Generalized Economic Modeling for Infrastructure and Capital Investment Projects

Abstract

Economic modeling and risk analysis are important processes for the appraisal of infrastructure and revenue-generating projects such as build-operate-transfer (BOT) projects. These processes have been commonly implemented using spreadsheets in which the analyst would build several models to analyze a project under varying conditions and risk assumptions. For better efficiencies in building economic structures and evaluation of projects, the current paper defines “classifications” of estimating and cash flow methods, and develops a generalized model. A classification represents a particular domain—construction, revenues, financing, operation and maintenance, or risk analysis, for example—and holds the estimating methods of that domain. The basic building block behind the model structure is a work package/stream that would have its own properties and estimating methods by direct selection from the relevant classification. By integrating the building blocks together a project economic structure is built and various performance measures are formulated. The model was implemented in a prototype software system called Evaluator. A BOT highway project is used to show an application of the concepts and the generalized model.