Nevena Vajdic

Use of key performance indicators for PPP transport projects to meet stakeholders’ performance objectives

Purpose – The need for more efficient and effective public-private partnership (PPP) projects makes performance management of increasing importance, especially with respect to stakeholder expectations. This paper seeks to examine the use of key performances indicators (KPI) based on the analysis of critical success factors (CSF) for monitoring of PPP transport projects from the perspective of different stakeholders. Design/methodology/approach – The list of stakeholders’ performance objectives including CSF was defined using the brainstorming technique applied to group of experts in PPP transport sectors and refined through literature review. Input of the expert group was validated against a feedback from a respective survey. Three main groups of stakeholders were identified: public sector, private sector, and users. Finally, the review and comparative analysis of existing KPIs in PPP transport projects was performed based on stakeholders’ objectives and project attributes using the “frequency of mention”...

Real option theory for risk mitigation in transport PPPs

Purpose – Public-private partnerships (PPPs) require the analysis and allocation of a broad spectrum of risks which are considered more complex than in traditional construction contracts. Traditional risk management techniques tend to ignore the managers ability to recognize and exploit opportunities, which arise as uncertainties are resolved over time and which could potentially increase the projects value. Therefore it is necessary that the risk management process takes account of the managerial flexibility (e.g. real options). The objective of this paper is to explore the possibilities and rationale for implementing real options strategies in the risk management process. Design/methodology/approach – The approach is based on a literature analysis aimed at identifying key risks and related mitigation strategies and on real option theory in order to model these strategies as managerial flexibilities that naturally exist or are built “artificially” in contractual conditions and clauses, guarantees, etc....

Developing Cost Estimation Models for Road Rehabilitation and Reconstruction: Case Study of Projects in Europe and Central Asia

The average unit costs of road works vary substantially between countries, and even between projects in the same country, due to a number of factors. In this paper an effort is made to develop prediction models for the unit costs of road works that could be applied for a wide range of conditions in different countries. A specialized dataset was used, which was generated under a World Bank study that included road works contracts from 14 countries in Europe and Central Asia (ECA). Two techniques were used for model development: multiple regression analysis and artificial neural networks. As the major problem found with the data set was missing or incomplete data, classification trees were used as an intermediate step to evaluate the correctness of the selected parameters. Three models were developed using regression analysis, two for the unit cost of asphalt concrete and one for the cost per km of rehabilitation and reconstruction works. The models include as independent variables the price of diesel fuel, country Gross National Income, World Governance Index, Transparency International Corruption Perception Index, percent of local bidders participating in the tender, and climate conditions. The analysis using classification trees confirmed the appropriateness of the variables selected in the regression analysis. The models developed using artificial neural networks were superior compared to the regression models, using mostly the same parameters. The resulting models could be particularly useful at the strategic level, for planning and optimization of works on road networks in ECA countries.

Probabilistic Approach to Evaluate Acceptable Toll Rates in Road Concessions

Countries worldwide make substantial efforts to keep the condition of their road infrastructure at an acceptable level under budgetary constraints. One possible model that enables the delivery of road projects under limited budgets is a public–private partnership (PPP). Because of several technical, financial, legal, and economic issues that need to be addressed, PPP agreements are relatively complex. In addition, defining long-term rights and obligations between the public sector and the private concessionaire requires an in-depth risk analysis because of the considerable number of risks usually encountered in PPP projects, such as a toll road concession. The objective of this paper is to present a method for an ex ante assessment of the acceptable toll rate for different stakeholders based on a probabilistic analysis of construction costs, operations and maintenance costs, and traffic volumes. The financial constraints included in the analysis are the debt service coverage ratio and return on equity. The resulting toll rates are determined from the simulated probability distributions of the input parameters. Such rates are then compared with the socially acceptable toll rate. The application of the proposed method to a case study of a toll road concession in Greece for which publicly available data were obtained indicates that the method presented is able to capture some uncertainties and improve the project’s risk quantification process. It is recommended that the proposed method be tested on other projects for further validation and eventual upgrading of the model for use as a tool in risk management in toll road concessions.

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

ABSTRACT 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.

Cross-asset risk assessment (X-ARA)

This paper presents an outline of the CEDR Transnational Road Research Programme funded research project “X-ARA – cross asset risk assessment”. Objective and scope of the project are described and the approach is outlined. The main part of this paper presents the findings of a desk study, carried out during the project, on literature related to risk assessment in asset management and the current practice on risk assessment of several European road operators.