Hybrid Dynamic Pricing Model for Transport PPP Projects during the Residual Concession Period

Abstract

Public–Private-Partnerships (PPPs) have been adopted worldwide to deliver infrastructure projects and/or provide public services. Having a reasonable concession price (operation and transfer) in place is pivotal for sustaining a win-win relationship between governments and private sectors. However, historical data have shown that the concession price of PPPs when transfer is less than satisfactory due to the changing attribute of pricing parameters, causing substantial loss of residual value (RV). Nevertheless, a rational and systematic pricing model for PPPs, especially transport PPPs, is not yet available. To this end, a hybrid dynamic pricing model for transport PPPs during the residual concession period underpinned by the case-based reasoning technique is proposed. Furthermore, using a case study of the Western Harbor Crossing tunnel in Hong Kong, the proposed model is validated to be able to account for the dynamic pricing parameters and calculate a reasonable and accurate residual concession price. The contributions of this study are twofold: (1) it highlights that a reasonable concession price beyond the operation period is significant in maintaining RV; and (2) it provides a hybrid dynamic pricing model for governments and private sectors to calibrate the current less-than-satisfactory residual concession price.