Concession period for PPPs: A win-win model for a fair risk sharing

Public Private Partnership (PPP) is adopted throughout the world for delivering public infrastructure. Despite the worldwide experience has shown that PPP can provide a variety of benefits to the government, to fully gain them several critical aspects related to a PPP project need to be managed, among these the determination of the concession period. This paper provides a methodology to calculate the concession period as the best instant of time that creates a 'win win' solution for both the concessionaire and the government and allows for a fair risk sharing between the two parties. In other words, the concession period is able to satisfy the private and the government by guaranteeing for both parties a minimum profit, and, at the same time, to fairly allocate risks between parties. In order to take into account the uncertainty that affects the PPP projects, the Monte Carlo simulation was used. To demonstrate the applicability of the proposed model, a Build Operate Transfer (BOT) port project in Italy has been used as case study. (C) 2014 Elsevier Ltd. APM and IPMA. All rights reserved