Studies Of Concession Period For Quasi-operational Infrastructure PPP Projects

The demand for infrastructure construction has increased significantly as the urbanization process of our country accelerating in the past 30 years. Public-private partnerships allow a lot of private capital to enter the field of infrastructure construction and bring new energy to ease the financial pressure of the government sector. The introduction of advanced technology and management methods improve the operational efficiency of the infrastructure. Infrastructure can be divided into operational infrastructure, quasi-operational infrastructure and non-operational infrastructure. There is charging mechanism in quasi-operational infrastructure projects, but the price charged cannot be the basis of the construction and operating costs based on its positive externalities. The income of it cannot be fully recover the investment. So we can use the PPP model to invest in the construction of quasi-operational infrastructure. The project company could obtain a certain income from the project through concession operation and the project will be handed over to the government when the concession period is over. Concession period is the boundary of public sector and the private sector’s rights, obligations and responsibilities, which is the key to ensure their interests. At present, the academic study of the concession period is not perfect. The main content of this paper is as follows:Firstly, the paper analyses the project division theory, public goods theory and theory of marketability, defining that quasi-operational infrastructure projects belong to quasi-public goods and could be finished by using PPP mode. By analyzing the definition of PPP mode of domestic and foreign scholars, the paper concludes the meaning of quasi-operational infrastructure PPP projects and the characteristics of it to explain the necessity of concession period studying.Secondly, the paper describes several affecting factors of quasi-operational infrastructure PPP projects’ concession period and calculates their mechanism action on concession period. Method of determining these factors is also proposed.And then, the decision-making methods of concession period such as internal rate of return method, net present value method and Monte Carlo simulation are compared by analyzing the advantages and disadvantages of each method. The paper demonstrates the applicability of the game model by describing the concession period negotiation process with game theory and principal-agent theory.Finally, a game decision model is built and an example is used to prove the feasibility of the model. Recommendations are proposed for the application of it.