Project Portfolio Construction Decision Research For PPP Infrastructure

The Chinese government is promoting the PPP model in infrastructure projects to alleviate the financial pressure of the government, improve the efficiency of public services, satisfy the demands for the construction of new urbanization. In the investment decision of infrastructure projects, the government often needs to select the optimal project portfolio from numerous projects to be built which can meets their requirements. But there is still lack of study on PPP project portfolio and the comprehensive evaluation method when the government as the decision makers. So this paper aims at the study of government’s project portfolio construction decision for PPP infrastructure, analysised each participant’s benefit demand, established PPP infrastructure project portfolio construction decision model, selected the optimal construction scheme to provide support for the government decision-making. Based on these, this paper mainly did the following work:① Analyzing the influencing factors of PPP project investment decision. Through literature study and summary China’s government investment project evaluation system, balance each participant’s benefit demand, identified the influencing factors of PPP project investment decision(mainly include economy, finance, budget, risk and social benefit etc) and analysised each factors. Because of the PPP project "benefit sharing, risk sharing” features, the paper particular studyed on the project value of PPP project in economy factor and the risk factor: 1) Due to the traditional NPV method cannot effectively analyze all kinds of uncertain factors and management flexibility and underestimate the true value of the project, the paper used real option theory in PPP project value evaluation to overcome the shortcomings of NPV evaluation; 2)According to the PPP project "risk sharing" characteristics, analysis the risk types and risk sharing mechanism, then calculate the portfolio of multi project correlation risk.② Constructing the portfolio decision model for PPP projects. Based on the main influence factors of PPP project and combining with the current project evaluation system, establish the goal programming model for PPP projects portfolio decision, establish constraint conditions according to the influence factors: the economic constraint, financial constraint, budget constraint, risk constraint and social benefit constraint. Use Monte Carlo to simulation the future cash flow and standard deviation, and apply the real option value of PPP project and project portfolio risk analysis to economic constraints and risk constraint, to make the decision-making more scientific. Through PPP infrastructure project portfolio construction decision model, using 0-1 integer programming method, finally draw the optimum portfolio scheme, provides the support for the government construction decision.③ Finally, an example proves the validity and practicability of the model and algorithm. Use the PPP project portfolio decision model to select the optimum portfolio scheme when the government facing many planed PPP project, to meet the public sector, private sector and social public interests, to achieve mutual benefit and win-win situation reach "Pareto optimal", make the limited resources to play the biggest effect, improve the efficiency of public services.