Robust public-private partnerships for joint railway and property development

doi:10.15302/J-FEM-2017068

Front. Eng

2017, Vol. 4

Issue (4) : 437-450 https://doi.org/10.15302/J-FEM-2017068

RESEARCH ARTICLE

Robust public-private partnerships for joint railway and property development

Ka Fai NG, Hong K. LO(

), Yue HUAI

Department of Civil and Environmental Engineering, The Hong Kong University of Science and Technology, Hong Kong, China

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Abstract

The involvement of the private sector in the construction or operation of an infrastructure project may enhance the financial viability of projects, which facilitates the formation of public-private partnership (PPP) for project delivery. PPP exploits the strength of the private sector by shifting certain project risks from the public party to the private sector who can efficiently manage certain risks. In joint railway and housing development, the approach of bundling railway and housing development (R&HD) allows cross-subsidization between immense railway construction cost and profitable housing rental revenue. This approach also provides flexibility in incorporating PPP models by distributing railway and housing revenues and costs and their inherent risks properly to the public and private sectors. Ng and Lo (2015a) developed an evaluation framework for joint railway and property development, which evaluates PPPs based on financial and construction criteria for selecting the best suitable PPP for a particular project. This study, which is based on the framework in Ng and Lo (2015a), aims to examine the robustness of various PPP configurations. This study analyzes the effects of PPP configurations on stakeholders’ risks and returns under population or demand growth and railway construction cost uncertainties. The eventual outcome of particular PPP configurations is also examined. This study also seeks to answer the following questions: How would optimal configuration change under highly volatile population and railway construction cost? Are there PPP configurations that are robust to these uncertainties and those that are sensitive to a particular uncertainty? This understanding is critical for managing risks and facilitating the formation of appropriate PPP for R&HD.

Keywords public-private partnership BFOOD housing and railway development

Corresponding Author(s): Hong K. LO

Just Accepted Date: 30 October 2017 Online First Date: 07 November 2017 Issue Date: 14 December 2017

Cite this article:

Ka Fai NG,Hong K. LO,Yue HUAI. Robust public-private partnerships for joint railway and property development[J]. Front. Eng, 2017, 4(4): 437-450.

URL:

https://academic.hep.com.cn/fem/EN/10.15302/J-FEM-2017068
https://academic.hep.com.cn/fem/EN/Y2017/V4/I4/437

Fig.1 (a) Three steps of the binomial lattice for population demand uncertainty; (b) a possible path

Tab.1 Assignment of BFOOD decision to parties with payback mechanisms

PPP models	Private Company	Government
B_RF_RO_RO_RD_R	$P h + P r − C rc − T P C Y 1$	$T P C Y 1$
B_RF_RO_RO_RD_G	$P r − C rc − T P C Y 1 + M P G X 1$	$P h + T P C Y 1 − M P G X 1$
B_RF_GO_GO_RD_R	$P h + P r − T P C Y 2$	$T P C Y 2 − C rc$
B_GF_GO_GO_RD_G	$P r + M P G X 1$	$P h − C rc − M P G X 1$
B_GF_GO_GO_GD_G	/	$P h + P r − C rc$

Tab.2 Benefits of private company and government

PPP models	$μ D$	$σ D$	$μ K$	$σ K$	$υ r 4$	$υ h 1$	$X M P G$	$Y T P C$
B_RF_RO_RO_RD_R	$μ D$	$σ D$	$μ K$	$σ K$	$υ r 4$	$υ h 1$	/	$Y 1$
B_RF_RO_RO_RD_G	$μ D ‾$	$σ D ‾$	$μ K$	$σ K$	$υ r 4$	$υ h 1 ‾$	$X 1$	$Y 1$
B_RF_GO_GO_RD_R	$μ D$	$σ D$	$μ K$	$σ K$	$υ r 4$	$υ h 1$	/	$Y 2$
B_GF_GO_GO_RD_G	$μ D ‾$	$σ D ‾$	$μ K ‾$	$σ K ‾$	$υ r 4$	$υ h 1 ‾$	$X 1$	/
B_GF_GO_GO_GD_G	$μ D ‾$	$σ D ‾$	$μ K ‾$	$σ K ‾$	$υ r 4 ‾$	$υ h 1 ‾$	/	/

Tab.3 Parameter setting for PPP models in the evaluation framework

Fig.2 (a) Private company benefit; (b) government benefit in PPP models

Tab.4 The resultant private company benefit, government benefit, and total consumer surplus

Fig.3 Total consumer surplus in PPP models

Fig.4 Housing revenues and costs in (a) Model 1 and (b) Model 2

Fig.5 Housing profit in (a) Model 1 and (b) Model 2

Fig.6 Railway revenue in (a) Model 1 and (b) Model 2

Fig.7 Benefits of (a) the private company and (b) the government in Model 1

Tab.5 Expected benefits of the private company (R) and the government (G) under different demand cases unit: 10⁷HKD

Tab.6 Coefficients of variation of the benefits of the private company (R) and the government (G) under different demand cases, (%)

Fig.8 Benefits of (a) the private company and (b) the government in Model 2

Fig.9 (a) MPG and (b) TPC under in Model 2

Fig.10 Benefits of (a) the private company and (b) the government in Model 3

Fig.11 Benefits of (a) the private company and (b) the government in Model 4

Fig.12 Benefit of the government in Model 5

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