Table of Contents

Foreword xi

Contributors xiii

Acknowledgements xxiii

Introduction xxv

Part One PPP Policy 1

Chapter 1 Private Finance Initiative in Use 3
Ezekiel Chinyio and Rod Gameson

1.1 Introduction 3

1.2 The Private Finance Initiative 4

1.3 UK Government’s Influence on the Use of PFI 5

1.4 Private Sector Tasks in PFI 6

1.5 Establishing PFI Contracts 6

1.6 Forms of Finance Used in PFI 8

1.7 Performance of PFI Schemes – A Theoretical Perspective 10

1.8 Improving the Performance of PFI 14

1.9 Performance of PFI Schemes – An Empirical Review 14

1.10 A Generic Overview of PFI Schemes 19

1.11 Comparative Studies 20

1.12 Conclusion 20

Chapter 2 Using the Private Sector to Finance Capital Expenditure: The Financial Realities 27
Jean Shaoul

2.1 Introduction 27

2.2 The Control of PFI 30

2.3 Post-implementation Evaluation of PFI 34

2.4 Conclusion 42

Chapter 3 Obstacles to Accountability in PFI Projects 47
Darinka Asenova and Matthias Beck

3.1 Introduction 47

3.2 Finance Capital and Institutional Decision Making 51

3.3 Conclusion 61

Chapter 4 Refinancingand Profitability of UK PFI Projects 64
Steven Toms, Darinka Asenova and Matthias Beck

4.1 Introduction 64

4.2 PFI Finance and Value for Money 65

4.3 Mechanisms and Policies of Refinancing 69

4.4 PFI Profits and Refinancing 72

4.5 Conclusion 77

Chapter 5 The Dedicated PPP Unit of the South African National Treasury 82
Philippe Burger

5.1 Introduction 82

5.2 The Rationale for PPPs 83

5.3 The Rationale for a Dedicated PPP Unit 84

5.4 A Brief History of PPPs and the PPP Unit in South Africa 86

5.5 The Role of the South African Dedicated PPP Unit 90

5.6 Future Challenges 93

5.7 Conclusion 95

Chapter 6 PPP in Greenfield Airport Development: A Case Study of Cochin International Airport Limited 97
Thillai A. Rajan, Sheetal Sharad and Sidharth Sinha

6.1 Introduction 97

6.2 Private Participation in New Airport Development 99

6.3 Indian Aviation Sector 103

6.4 The Cochin International Airport Project 105

6.5 Performance of CIAL 112

6.6 Summary and Lessons 117

Chapter 7 PPPs for Physical Infrastructure in DevelopingCountries 123
Akintola Akintoye

7.1 Introduction 123

7.2 An Overview of Public-Private Partnerships 124

7.3 PPP: Developed Economies 125

7.4 PPP: Developing Economies 127

7.5 PPP: Analysis of Private Sector Participation 129

7.6 Discussion 138

7.7 Conclusions 141

Chapter 8 Team Buildingfor PPPs 145
Mohan M. Kumaraswamy, Florence Y.Y. Ling and Aaron M. Anvuur

8.1 Introduction 145

8.2 Integrating and Sustaining PPP Teams 147

BLBK049-Akintoye July 30, 2008 13:38 8.3 Hong Kong Perspectives of PPP Teams 149

8.4 Singapore Perspectives of PPP Teams 153

8.5 Integrating PPP Project Teams 156

8.6 Selecting Project Consortium Teams 156

8.7 Concluding Observations 160

Part Two PPP Finance 163

Chapter 9 PPP Infrastructure Investments: Critical Aspects and Prospects 165
Demos C. Angelides and Yiannis Xenidis

9.1 Introduction 165

9.2 Critical Issues in Financing PPP Projects 167

9.3 Prospects for PPP Infrastructure Development 171

9.4 Conclusion 178

Chapter 10 Patterns of Financing PPP Projects 181
Sudong Ye

10.1 Introduction 181

10.2 General Patterns of Financing PPP Projects 186

10.3 Choice of Financing Patterns 195

10.4 Summary 196

Chapter 11 PPP Financingin the USA 198
Arthur L. Smith

11.1 Introduction 198

11.2 PPP Financing Models in the US 200

11.3 Case Studies 206

11.4 Conclusions 210

Chapter 12 Financial Modelling of PPP Projects 212
Ammar Kaka and Faisal Alsharif

12.1 Introduction 212

12.2 Research in PPP Financial Modelling 213

12.3 Cost Models 214

12.4 Occupancy Cost 215

12.5 Cash Flow Models 217

12.6 PFI Financial Modelling in Practice 217

12.7 An Example of a PFI Financial Model for Schools 224

12.8 Conclusion 226

Chapter 13 Application of Real Options in PPP Infrastructure Projects: Opportunities and Challenges 229
Charles Y.J. Cheah and Michael J. Garvin

13.1 Introduction 229

13.2 Infrastructure Project Flexibility as Real Options 231

13.3 Real Options Literature Related to Architecture, Engineering, Construction and Infrastructure Projects 234

13.4 Modelling Issues and Concerns 237

13.5 An Integrated Real Options–Risk Management Process for PPP Infrastructure Projects 244

13.6 Summary 245

Chapter 14 Financial Implications of Power Purchase Agreement Clauses in Revenue Stream of Independent Power Producers in Nepal 250
Raju B. Shrestha and Stephen Ogunlana

14.1 Introduction 250

14.2 Financial Analysis 252

14.3 Analyses of Clauses 255

14.4 Summary 263

Chapter 15 Government Policy on PPP Financial Issues: Bid Compensation and Financial Renegotiation 267
S. Ping Ho

15.1 Introduction 267

15.2 Game Theory 268

15.3 Is Bid Compensation Effective in PPP Tendering? 271

15.4 Financial Renegotiation and its Associated Problems 280

15.5 Financial Renegotiation Game and its Equilibrium 281

15.6 Propositions and Rules 289

15.7 Governing Principles and Policy Implications for Project Procurement and Management 292

15.8 Conclusion 299

Part Three PPP Management 301

Chapter 16 Innovation in PPP 303
David Eaton and Rıfat Akbiyikli

16.1 Introduction 303

16.2 Innovation and Competitive Advantage in PPP 304

16.3 Stimulants and Impediments to Innovation in PFI/PPP Projects 314

16.4 Innovation and Financial Issues in PFI/PPP Projects 319

16.5 Conclusion 324

Chapter 17 Combining Finance and Design Innovation to Develop Winning Proposals 327
Colin F. Duffield and Chris J. Clifton

17.1 Introduction 327

17.2 The Drivers of PFI/PPP Projects in Different Jurisdictions 327

17.3 Design Innovation: The Issues 329

17.4 Financing Arrangements for PFI/PPP Projects 333

17.5 The Theory and Practice of Winning Proposals 342

Chapter 18 The Application of a Whole-Life Value Methodology to PPP/PFI Projects 346
John Kelly

18.1 Introduction 346

18.2 Projects 346

18.3 Client Value System 349

18.4 Whole-Life Costing 351

18.5 The Application of Whole-Life Value to the PPP/PFI Process 356

18.6 Discussion 360

Chapter 19 Best Value Procurement in Build Operate Transfer Projects: The Turkish Experience 363
Irem Dikmen, M. Talat Birgonul and Guzide Atasoy

19.1 Introduction 363

19.2 Bid Evaluation in BOT Projects 365

19.3 Case Studies 367

19.4 Best Value Procurement in BOT Projects 370

19.5 An Application of the Proposed Methodology 372

19.6 Concluding Remarks 376

Chapter 20 Application of Risk Analysis in Privately Financed Projects: The Value For Money Assessment through the Public Sector Comparator and Private Finance Alternative 379
Tony Merna and Douglas Lamb

20.1 Introduction 379

20.2 The PSC and the PFA 381

20.3 Conclusion 395

Chapter 21 Developing a Framework for Procurement Options Analysis 398
Darrin Grimsey and Mervyn K. Lewis

21.1 Introduction 398

21.2 What do PPPs Bring to Procurement? 398

21.3 Developing a Methodology 399

21.4 Conclusion 412

Chapter 22 The Payment Mechanism in Operational PFI Projects 414
Jon Scott and Herbert Robinson

22.1 Introduction 414

22.2 The Key Principles 414

22.3 Value for Money Arguments 415

22.4 Key Components of the Payment Mechanism 416

22.5 The Output Specification 419

22.6 Performance Measurement System 421

22.7 Case Studies 424

22.8 Analysis and Discussion of Findings 429

22.9 Concluding Remarks 433

Chapter 23 Concession Period Determination for PPP Infrastructure Projects in HongKong 436
Xueqing Zhang

23.1 Introduction 436

23.2 PPP Projects in Hong Kong 437

23.3 Build, Operate, Transfer Scheme 440

23.4 Concession Period 441

23.5 Concession Period Determination Methods 443

23.6 Simulation-Based Concession Period Determination Methodology 444

23.7 Simulation-Based Concession Period Determination Framework 446

23.8 Conclusions 454

Index 457

About the Author

Akintola Akintoye, Professor of Construction Economics and Management and Head of School, School of Built and Natural Environment, University of Central Lancashire, Preston, UK

Matthias Beck, Professor of Public Sector Management, The York Management School, University of York, UK

Reviews

"The editors draw upon a considerable amount of contributions from affiliated academic and practical experts with experience across a vast geographical spread.... Readers will find it invaluable in expanding their academic and practical knowledge of the subject." (Building Engineer, March 2009)