PPP cost-sharing of multi-purpose utility tunnels

Abstract

Construction, maintenance, and renewal of underground utilities (e.g. gas, water and sewer pipes, and electrical and telecommunication cables) impose a large lifecycle cost on utility companies and the citizens of urban areas. Integrating all the utilities in a Multi-purpose Utility Tunnel (MUT) can reduce post-construction costs of accessibility, inspection, maintenance, protection, and social costs. Although the high construction cost is an obstacle for promoting MUTs, post-construction cost savings make MUTs an economic alternative solution considering the total lifecycle costs. On the other hand, sharing the lifecycle cost of MUTs is another issue, particularly for the high initial investment in construction. Public-Private Partnership (PPP) is a promising approach for sharing the lifecycle cost of MUTs among public and private investors and facilitating the development of MUT projects. This paper aims to develop a model for PPP financing and cost-sharing of MUT projects using game theory. The PPP investors need to investigate different scenarios for lifecycle cost-sharing and choosing the best strategy considering their financial situation. The proposed model is based on three steps: (a) selection of MUT cost allocation method for MUT lifecycle phases, (b) cost adjustment based on risk and benefit cost factors, (c) game model of MUT cost-sharing based on an entity covering a part of the MUT construction cost using loans/bonds with a penalty that is used as a reward to the other entity. The results show that this model can improve the fairness of MUT cost allocation and be used as an analytical tool for the MUT project stakeholders to choose appropriate financing strategy based on anticipated lifecycle benefits and costs.