NPV Model for Evaluating the Economic Efficiency of Municipal Street Maintenance by Private Providers
Publication: Journal of Construction Engineering and Management
Volume 135, Issue 8
Abstract
Municipal street maintenance can be either performed by a local authority or by a private provider through public–private partnership (PPP) or outsourcing. The choice of either alternative requires proof of economic efficiency at the planning phase of these services. The economic model presented in this paper outlines the basis for the comprehensive probabilistic comparison of the economic efficiency of two approaches: (1) self-performance (public sector delivery) and (2) performance by a private provider (PPP delivery). Based on clear system boundaries, the net present values of the two alternatives are addressed, including possible risk costs. The results of the efficiency comparison are then evaluated using the net present value difference axiom and the net present value efficiency axiom. To ensure that the short-term effects of privatizing or outsourcing street maintenance services are not overrated and the long-term economic efficiency is maintained, the analysis must cover at least two long-term periods.
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Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 135 • Issue 8 • August 2009
Pages: 701 - 709
Copyright
© 2009 ASCE.
History
Received: Oct 9, 2007
Accepted: Mar 11, 2009
Published online: Jul 15, 2009
Published in print: Aug 2009
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