Optimizing investment selection for ppp framework in the transport sector: A risk perspective

Abstract

The huge financial requirement of essential transport infrastructure system has challenged the availability of government funding. To fill the fiscal gap, public–private partnerships (PPP) framework has been applied as a promising mechanism. The success of PPP projects, however, is significantly influenced by a number of critical factors. Therefore, an optimum and comprehensive evaluation of projects, reflecting critical risks, supporting investment decisions, has been highly demanded by both the public and private sector. Various works, in previous studies, have been spreading scientific models assessing risks in the construction industry, and some of them focused on the area of PPP. However, the majority of published methods just concentrated on addressing and leveling risks, and there is a lack of application in evaluating and comparing different PPP projects, as investment options, with regards to key issues. Hence, in the situation of limited budget, the public and private partners may struggle with deciding the most potential alternative. To overcome this real-world challenge, this paper, by proposing a mathematical model, attempts to optimize investment selection by evaluating different projects’ riskiness with the focus on transport projects. Different actual PPP transport projects in Vietnam were employed as case studies to analyze the practicality of the proposed application.