Michael J. Garvin

Meeting the Burden of Proof with Case-Study Research

The case-study research method is popular across various disciplines; however, critics of the method argue that results from this form of research are applicable only to the case studied and cannot be generalized further. In the field of construction engineering and management (CEM), the number of papers employing case-study research methods over the past decade has increased substantially. As the method proliferates, the question arises: are CEM case studies being performed with sufficient validity and reliability to meet the burden of proof to generalize from the case-study findings? Meeting the burden of proof is particularly critical in CEM because of the unique, site-based nature of the projects and industry. This paper presents a review of 156 papers employing case studies published in the Journal of Construction Engineering and Management, of which the writers identified 33 theory-building case-study-method papers. This subset of theory-building papers was examined to induce a set of requirements a...

Enabling Development of the Transportation Public-Private Partnership Market in the United States

Public-private partnerships (PPP) for infrastructure development and management have received significant attention in academic, institutional, and political circles over roughly the last two decades. This attention was prompted, to a great extent, by early experiments with PPP-type arrangements in Australia, Canada, and the United States coupled with the United Kingdoms Private Finance Initiative policy—not to mention the experience of other parts of the world such as Asia, continental Europe, and South America. PPP policies and practices have evolved in other world regions, but the United States remains a relatively slow mover in this market. While varying explanations for this circumstance are plausible, the situation can play to Americas advantage since the nation can capitalize upon the tested experience of its international counterparts. Drawing upon data and information collected from two principal sources: (1) case histories of PPP projects in North America to date and (2) a scanning tour of Australia, Portugal, Spain, and the United Kingdom in 2008, misconceptions regarding PPPs are clarified, contemporary international policies and practices are characterized, and recommendations for implementing PPPs for transportation infrastructure are made. The principal intent of this paper is to trigger a dialogue about PPPs and how they might improve Americas infrastructure assets.

Use and misuse of qualitative comparative analysis

Research in construction is often confronted with a trade-off of selecting either in-depth studies of small-N cases, which may affect generalization of findings, or statistical large-N studies, which may limit examination of causal links. Qualitative comparative analysis (QCA) provides a middle ground between these options, allowing researchers to analytically determine different combinations of conditions that produce an outcome in comparative studies. QCA has been applied extensively in other fields; however, the method has only recently started to gain traction in construction research. Guidance on the implementation of QCA is provided, including: a description of the method and its variants; stages required for its application; its benefits and critiques; applications in the construction field; and recommendations for scholars employing the method. QCA is a promising approach for probing causal links via investigations between variable-based, large-N analyses and qualitative, case-based, small-N studies. However, researchers must not use the method in haste or simply to obtain quantitative results from qualitative data. It requires significant time and rigour to determine and justify the conditions, outcomes and cases used in its application. QCA is well suited for research where interactions between conditions and outcomes are not well understood and can be used to build theory in the complex environment of construction.

Collar options to manage revenue risks in real toll public‐private partnership transportation projects

The revenue risk is of great importance to ensure the success of a real toll public–private partnership (PPP) transportation project. Past research has proposed a revenue guarantee put option as an alternative way to quantify and potentially manage this risk. A practical, or commercial, limitation of this type of option is its requirement for an upfront premium payment, and a concessionaire is likely to shy away from additional monetary requirements. A collar option, which is a combination of a put and call option, not only overcomes this barrier but it also provides other benefits. Modifications to the basic collar’s structure can redistribute downside losses and upside profits to fulfil stakeholders’ needs and thus improve the effectiveness of risk management. The terms, applicability and limitations of a collar option are discussed, and a numerical example is developed to illustrate how to determine the strike prices of a collar option.

Variance models for project financial risk analysis with applications to greenfield BOT highway projects

Assessment of BOT project financial risk is generally performed by combining Monte Carlo simulation with discounted cash flow analysis. The outcomes of this risk assessment depend, to a significant extent, upon the total project uncertainty, which aggregates aleatory and epistemic uncertainties of key risk variables. Unlike aleatory uncertainty, modelling epistemic uncertainty is a rather difficult endeavour. In fact, BOT epistemic uncertainty may vary according to the significant information disclosed during the concession period. Two properties generally characterize the stochastic behaviour of the uncertainty of BOT epistemic variables: (1) the learning property and (2) the increasing uncertainty property. A new family of Markovian processes, the Martingale variance model and the general variance model, are proposed as an alternative modelling tool for BOT risk variables. Unlike current stochastic models, the proposed models can be adapted to incorporate a risk analysts view of properties (1) and (2). A case study, a hypothetical BOT transportation project, illustrates that failing to properly model a projects epistemic uncertainty may lead to a biased estimate of the projects financial risk. The variance models may support, guide and extend the thinking process of risk analysts who face the challenging task of representing subjective assessments of key risk factors.

Real options in infrastructure projects: theory, practice and prospects

Developed from financial options theory and pricing models, real options have evolved to become a mainstream area of academic inquiry. This account traces the field generally from its origins to present day. Research has demonstrated the potential for real options to enhance project value by managing uncertainty through investment, structuring and design decisions. Despite this, real options theory is not widely used as a whole or within the discipline of infrastructure development and construction project management. The creation of infrastructure occurs almost exclusively in a project-based environment. Not surprisingly, project managers play a pivotal role in the success of such projects and make frequent decisions that shape and reshape implementation strategies. Perhaps, the path towards disseminating real options into infrastructure project practice is to improve the understanding of the managerial environment and behaviour. Hence, the characteristics of infrastructure projects and project managemen...

Structuring PPP toll-road contracts to achieve public pricing objectives

Although the success of public–private partnership (PPP) contracts is often evaluated on financial terms, an even more fundamental question is whether these contracts achieve the public objectives for which they were designed. The states responsibility as contracting agency for public infrastructure gives it a crucial role in defining these goals, which fall into multiple categories and can vary for each procurement. For toll-road PPPs, the category of pricing objectives is a significant component of these broader public goals. Such pricing objectives often include (1) achieving an affordable toll rate, (2) managing congestion and (3) minimizing state subsidy/maximizing up-front payment from concessionaires. To identify the specific PPP contract elements which support these pricing-related objectives, the method of qualitative comparative analysis was applied. Through this recently developed approach for evaluating qualitative data quantitatively, patterns of PPP contract strategies which correspond to t...

CONSTRUCTING RESEARCH WITH CASE STUDIES

A case study is an empirical inquiry that investigates a contemporary phenomenon within its real-life context. The case study research method is popular across various disciplines, however, critics of the method argue that results from this form of research are applicable only to the case studied and cannot be generalized further. In the field of construction engineering and management, the number of papers employing case study research methods over the past decade has increased substantially. The question that arises as the method proliferates is whether case studies are being performed with sufficient validity and reliability to maximize the extent to which the findings can be generalized. Given the unique, project-based nature of the construction industry, in this manuscript, we discuss research design and data collection strategies construction engineering and management researchers can employ to improve validity, reliability and the extent to which they can generalize from their findings.

Using real options for revenue risk mitigation in transportation project financing

Effective risk management is essential for success in transportation project financing arrangements such as build–operate–transfer (BOT). Both sponsors and lenders consider the revenue risk an extremely important factor when they assess a BOT projects feasibility. One potential strategy for mitigating the revenue risk is a revenue guarantee, in which a guarantor secures a minimum amount of revenue for a project; such guarantees take the form of a put option. However, the inclusion of such guarantees in BOT arrangements is hampered by the lack of methods to determine the value, or the fair price, of these types of options. Current valuation techniques lack the flexibility to structure the options in a manner that is affordable to the government and attractive to the private sector. This significant shortcoming opens a research opportunity to explore the development of methods for valuing more flexible and affordable guarantee structures. This paper presents two new valuation methods, the multi–least squares Monte Carlo method and the multi-exercise boundary method, which model the revenue guarantee as a multiple-exercise real option. The two valuation methods successfully combine Monte Carlo simulation and dynamic programming techniques to price multiple-exercise real options. A hypothetical case study illustrates the application and the potential of the two methods to serve as tools for risk mitigation in BOT projects.

APPROACHES FOR STRUCTURING CONCESSION LENGTHS AND TOLL RATES FOR TRANSPORTATION INFRASTRUCTURE PPPS

Many US transportation public-private partnerships (PPPs) are based on the concession model, under which the structure of user fees and the agreement duration is central to ensuring a fair balance of risk and reward between the public and private participants. Yet previous studies of toll-rate structuring and concession-length determination have treated these two variables largely independently. Toll charges, for instance, are typically established as either supply-based, linked to the cost of constructing, maintaining, and/or operating the facility; or demand-based, adjusted to influence driver behavior in certain ways such as through variable time-of-day congestion charges. Concession lengths are designed separately to enable tax-depreciation advantages for the private sector and/or to mitigate traffic-demand risk. Considering these two variables together, though, provides new opportunities to improve the risk-andreward profile for both partners. A review and comparative analysis of dualvariable approaches, illustrated by projects in which these strategies have been used, offers additional tools to consider in structuring future PPP procurements.