Avoiding Disputes in PPP Road Contracts: Quantifying Impacts of Increased Allowable Truck Loads

Abstract

Dealing with changes is one major concern in long-term public-private partnerships (PPP) concessions, especially during the implementation phase, as some changes might lead to disputes between PPP partners and disrupt the successful execution of the project. In the transport sector, a change in the law regulating truck loading standards inevitably influences the financial stability of road projects procured through PPP. That is, the government’s decision of increasing the permissible truck load can lead to an accelerated deterioration of the pavement, and accordingly imposes additional expenditures that are borne by the concessionaire for maintaining the road condition at a satisfactory level, as required by the PPP contract terms. Given the fact that PPP concessions allow for additional compensations to the concessionaires in the case of modifications in the legislative and regulatory conditions, this study proposes two remuneration strategies for consideration by the concerned government to mitigate the adverse implications of increasing truck load limit on the concessionaire’s financial status and consequently to avoid the occurrence of disputes with the concessionaire. The work presented herein is twofold, as it quantifies the impact of the change in truck load regulations on two main contract terms: the toll regime and the concession period. Under the first approach, the government would provide direct compensation to the concessionaire through a shadow toll paid per overloaded truck. The value of the shadow toll was found to be largely influenced by the truck class, truck load, pavement structure, climatic conditions and traffic volumes. Moreover, it was found that the highest values of shadow tolls would apply to projects with relatively thin pavements and high traffic volumes. Under the second approach, an extension of the concession period was considered, which allows the concessionaire to recover the increased pavement maintenance costs. It was found that the length of the extended term depends, to a great extent, on the project’s characteristics in terms of the pavement structure, climatic conditions, traffic volumes, and more importantly on the toll revenues generated during the extended period. The two proposed alternative compensation techniques were devised and demonstrated through a methodology that involved flexible pavements performance prediction under varying loading conditions, using AASHTOWare Pavement ME. The proposed methodologies represent a framework that helps the two main parties involved in a PPP road project (i.e., the concessionaire and the highway agency) to accurately assess the effect of any increase in truck loading on the pavement performance and to decide on a fair compensation to be offered by the highway agency to the concessionaire, thereby contributing to the avoidance of dispute occurrence.