Determining a reasonable concession period for private sector provision of public works and service

Abstract

The concession period is one of the most important issues to be addressed in private sector provision of public works and services through concession arrangements as it, to some extent, demarcates the rights and responsibilities between public and private sectors in a project's life cycle, and it is also critical to the project's sustainable development. This paper proposes a methodology for the determination of an appropriate length of the concession based on a win–win principle for parties involved and exercises simulation techniques in measuring and evaluating construction and economic uncertainties and risks. A case study of a hypothetical infrastructure project is provided to demonstrate the application of the proposed methodology, mathematical model, and simulation techniques.Key words: build–own–transfer, concession, critical path method, financial management, infrastructure, Monte Carlo simulation, partnerships, procurement, risk analysis.