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A decision support system for value for money analysis of minimum revenue guaranteed road projects

Tekin, Zeki Emre
Public Private Partnership (PPP) projects have ability to fund themselves when investments generate sufficient revenue. However, commercial revenues except collected tolls are limited in road projects. On the other hand, demand uncertainty creates concerns regarding toll revenues and governments generally provide Minimum Revenue Guarantee (MRG) to make road PPPs feasible and attractive for private sector. If optimum level of MRG are not assessed during preparation stage and required funds are not allocated for projected payments, not only PPP model does not provide value for money (VfM) but also government may experience fiscal problems in the budget. Hence, in this thesis, a decision-support system (DSS) that enables quantifying the risks and MRGs probabilistically and at the same time, allows choosing optimal MRG level by considering not only private sector profitability but also VfM values is developed. Proposed system offers qualitative assessment criteria to be evaluated together with probabilistic VfM values. The proposed system is used for value for money analysis of a road PPP project procured in Turkey compatible with existing practice. The results show that multi view approach adopted in the system helps the public sector to create the best tender structure for maximization of VfM and at the same time enables the private sector to offer the most profitable operation duration during tender process.