative comparative analysis (fsQCA) to evaluate the combined impact and interactions of these factors.
Findings
Results indicate that high private capital participation does not hinge on a single institutional quality factor but results from the synergistic influence of multiple factors. The paths leading to high private capital participation can be categorized as regulatory-led, normative-cognitive synergistic, regulatory-normative synergistic and institutional failure-led. Among these, regulatory quality plays a central role in the regulatory-led; the synergy between political stability and voice and accountability is pivotal in the normative-cognitive synergistic, and the rule of law, in combination with voice and accountability, is essential to the regulatory-normative synergistic.
Originality/value
This research systematically examines the multidimensional impact of institutional quality, revealing how different institutional factors interact to influence private capital’s willingness to participate and behavior. It enriches applied research in institutional economics within PPP projects and provides a new theoretical perspective and methodological framework to the scholarly community.
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Ernest Effah Ameyaw and Albert P.C. Chan
Public–private partnerships (PPPs) are viewed as a reform tool for resolving inefficiency and absence of dynamism in water supply delivery in developing countries. However, the…
Abstract
Purpose
Public–private partnerships (PPPs) are viewed as a reform tool for resolving inefficiency and absence of dynamism in water supply delivery in developing countries. However, the requirements for their successful implementation have received very little attention. This paper aims to describe a set of critical success factors (CSFs) that, when given special and continual attention, would ensure a successful project implementation and to provide a predictive tool to aid implementers to evaluate the likelihood of a successful PPP water supply project.
Design/methodology/approach
Fourteen perceived CSFs were initially derived from project cases and extant literature, and verified through a two-round Delphi survey. Factor analysis established five critical success factor groups (CSFGs) that were then used to develop a fuzzy synthetic evaluation tool for assessing the chance of a successful project.
Findings
The five key CSFGs are commitment of partners, strength of consortium, asset quality and social support, political environment, and national PPP unit. The model output showed that, overall, these factors have a “very high” positive impact on a successful implementation of a water supply project. Hence, there is an excellent correlation between achievement of the CSFGs and project success. Success indices of individual principal factors are also “very high”.
Originality/value
The study presents a tool to public clients and private audience, and it is hoped that the study will trigger policy development towards PPP practice in developing countries, because these findings have wider implications for legal and regulatory systems, public capacity, financing, public procurement and politics.