Demand-driven analysis of bot contract design under demand uncertainty

Lin Deng, Zhijia Tan, William H.K. Lam

Research output: Chapter in book / Conference proceedingConference article published in proceeding or bookAcademic researchpeer-review

Abstract

This paper aims to analyze how to determine the optimal concession period of BOT contract under demand uncertainty with the information about historical traffic demand. The previous literature about BOT contracts under demand uncertainty assumes that it is partially or fully resolved as soon as the highway is built, which may cause large estimation errors and lead to undesirable renegotiation for overlooking the demand fluctuation in the operation stage. We assumed that the growth rate of traffic demand is lognormal distributed and proposed an adaptive and dynamic prediction mechanism to predict the future traffic demand on the basis of statistical characteristics derived from the historical traffic demand, and then a decision model based on the NPV method was proposed to determine the optimal concession period with the average value and expect value of predicted traffic demand respectively. We compared the numerical results of the two types of concession periods and found that demand fluctuation in the operation stage did exist. It is more reasonable to consider the optimal BOT contract design with the expected value of future traffic demand because the risk of project failure can be quantified with probability.

Original languageEnglish
Title of host publicationProceedings of the 24th International Conference of Hong Kong Society for Transportation Studies, HKSTS 2019
Subtitle of host publicationTransport and Smart Cities
EditorsAndy H.F. Chow, S.M. Lo, Lishuai Li
PublisherHong Kong Society for Transportation Studies Limited
Pages347-354
Number of pages8
ISBN (Electronic)9789881581488
Publication statusPublished - 1 Jan 2010
Event24th International Conference of Hong Kong Society for Transportation Studies: Transport and Smart Cities, HKSTS 2019 - Hong Kong, Hong Kong
Duration: 14 Dec 201916 Dec 2019

Publication series

NameProceedings of the 24th International Conference of Hong Kong Society for Transportation Studies, HKSTS 2019: Transport and Smart Cities

Conference

Conference24th International Conference of Hong Kong Society for Transportation Studies: Transport and Smart Cities, HKSTS 2019
CountryHong Kong
CityHong Kong
Period14/12/1916/12/19

Keywords

  • BOT contract
  • Concession period
  • Demand uncertainty
  • Demand-driven

ASJC Scopus subject areas

  • Building and Construction
  • Information Systems
  • Civil and Structural Engineering
  • Transportation
  • Computer Networks and Communications

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