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    Variation Negotiation in PPP Toll-Road Projects: Option Approach

    Source: Journal of Legal Affairs and Dispute Resolution in Engineering and Construction:;2021:;Volume ( 013 ):;issue: 004::page 04521025-1
    Author:
    Tuan Anh Nguyen
    ,
    Yuting Sun
    DOI: 10.1061/(ASCE)LA.1943-4170.0000495
    Publisher: ASCE
    Abstract: The literature on public-private partnership (PPP) agreements suggests that variation renegotiation places the public sector authority at a disadvantage, because the authority has to pay extra costs to claim its variation. This leads to the need for a PPP contract to incorporate flexibility, embedded with real options analysis (ROA), to deal with these variations. This paper proposes that PPP agreements should ideally contain an option for the authority to order variation as an effective response to changing circumstances in the postconstruction phase throughout the concession period of toll roads. Having the variation option, the authority sets a threshold on the concessionaire’s bargaining power via variation negotiation as the authority can order its variation at its favorably controlled price. The paper also presents the ROA, based on the probabilistic cash flow approach, that gives the financial value of flexibility for the authority to order variation. This approach is straightforward and provides a fair way forward for the implementation of PPP toll roads.
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      Variation Negotiation in PPP Toll-Road Projects: Option Approach

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    http://yetl.yabesh.ir/yetl1/handle/yetl/4272441
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    contributor authorTuan Anh Nguyen
    contributor authorYuting Sun
    date accessioned2022-02-01T22:00:03Z
    date available2022-02-01T22:00:03Z
    date issued11/1/2021
    identifier other%28ASCE%29LA.1943-4170.0000495.pdf
    identifier urihttp://yetl.yabesh.ir/yetl1/handle/yetl/4272441
    description abstractThe literature on public-private partnership (PPP) agreements suggests that variation renegotiation places the public sector authority at a disadvantage, because the authority has to pay extra costs to claim its variation. This leads to the need for a PPP contract to incorporate flexibility, embedded with real options analysis (ROA), to deal with these variations. This paper proposes that PPP agreements should ideally contain an option for the authority to order variation as an effective response to changing circumstances in the postconstruction phase throughout the concession period of toll roads. Having the variation option, the authority sets a threshold on the concessionaire’s bargaining power via variation negotiation as the authority can order its variation at its favorably controlled price. The paper also presents the ROA, based on the probabilistic cash flow approach, that gives the financial value of flexibility for the authority to order variation. This approach is straightforward and provides a fair way forward for the implementation of PPP toll roads.
    publisherASCE
    titleVariation Negotiation in PPP Toll-Road Projects: Option Approach
    typeJournal Paper
    journal volume13
    journal issue4
    journal titleJournal of Legal Affairs and Dispute Resolution in Engineering and Construction
    identifier doi10.1061/(ASCE)LA.1943-4170.0000495
    journal fristpage04521025-1
    journal lastpage04521025-10
    page10
    treeJournal of Legal Affairs and Dispute Resolution in Engineering and Construction:;2021:;Volume ( 013 ):;issue: 004
    contenttypeFulltext
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    DSpace software copyright © 2002-2015  DuraSpace
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