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Akintoye, A, Hardcastle, C, Beck, M, Chinyio, E A and Asenova, D (2003) Achieving best value in private finance initiative project procurement. Construction Management and Economics, 21(05), 461-70.

Ammar, M A (2003) Float analysis of non-serial repetitive activities. Construction Management and Economics, 21(05), 535-42.

Chan, A P C, Chan, D W M and Ho, K S K (2003) An empirical study of the benefits of construction partnering in Hong Kong. Construction Management and Economics, 21(05), 523-33.

Khosrowshahi, F and Alani, A M (2003) A model for smoothing time-series data in construction. Construction Management and Economics, 21(05), 483-94.

Ng, M F, Tummala, V M R and Yam, R C M (2003) A risk-based maintenance management model for toll road/tunnel operations. Construction Management and Economics, 21(05), 495-510.

Voordijk, H, Leuven, A v and Laan, A (2003) Enterprise Resource Planning in a large construction firm: implementation analysis. Construction Management and Economics, 21(05), 511-21.

Waraszawski, A (2003) Parametric analysis of the financing cost in a building project. Construction Management and Economics, 21(05), 447-59.

Ye, S and Tiong, R L K (2003) The effect of concession period design on completion risk management of BOT projects. Construction Management and Economics, 21(05), 471-82.

  • Type: Journal Article
  • Keywords: concession period structure; incentive scheme; privately financed infrastructure; BOT; completion risk management; simulation
  • ISBN/ISSN: 0144-6193
  • URL: https://doi.org/10.1080/0144619032000073488
  • Abstract:

    The design of concession period for build-operate-transfer (BOT) projects is crucial to financial viability and completion risk management. A systematic analysis shows that concession period design involves the design of concession period structure, the determination of the concession period length and incentive schemes. The concession period may have a single-period structure or a two-period structure, its length may be fixed or variable, and it may be combined with incentive schemes. Different designs reflect different risk control strategies for completion time overruns. The single-period concession structure requires the project company to assume completion risk, while the two-period concession structure could, to some extent, reduce the completion risk exposure to the project company, depending on the incentive schemes. Through Monte Carlo simulation, this paper evaluates the mean net present value (NPV), variance and NPV-at-risk of different concession period structures so that both the government and the concessionaires can understand their risk exposure and rewards. The paper then analyses the influence of project characteristics on concession period design to evaluate the feasibility of the design. It is concluded that a well-designed concession period structure can create a ’win-win’ solution for both project promoter and the host government.