Social Welfare–Based Concession Model for Build/Operate/Transfer Contracts
Publication: Journal of Construction Engineering and Management
Volume 141, Issue 1
Abstract
The concession period is one of the critical factors in the arrangement of a build-operate-transfer contract. For infrastructure that has major strategic, economic, and social effects, the concession period should balance the interests among the private investors, the government, and the users. However, existing research has more frequently discussed economic benefits rather than social welfare. In this regard, this paper proposes an improved model based on the traditional concession model by taking into account the case that the government might lower the service price in the posttransfer period to increase social welfare. This paper also introduces the optimal pricing methods for both concession and posttransfer period. The proposed methodology suggests a narrower concession interval, which helps improve the negotiation efficiency between the government and the private investor to a certain extent. The application of the proposed model is demonstrated by a case study of Western Harbor Tunnel in Hong Kong, and the outcome shows that a significant improvement was made when taking into account social welfare.
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Acknowledgments
This research was funded by the China International Contractors Association and Ministry of Housing and Urban-Rural Development of China. The authors are grateful for support provided by Shanghai Construction Group, China Civil Engineering Group, China Harbor Engineering Group, and China Railway Construction Corporation, and they would like to express sincere appreciation to anonymous referees for their helpful comments and suggestions.
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Published In
Journal of Construction Engineering and Management
Volume 141 • Issue 1 • January 2015
Copyright
© 2014 American Society of Civil Engineers.
History
Received: Dec 10, 2013
Accepted: Jul 3, 2014
Published online: Aug 19, 2014
Published in print: Jan 1, 2015
Discussion open until: Jan 19, 2015
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