Research On The Adjustment Model Of The Concession Period And Price For BOT Projects

As a project financing mode to attract social capital, BOT (Build-Operate-Transfer) arrangements have been widely developed in infrastructure construction and public utility. Revenue of a BOT project is one of the most critical issues in concession negotiation between the public and private sectors, and rationality of the revenue directly affects the success of the project. In practice, regarding the different dec is ion-making objectives of the public and private sectors, it needs to consider the project investment, operation and maintenance costs, concession period and price, and then make right decisions on the revenue. To share risks between the public and private sectors as well as control the revenue within a reasonable interval which is approved by the two participants, many BOT projects adjust the concession period or the concession price during the period of operation. However, there are disadvantages of these adjustments, hence, it is necessary to research on the adjustment model of the concession period and price for BOT projects.First, based on considering the classification of infrastructure projects as well as the characteristic of BOT arrangements, BOT projects can be divided into two categories including pure-commercial and quasi-commercial BOT projects. Factors that influence the revenues of the two types of BOT projects are identified firstly. Then, by applying system dynamics approach, interactions and mathematical expressions among the factors and revenues are analyzed and identified. Additionally, by the use of fuzzy logic, several linguistic variables are estimated and quantified. As a result, the revenue models for the two types of BOT projects are constructed.Second, for the pure-commercial BOT project, uncertainty of the demand is a primary cause of deviation from the revenue forecasted; therefore, a demand function is defined, and variations of the function are proposed according to the increase and decrease of the demand, respectively. Further, by combining the functions of demand and project revenue, the adjustment model concerning the concession period and price for pure-commercial BOT projects are constructed, and solutions of the model under different conditions are calculated.Then, to the quasi-commercial BOT project, many general publics are involved. It is necessary to take different objectives of interests into consideration from the perspectives of the general publics as well as the public and private sectors. By applying the approach of multi-objective programming, a multi-objective decision-making model of adjusting the concession period and price for quasi-commercial BOT is proposed. In the model, the attitude of the general public is quantified based on the prospect theory and fuzzy set theory, and then the alternatives for adjusting the concession period and price are analyzed. Finally, numerical examples of the pure-commercial and quasi-commercial BOT projects are employed to demonstrate and validate the proposed models. Additionally, conclusions, shortages and improvements of this research are proposed to give some suggestions of adjusting the concession period and price in BOT projects for the public and private sectors.