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1 – 10 of over 2000
Article
Publication date: 29 April 2021

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.

Details

Engineering, Construction and Architectural Management, vol. 29 no. 3
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 1 May 2004

Prasanta K. Dey and Stephen O. Ogunlana

Construction projects are risky. However, the characteristics of the risk highly depend on the type of procurement being adopted for managing the project. A build‐operate‐transfer…

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Abstract

Construction projects are risky. However, the characteristics of the risk highly depend on the type of procurement being adopted for managing the project. A build‐operate‐transfer (BOT) project is recognized as one of the most risky project schemes. There are instances of project failure where a BOT scheme was employed. Ineffective rts are increasingly being managed using various risk management tools and techniques. However, application of those tools depends on the nature of the project, organization's policy, project management strategy, risk attitude of the project team members, and availability of the resources. Understanding of the contents and contexts of BOT projects, together with a thorough understanding of risk management tools and techniques, helps select processes of risk management for effective project implementation in a BOT scheme. This paper studies application of risk management tools and techniques in BOT projects through reviews of relevant literatures and develops a model for selecting risk management process for BOT projects. The application to BOT projects is considered from the viewpoints of the major project participants. Discussion is also made with regard to political risks. This study would contribute to the establishment of a framework for systematic risk management in BOT projects.

Details

Industrial Management & Data Systems, vol. 104 no. 4
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 11 July 2020

Cenk Budayan, Ozan Okudan and Irem Dikmen

The purpose of this paper is to identify and prioritize key performance indicators (KPIs) that can be used for stage-based performance assessment of build-operate-transfer (BOT

Abstract

Purpose

The purpose of this paper is to identify and prioritize key performance indicators (KPIs) that can be used for stage-based performance assessment of build-operate-transfer (BOT) projects.

Design/methodology/approach

This research was conducted through focus group discussions and face-to-face questionnaires. Firstly, stage-level KPIs for BOT projects were identified by conducting a literature survey. The list of KPIs that can be used for measuring performance at different stages of a BOT project was finalized by conducting focus group discussions with 12 participants. The data related to the importance of identified KPIs were collected via a face-to-face questionnaire in which 30 high-level managers participated. Based on these data, KPIs were prioritized considering eight different stages of a BOT project by using Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS).

Findings

The research findings reveal that 63 stage-level KPIs can be used for measuring the performance of BOT projects at eight different stages, which are “feasibility study and preliminary plan,” “announcement and submission of application,” “evaluation and selection,” “negotiation and signing of concession agreement,” “design,” “construction,” “operation” and “transfer.” The most important KPIs were determined as “comprehensiveness of project technical feasibility,” “detailed tendering procedure,” “effectiveness of concessionaires' technical knowledge/capability evaluation,” “good relationships between government and concessionaire,” “technology transfer,” “effectiveness of quality control,” “effectiveness of facility management” and “effectiveness of hand-back management” for each stage. The findings can be used by companies to evaluate performance at each stage of a BOT project and, if necessary, take the necessary actions for performance improvement at the stage level.

Research limitations/implications

The main limitation is the size of the sample, which represents the perspectives of 30 Turkish high-level managers on KPIs in BOT projects. Besides, the selected method, namely, TOPSIS, does not provide quality measures related to the outputs; therefore, it is difficult to see the inconsistencies among the experts.

Practical implications

The study findings will help in devising appropriate performance evaluation practices for BOT projects to overcome the shortfalls of the existing practices and systems proposed in the literature and help in achieving the superior performance while developing infrastructure through the BOT route.

Originality/value

This paper proposes a process-based approach for measuring the performance of a BOT project considering eight different stages. It fills a research gap in the public–private partnership literature by focusing on stages rather than phases. The results can be used by practitioners to establish stage-level performance management systems for BOT projects.

Details

International Journal of Managing Projects in Business, vol. 13 no. 6
Type: Research Article
ISSN: 1753-8378

Keywords

Article
Publication date: 9 March 2020

Phuong Thi Le, Nicholas Chileshe, Konstantinos Kirytopoulos and Raufdeen Rameezdeen

The Built Operate Transfer (BOT) model has been increasingly used in transportation investments in Vietnam. However, there is still an inadequacy of risk management applications…

Abstract

Purpose

The Built Operate Transfer (BOT) model has been increasingly used in transportation investments in Vietnam. However, there is still an inadequacy of risk management applications in these projects and lack of research in this area. The study aims to improve the success of projects implemented through the BOT model in Vietnam.

Design/methodology/approach

The study followed a sequential design including interviews and a questionnaire survey to investigate the perception of stakeholders from public and private sector regarding the probability of occurrence and the severity of impact of risks in BOT transportation projects in Vietnam. Quantitative data from the survey was subjected to descriptive and inferential statistics to explore the priority of risks as well as the differences in the perception between the public and private sectors.

Findings

The results showed that the top five most significant risks in BOT transportation projects in Vietnam are: (1) problems with land acquisition and compensation, (2) inappropriate location of toll booths, (3) public resistance to pay, (4) high toll rate and (5) lack of cash flow. With the exception of “lack of cash flow,” there were no statistically significant differences in the rankings of individual risks between the public and private sector. In addition, there is a significant positive correlation in the overall rankings of all risks for both sectors.

Originality/value

This study contributes to the body of knowledge by exploring the probability of occurrence and the severity of the impact of risks in BOT transportation projects in a developing country like Vietnam which has not been extensively explored yet. Second, it provides an insight into the perception of stakeholders from the public and private sector regarding the level of risks which is very useful for potential stakeholders in making decisions when they intend to participate in such partnerships. Third, it enables the Vietnamese government to establish suitable policies related to such projects. These contributions are very important in improving risk management in PPPs in developing countries.

Details

Engineering, Construction and Architectural Management, vol. 27 no. 6
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 19 June 2019

Hande Aladağ and Zeynep Işık

In build-operate-transfer (BOT) transportation projects, design and construction phases are critical in terms of their effect on time and cost overruns. The purpose of this paper…

Abstract

Purpose

In build-operate-transfer (BOT) transportation projects, design and construction phases are critical in terms of their effect on time and cost overruns. The purpose of this paper is to identify the role of risk factors affecting these phases and their significance level for BOT transportation projects.

Design/methodology/approach

Design and construction risks were determined and then validated by focus group discussions. Afterwards, an illustrated case study was presented to better understand the effects of determined risks in a BOT mega transportation project. As the last step of the study, the fuzzy analytical hierarchy process method was used to prioritize risk factors.

Findings

The prominent risk factors were found out as occupational accidents, integration between design and construction phases and excessive design variations.

Research limitations/implications

Different kinds of BOT transportation projects in different countries might be executed very differently considering specific social, political, economic and other factors. However, the results of the study are important in terms of the specific lessons learned from the case study that can be used as a foundation for developing possible risk mitigation measures.

Originality/value

Though the risk management of BOT projects has been investigated frequently in the literature, there is a knowledge gap in the quantitative evaluation of risk significance specific to design and construction risks. The prioritization of determined risks with an associated case from a mega transportation project will contribute to the BOT project practitioners about possible challenges in design and construction phases in BOT mega transportation projects.

Details

Engineering, Construction and Architectural Management, vol. 26 no. 10
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 28 November 2019

Morteza Bayat, Mostafa Khanzadi, Farnad Nasirzadeh and Ali Chavoshian

This study aims to determine the optimal value of concession period length in combination with capital structure in build–operate–transfer (BOT) contracts, based on direct…

Abstract

Purpose

This study aims to determine the optimal value of concession period length in combination with capital structure in build–operate–transfer (BOT) contracts, based on direct negotiation procurement and considering the conflicting financial interests of different parties involved in the project.

Design/methodology/approach

The financial model of a BOT project is developed considering all the influencing factors. Then, fuzzy set theory is used to take into account the existing risks and uncertainties. Bilateral bargaining game based on alternating-offers protocol is applied between the government and the sponsor to divide project financial benefit considering the lender’s requirements. Finally, concession period and equity level will be determined simultaneously according to the sponsor’s and government’s share of project financial benefit and the lender’s requirements.

Findings

The proposed model is implemented on a real case study, and a fair and efficient agreement on concession period length and capital structure is achieved between the government and the sponsor considering the lender’s requirements. It is revealed that being the first proposer in the bargaining process will affect the concession period length; however, it will not affect the equity level. Moreover, it is shown that considering income tax as a part of government’s financial benefit increases the length of concession period.

Research limitations/implications

The presented model concentrates on direct negotiation procurement in BOT projects where the sponsor and government bargain on dividing financial benefits of project. It is assumed that the product/service price is determined before according to market analysis or users’ affordability. All the revenue of project during concession period is assumed to belong to the sponsor.

Practical implications

The proposed model provides a practical tool to aid BOT participants to reach a fair and efficient agreement on concession period and capital structure. This could prevent failing or prolonging the negotiation and costly renegotiation.

Originality/value

By investigation of previous studies, it is revealed that none of them can determine the optimal value of concession period length and capital structure simultaneously considering the BOT negotiation process and different financial interests of parties involved in the project. The proposed model presents a new approach to determine the financial variables considering the conflicting interests of involved parties. The other novelty aspects of the presented model are as follows: introducing a new approach for calculating the sponsor and the government’s share of project financial benefit that will affect the determination of the concession period length and considering the effect of existing risks and uncertainties on final agreement between the involved parties using fuzzy set theory.

Details

Construction Innovation , vol. 20 no. 1
Type: Research Article
ISSN: 1471-4175

Keywords

Article
Publication date: 24 April 2009

Esther Cheung and Albert P.C. Chan

Several major infrastructure projects in the Hong Kong Special Administrative Region (HKSAR) have been delivered by the build‐operate‐transfer (BOT) model since the 1960s…

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Abstract

Purpose

Several major infrastructure projects in the Hong Kong Special Administrative Region (HKSAR) have been delivered by the build‐operate‐transfer (BOT) model since the 1960s. Although the benefits of using BOT have been reported abundantly in the contemporary literature, some BOT projects were less successful than the others. This paper aims to find out why this is so and to explore whether BOT is the best financing model to procure major infrastructure projects.

Design/methodology/approach

The benefits of BOT will first be reviewed. Some completed BOT projects in Hong Kong will be examined to ascertain how far the perceived benefits of BOT have been materialized in these projects. A highly profiled project, the Hong Kong‐Zhuhai‐Macau Bridge, which has long been promoted by the governments of the People's Republic of China, Macau Special Administrative Region and the HKSAR that BOT is the preferred financing model, but suddenly reverted back to the traditional financing model to be funded primarily by the three governments with public money instead, will be studied to explore the true value of the BOT financial model.

Findings

Six main reasons for this radical change are derived from the analysis: shorter take‐off time for the project; difference in legal systems causing difficulties in drafting BOT agreements; more government control on tolls; private sector uninterested due to unattractive economic package; avoid allegation of collusion between business and the governments; and a comfortable financial reserve possessed by the host governments.

Originality/value

The findings from this paper are believed to provide a better understanding to the real benefits of BOT and the governments' main decision criteria in delivering major infrastructure projects.

Details

Journal of Property Investment & Finance, vol. 27 no. 3
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 April 2000

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.

Details

Engineering, Construction and Architectural Management, vol. 7 no. 4
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 23 September 2019

Tirth Dineshkumar Patel, Theo C. Haupt and Tejas Bhatt

The built-transfer and operate (BOT) toll model has been a common approach for highway construction in India. Due to large amount of investment, many stakeholders and long…

Abstract

Purpose

The built-transfer and operate (BOT) toll model has been a common approach for highway construction in India. Due to large amount of investment, many stakeholders and long concession period, Indian BOT toll roads become susceptible to different risks. Risk assessment is one of the essential and difficult steps of risk management that enables professionals to quantify and analyze the risks that may hamper the BOT toll project performance in terms of cost, quality, safety and time. The purpose of this study is to identify and assess the risk factors by the fuzzy probabilistic model.

Design/methodology/approach

The comprehensive literature review has been carried out for identification of Indian BOT toll roads projects' risk factors. A structured questionnaire was prepared which was then filled by contractors, government officers, academicians, project managers and consultants. For risk assessment, a systematic quantitative-based fuzzy probabilistic model is proposed with the help of lab-view, as a risk assessment technique to simulate the impreciseness of human judgment and to improve the assessment accuracy.

Findings

The risk assessment is one of the difficult tasks because BOT toll roads have complex structure. In this study, total 71 risks have been identified and categorized under 14 risk factors on a basis of case studies of Indian toll roads and literature review. All risks have been assessed by the fuzzy probabilistic model by lab-view. The land acquisition is the most crucial risk of BOT toll roads project which is subsequently followed by construction time and cost over-run. Also, Indian BOT toll roads are facing the traffic shortfalls critically, which became a reason toward declination trend for investment in BOT toll projects by the private players. Other risks like political risks, contractual and social risk badly are affecting the project performance. Early risk identification and assessment can be beneficial for the project, which is required to prepare the risk response strategy before the project commencement.

Originality/value

This study throws light on comprehensive risk assessment and framework modeling of the risk assessment for the BOT toll roads project in India. This comprehensive risk assessor model can be used for BOT toll roads in Indian scenario for prioritization of the critical risk. It is important for the public and private sectors to establish an effective risk assessor model for public–private partnership (PPP) projects to achieve win-win condition for both.

Details

Journal of Engineering, Design and Technology , vol. 18 no. 1
Type: Research Article
ISSN: 1726-0531

Keywords

Article
Publication date: 30 November 2018

Akintayo Opawole, Kahilu Kajimo-Shakantu, Oluwaseyi Olalekan Alao and Chinanu Patience Ogbaje

The build-operate-transfer (BOT) model is fast becoming a sustainable tool for remedying the deficiencies of public financing of hostel facilities in Nigeria. Being a new concept…

Abstract

Purpose

The build-operate-transfer (BOT) model is fast becoming a sustainable tool for remedying the deficiencies of public financing of hostel facilities in Nigeria. Being a new concept in Nigeria, this study aims to assess clients’ organizations perspective of risk factors associated with BOT model with a view to providing information for their effective management.

Design/methodology/approach

Quantitative descriptive analysis was used, which was based on primary data obtained through questionnaire survey. The respondents included architects, engineers (structural/civil/mechanical/electrical), builders and quantity surveyors who were officials in the physical planning development and works departments of five sampled universities in the southwestern Nigeria who executed at least one BOT hostel project. A total number of 45 copies of questionnaire were administered, out of which 35 copies representing a response rate of 77.8 per cent were retrieved. Data analysis was undertaken using descriptive statistics: percentages, mean item score and relative importance index.

Findings

Severity of the risk factors specific to BOT model for hostel development was revealed. Besides, conceptual allocations and mitigation measures were suggested against each risk factor.

Practical implications

Private sector investor would find the results of this research useful in preparing robust BOT contract packages through the understanding of the nature of risk factors associated with the procurement model.

Originality/value

With limited evaluation of BOT in hostel facilities procurement, this study developed a simplified approach to management of risk factors associated with BOT model in the education sector.

Details

Journal of Engineering, Design and Technology, vol. 17 no. 1
Type: Research Article
ISSN: 1726-0531

Keywords

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