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1 © Professur Betriebswirtschaftslehre im Bauwesen So2017
INFRASTRUCTURE PROJECT
PUBLIC INFRASTRUCTURE PROVISION WITHIN THE FRAMEWORK
OF THE NEW INSTITUTIONAL ECONOMICS
Prof. Dr.-Ing., Dipl.-Wirtsch.-Ing. Hans Wilhelm Alfen
Dr. (AM), Dipl.-Wirtsch.-Ing. (AM) Norayr Badasyan
2 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Biography
Practical Experience
• Team Leader, Inspection Reform Project, Government of RA
• Leading Specialist, Investment Policy Department
• First Class Specialist, Agency of Accreditation
Academic work/studies
• Research Associate at BUW
• Research Fellow at the National Academy of Sciences of Armenia
• Assistant Professor at Armenian State University of Economics
Education
• Defended a Dissertation for the title of Doctor Engineering, BUW
• Doctor of Economics, National Academy of Sciences of Armenia
• Diploma of Economist-engineer, Armenian State University of Economics
3 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Introduction
Introduction to the Project: Structure,
Assessment, Objectives, Methodology of
the Course
Based on ÖBM, Projektfinanzierung and
Economic Feasability Studies
4 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Schedule-Fahrplan
N Date Lecturer Topic Slides
1 13.04.17 NB Introduction to the Project:
Structure, Assessment, Objectives, Methodology of the Course 1 to 13
2 20.04.17 NB Theoretical Background/NIE: Property Rights Theory, Transaction
Cost Theory, Principal Agent Theory 13 to 26
3 27.04.17 NB
Discussions on the Chosen Projects
PIP Toolbox within the NIE: Main Attributes Developing the PIP
Toolbox 27 to 44
4 04.05.17 NB
Identification of the Organizational Models: Privatization Model,
Partnership Model, Contractual Model, Financial Model and
Business Model 45 to 53
5 11.05.17 NB
Identification of the Organizational Models: Privatization Model,
Partnership Model, Contractual Model, Financial Model and
Business Model 54-60
6 18.05.17 NB Mid-term Presentation from Students
7 25.05.17 NB Externalities and Case Study of the North-South Road Corridor 61-79
8 26.05.17-21.06.17 Individual Work on Case Studies, Meetings and Discussions on
the Progress according to the appointmnets
9 22.06.17 AL/NB SUBMISSION OF THE WRITTEN PROJECTS
10 29.06.17 AL/NB FINAL PRESENTATION
5 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Student Tasks
1. Choose a Project: Infrastructure Project with Private Involvement (e.g. PPP)
2. Analyze the PIP Organizational Model within the PIP Toolbox
3. Analyze other possibilities/options of the Project according to the Country and
Sector Specifics
4. Conduct Financial Analysis
5. Conduct Economic Analysis
6. Due Diligence Analysis
6 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Course Assessment and Material
Assessment:
Submission of the Written Case Study (75%),
Presentation/Defense (25%)
Credits: 12
Material:
• Power Point Slides
• Exercises
• Additional Literature to read
• Individual work
7 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Course Objective and Outcomes
• To understand the nature of the
institutions and their influence on the
development of PIP projects
• To understand the nature of the property
rights and transaction costs and the
links between the latter and the PIP
toolbox
• Use the ideas derived from the course
for the analyses of different PIP case
studies bridging the theory and the
practical field
• Analysis of financial and economic
outcomes of the case studies
Source: Alfen, 2010, Alfen,
PPT Singapore 2013
8 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Interests of Public and Private Partners (On the example of the Road
Sector)
Public Private
Reduced Travel
Time
Reduced Vehicle
Operating Costs
Reduced
Number of
Accidents
Increased Traffic
Volume
Reduced
Environmental
Pollution
Adequate Return
on Capital
Investments
Less Life Cycle
Costs
Less Risk Costs
Financial
Stability
Sufficient NPV,
FIRR, etc.
Ad
de
d S
oc
ial W
elf
are
Su
fficie
nt C
as
h F
low
Balance System of the
Interests of the Partners
9 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Economically Unviable Projects
Economic Benefits
Economically
NOT Viable
Economic Costs Project Costs Project Revenues
Financially
Viable
Author‘s own source developed based on „World Bank (2012):
Best Practices in Public-Private Partnerships Financing in Latin
America. The role of subsidy mechanisms”.
PUBLIC/EIRR
PRIVATE/FIRR
BALANCE
10 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Financially Unviable Projects
Economic Benefits Economic Costs
Economically
Viable
Project Costs Project Revenues
Financially
NOT Viable
Author‘s own source developed based on „World Bank (2012): Best
Practices in Public-Private Partnerships Financing in Latin America.
The role of subsidy mechanisms”.
BALANCE
PUBLIC/EIRR
PRIVATE/FIRR
11 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Economically and Financially Viable Projects
Project Costs Project Revenues
Financially
Viable
Economic Costs Economic Benefits
Economically
Viable BALANCE
PUBLIC/EIRR PRIVATE/FIRR
Author‘s own source developed based on „World Bank (2012):
Best Practices in Public-Private Partnerships Financing in Latin
America. The role of subsidy mechanisms”.
12 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Methodology
Lectures
Exercises to
Practice
Relevant Case
Studies
Final Results
Economic and
Financial Analysis
(mid-term
presentations)
Usage of the
Course Material to
Conduct
Organizatinal
Model Analysis
Project-Lectures Student Tasks
13 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Theoretical Background
Theoretical Background/NIE: Property
Rights Theory, Transaction Cost Theory,
Principal Agent Theory
Literature to Read:
1. Williamson, Oliver: A Comparison of Alternative Approaches to Economic
Organization. In Journal of Institutional and Theoretical Economics 146 (1),
pp. 61–71.
2. Williamson, Oliver (1979): Transaction-Cost Economics: The Governance of
Contractual Relations. In Journal of Law and Economics 22 (2), pp. 233–261.
3. Williamson, Oliver (1985): The economic institutions of capitalism. Firms,
markets, relational contracting. New York, London: Free Press; Collier
Macmillan.
4. Williamson, Oliver (2000): The New Institutional Economics: Taking Stock,
Looking Ahead. In Journal of Economic Literature 38 (3), pp. 595–613.
5. Coase, Ronald (1937): The Nature of the Firm by Coase. In Economica: New
Series 4, No: 16, pp. 386–405.
6. Coase, Ronald (1960): The Problem of Social Cost. In Journal of Law and
Economics 3, pp. 1–44.
14 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Political and Economic Institutions: Differences (Nogales City)
• Free Political and
Economic Institutions
are the Point of
Departure for the
Development
• Political Institutions
Develop the Economic
Institutions
• No Free Economic
Institution Exist without
Free Political Institution
15 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Neoclassical and New Institutional Economics
Contractual
Non-
Contractual
Neoclassical
Other
Environmental
rules
Organizations
Public
Private
Public Choice
Property
Rights
Ex-post
Ex-ante
Agency
Theory
Transaction
Cost Theory
Source: Williamson,
1991
16 © Professur Betriebswirtschaftslehre im Bauwesen So2017
New Institutional Economics
Source: (Williamson, p. 62)
17 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Coase Theory
…if the property rights are clearly defined and transaction costs are equal to
zero, the allocation of recourses will remain unchanged and effective
regardless of the changes in the distribution of the property rights (Coase,
1960).
Example (Dan Quint, 2011)
If it’s efficient for you to have the party… Your benefit from having the party is greater than my benefit from a good night’s sleep
If you start out with the right to have the party, no problem
If I start out with the right to quiet, you can pay me for the right to have the party
If it’s efficient for you not to have the party… Good night sleep is worth more to me
If I have right to silence, no problem
If you have right to party, I can pay you not to have it
The point: either way, we achieve efficiency If it’s efficient to have the party, you have the party
If it’s efficient not to, you don’t
Regardless of who started off with the right
18 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Exercise 1 on PR Theory
Description
You have rented a new apartment near the Music School. The Music School works from 9:00-22:00 and a loud music comes from their window. Rather than to put a
sound proof windows, the Music School uses the basic ones saving 1000 Euros yearly. You are affected from the sound coming from there because the Music
School doesn’t spend the 1000 Euros to put the required windows.
Legal Restrictions
The Music School doesn’t have right to make a noise from 20:00-8:00 (in the evenings).
Question 1
Externalities occur when there is an external benefit (positive) or external lose (negative) from the activities of the other parties.
What kind of externalities the loud music from the Music School can cause for you (positive or negative)? Bring examples (also for other cases).
Question 2
In case you stay and work at home from 13:00-17:00 earning 40 Euros every day during this time period. The loud music from the Music School doesn’t let you focus
on your daily topics and you lose the opportunity to earn 30 Euros per day.
How does the allocation of the property rights impact the relations between you and the Music School? Who will buy the sound proof windows? Will you pay 1000
Euros yearly to put sound proof windows?
Question 3
You have a right to ban/prohibit the loud music after 20:00. The Music School earns 50 Euros 5 times per week in between 20:00-22:00, as there are a lot people
interested in evening classes (you don’t work at home and come back home after 18:00). Who will buy the sound proof windows?
Question 4
The Music School prefers to work more after 20:00 earning 50.000 Euros per year and is obliged to compensate you 800 Euros per year for the noise. Will the Music
School pay 1000 Euros yearly for the sound proof windows?
Question 5
Coase theory says that when there are no transaction costs or the transaction costs are low and if the property rights (rights of the parties) are clear and well defined,
then negotiations will lead to efficiency.
Explain Coase theory on the current example (Music School).
19 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Attributes of the Property Rights Theory
Property Rights, are the social institutions that define or delimit the range of privileges granted to individuals to specific resources… (Libecap, 1989) • Right to exclude non-owners from access; • Right to appropriate the stream of economic rents; and • Right to sell or otherwise transfer the resource to others.
Bundle of rights (Alchian and Demsetz, 1972) • Owner has the right of residual claimant; • Owner has a right of input behavior; • Owner is the central party common to all contracts with inputs; • Owner alters the membership of the team; • Owner has a right to sell all these rights
Honore’s bundle of rights (Honore, 1960) • the right to possess, • the right to use, • the right to manage, • the right to the income, • the right to the capital, • the right to security, • the incident of transmissibility, • the incident of absence of term, • the prohibition of harmful use, • liability to execution, • residuary character.
20 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Attributes of the Property Rights to be used in PIP
• Right to own-right of exclusive physical control of an asset,
• Right to manage-the right to decide who and how can use the asset,
• Right on income-the right to own the results from the asset,
• Right to transfer the power over property-the right to expose, lease, change,
Possession-the right to use and maintain the asset.
Obligations-the rights to recover the violated property rights, bearing responsibility for
the negative effects of the usage and maintenance of the asset.
21 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Meaning of the Transaction Costs
Transaction Costs are “all
those costs that cannot be
conceived to exist in a
Robinson Crusoe economy
where neither property
rights, nor transactions, nor
any kind of economic
organization can be found”
(Wang, 2007)
Trade with Friday would
make a ground for the
transaction costs!
Who can do what? Who is
better in fishing or collecting
nuts?
22 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Exercise 2 on TC Theory
Description
You have been graduated from the University and want to set your own consulting company in the sphere of the public infrastructure
provision. You are considering about two different options to go with your idea.
Option 1
You hire a team of 5 members from the people you studied together. For all of them you have to pay salaries, provide them with relevant
computers and to hire an office area. Each of your team members have different contract scheme and have different salaries.
At the same time you need a loan from the bank or to borrow some money from your other friends to set a business. At the same time
another friend of you is interested to invest in your business and each month to receive X amount of money for the next 5 years.
You participate in tenders, you get offers, and you work with the clients, set deadlines, provide the clients with relevant outcomes and at the
same time pay every month the needed amount from the loan with the interests or the money you borrowed.
Option 2
You decide for the beginning to find the clients on the internet and to find a team online every time you have an offer. After each offer you can
write to your friends on Facebook to ask them to do a part of the required job and in the end you gather all the parts of the work and submit it
to your client by email.
Question 1
Please, analyze all the pros and cons of both options. What is the main difference of these two options?
Question 2
Which option would you choose? Why?
Question 3
Which option has higher transaction costs? Why? What can be considered as transaction costs in these examples/options?
23 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Transaction Attributes
Investment Characteristics
Nonspecific Mixed Idiosyncratic
Fre
qu
en
cy
Occa
sio
na
l
M
ark
et g
ove
rna
nce
(c
lassic
al co
ntr
acting
)
Trilateral Governance
(neoclassical contracting)
Bilateral governance Unified governance
(relational contracting)
Re
curr
ent
Specificity
Uncertainty
Frequency
Classical
Neoclassical
Relational
Adopted from Williamson 1985
24 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Governance Structure
Governance structure
Attributes Market Hybrid Hierarchy
Instruments Incentive intensity Administrative controls
++ 0
+ +
0
++
Performance Attributes Adaptation autonomous Adaptation cooperative
++ 0
+ +
0
++
Contract Law ++ + 0
++=strong; +=semi-strong; 0=weak.
Adopted from Williamson 1991
25 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Principle-Agent Theory
Moral Hazard
• Shirking (e.g. No monitoring and employees talking on a phone),
• Senior Executives ignoring the interests of the other stakeholders,
• Elected Officers (self interests rather than public interests),
• Different Objectives (Public and Private Sectors)
Principal-Owner of
the Resources (e.g.
Public)
Agent (hired part to
conduct relevant
services)
Contr
act
Info
rma
tion
As
ym
me
try
26 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Exercise on PA Theory
Agent is the seller of iPhones. Agent (seller) supplies either real or fake cellular phones.
Principal is the buyer of the IPhones. Principal (buyer) has to either verify the quality of IPhones
(and has to pay for it) or trust the seller.
Sellers-write on a paper (so no one can see it) whether you are going to sell the real or fake IPhone
(based on your decision you can earn or lose money).
Buyers-write on a paper (so no one can see it) whether you are going to check the quality of the
IPhone (based on your decision you can earn or lose money).
Contract
In case seller sells real IPhones and the buyer doesn’t check, both sides receive additional 20
Euros.
In case seller sells fake IPhone and the buyer is not checking, the seller receives another 20 Euros
and all the money of the buyer.
In case the buyer decides to check the quality, the seller can pay the paid money for the IPhone
back and keep his/her 20 Euros in case he/she has sold a fake IPhone.
Talk together (buyer and seller) about your strategy on what are you going to do (you can lie what
you have written on a paper earlier, which probably can make you earn more money and win).
27 © Professur Betriebswirtschaftslehre im Bauwesen So2017
PIP Toolbox
PIP Toolbox within the NIE:
Main Attributes Developing the
PIP Toolbox
Literature to Read:
1. Weber, B., Alfen, H. W. English. (2010). Infrastructure as an asset class:
Investment strategies, project finance and PPP, Wiley.
2. Buschmeier, B., & Alfen, H. W. (2014). Projektentwicklungsmodell für die
Optionen der Beschaffung von Bundesfernstraßen: Ökonomisches
Entscheidungsmodell begründet auf einer optimierten institutionellen Lösung und
einer vervollständigten Nutzerfinanzierung. Schriftenreihe der Professur
Betriebswirtschaftslehre im Bauwesen: Vol. 20. Kromsdorf: Bauhaus-Univ.-Verl.
Weimar als Imprint von VDG.
3. Badasyan, N., Alfen, H.W., "The Public Infrastructure Provision Toolbox within
the Framework of the New Institutional Economics", European Procurement and
Public Private Partnership Law review, Volume 10, Issue 2 (2015), pp. 72-82.
28 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Essence of the PIP Toolbox
29 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Privatization Models
Adopted from Weber, Alfen
2010
DesignFinan-
cing
Invest-
mentBuild
Ope-
ration
Transfered tasks
Type of privatisation
Ownership
Public PrivateDuration
Provision
function
Formal privatisation: „public entities in private clothes“
legally ...
financially
private business model
private financing (company)
public
public
100% unlimited
Functional privatisation: „The private partner as the assistant of the public”
outsourcing ...public
100%
limited
... of single delegable tasks / services
... of comprehensively integrated services x% x%
Materially privatisation: transfer of ownership / provision function
partial material
privatisation public/private x%
umlimited
joint venture
sale of shares to private investors 100%
x%
privatefull material
privatisation
30 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Privatization Models
Developed based on: Weber, Barbara; Alfen, Hans Wilhelm (2010): Infrastructure as an asset class. Investment strategies, project
finance and PPP. Chichester, West Sussex, U.K: Wiley; Williamson, Oliver (1992): Markets, hierarchies, and the modern corporation.
An unfolding perspective. In Journal of Economic Behavior and Organization 17, pp. 335–352; Kleiss, Torsten (2008): Institutional
arrangements for municipal solid waste combustion projects. Weimar: Bauhaus-Univ (Schriftenreihe der Professur
Betriebswirtschaftslehre im Bauwesen, No. 6).
Administrative
Controls (++)
Adaptation
Cooperative (++)
OWNERSHIP TASKS DURATION MODEL CRITERIA GOV.
STRUCTURE
Public
Private
Business Model
Private
Financing
Outsourcing
Single Tasks
Outsourcing
Comprehensive
Tasks
Public/Private Sales of Shares
to Private
Private Sales of 100%
Shares to
Private
Unlimited
Limited
Unlimited
Unlimited
FORMAL
FUNCTIONAL
PARTIAL
MATERIAL
FULL
MATERIAL
Incentive
Intensity(+)
Administrative
Controls(+)
Adaptation
Autonomous (+)
Adaptation
Cooperative (+)
Hierarchy
Hybrid
Incentive
Intensity (++)
Adaptation
Autonomous (++)
Market
31 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Privatization Models
Developed based on: Weber, Barbara; Alfen, Hans Wilhelm (2010): Infrastructure as an asset class. Investment strategies, project
finance and PPP. Chichester, West Sussex, U.K: Wiley; Williamson, Oliver (1992): Markets, hierarchies, and the modern corporation.
An unfolding perspective. In Journal of Economic Behavior and Organization 17, pp. 335–352; Kleiss, Torsten (2008): Institutional
arrangements for municipal solid waste combustion projects. Weimar: Bauhaus-Univ (Schriftenreihe der Professur
Betriebswirtschaftslehre im Bauwesen, No. 6).
Administrative
Controls (++)
Adaptation
Cooperative (++)
OWNERSHIP TASKS DURATION MODEL CRITERIA GOV.
STRUCTURE
Public
Private
Business Model
Private
Financing
Outsourcing
Single Tasks
Outsourcing
Comprehensive
Tasks
Public/Private Sales of Shares
to Private
Private Sales of 100%
Shares to
Private
Unlimited
Limited
Unlimited
Unlimited
FORMAL
FUNCTIONAL
PARTIAL
MATERIAL
FULL
MATERIAL
Incentive
Intensity(+)
Administrative
Controls(+)
Adaptation
Autonomous (+)
Adaptation
Cooperative (+)
Hierarchy
Hybrid
Incentive
Intensity (++)
Adaptation
Autonomous (++)
Market
32 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Privatization Models
Developed based on: Weber, Barbara; Alfen, Hans Wilhelm (2010): Infrastructure as an asset class. Investment strategies, project
finance and PPP. Chichester, West Sussex, U.K: Wiley; Williamson, Oliver (1992): Markets, hierarchies, and the modern corporation.
An unfolding perspective. In Journal of Economic Behavior and Organization 17, pp. 335–352; Kleiss, Torsten (2008): Institutional
arrangements for municipal solid waste combustion projects. Weimar: Bauhaus-Univ (Schriftenreihe der Professur
Betriebswirtschaftslehre im Bauwesen, No. 6).
Administrative
Controls (++)
Adaptation
Cooperative (++)
OWNERSHIP TASKS DURATION MODEL CRITERIA GOV.
STRUCTURE
Public
Private
Business Model
Private
Financing
Outsourcing
Single Tasks
Outsourcing
Comprehensive
Tasks
Public/Private Sales of Shares
to Private
Private Sales of 100%
Shares to
Private
Unlimited
Limited
Unlimited
Unlimited
FORMAL
FUNCTIONAL
PARTIAL
MATERIAL
FULL
MATERIAL
Incentive
Intensity(+)
Administrative
Controls(+)
Adaptation
Autonomous (+)
Adaptation
Cooperative (+)
Hierarchy
Hybrid
Incentive
Intensity (++)
Adaptation
Autonomous (++)
Market
33 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Privatization Models
Developed based on: Weber, Barbara; Alfen, Hans Wilhelm (2010): Infrastructure as an asset class. Investment strategies, project
finance and PPP. Chichester, West Sussex, U.K: Wiley; Williamson, Oliver (1992): Markets, hierarchies, and the modern corporation.
An unfolding perspective. In Journal of Economic Behavior and Organization 17, pp. 335–352; Kleiss, Torsten (2008): Institutional
arrangements for municipal solid waste combustion projects. Weimar: Bauhaus-Univ (Schriftenreihe der Professur
Betriebswirtschaftslehre im Bauwesen, No. 6).
Administrative
Controls (++)
Adaptation
Cooperative (++)
OWNERSHIP TASKS DURATION MODEL CRITERIA GOV.
STRUCTURE
Public
Private
Business Model
Private
Financing
Outsourcing
Single Tasks
Outsourcing
Comprehensive
Tasks
Public/Private Sales of Shares
to Private
Private Sales of 100%
Shares to
Private
Unlimited
Limited
Unlimited
Unlimited
FORMAL
FUNCTIONAL
PARTIAL
MATERIAL
FULL
MATERIAL
Incentive
Intensity(+)
Administrative
Controls(+)
Adaptation
Autonomous (+)
Adaptation
Cooperative (+)
Hierarchy
Hybrid
Incentive
Intensity (++)
Adaptation
Autonomous (++)
Market
34 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Partnership Models
Adopted from Weber, Alfen
2010
35 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Partnership Models
36 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Partnership Models
37 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Partnership Models
38 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Organizational Models
Vertical
Horizontal
Ow
ners
hip
Public
Public/
Private
Private
Private business model
Private financing
Outsourcing of single
tasks
Outsourcing of
comprehensively
integrated services
Joint venture
Sales of shares to
private
Formal Privatization
Functional privatization
Partial material
privatization
Full material
privatization
Full material
privatization on spot
market
Unlimited
Unlimited
Unlimited
Unlimited
Short
Hierarchy
Hybrid
Market
Ownership
Ownership
Provision
Provision
Transferred
task
Transferred
task
MODEL
MODEL
Duration
Duration
Governanc
e structure
Governanc
e structure
Adm.
Control;
Adapt.
Coopera
tive
Incentive
int.;
adm.
Controls;
adaptati
on aut.;
adapt.
Coop;
Contract
law
Adm.
Control;
Adapt.
Coopera
tive
Incentive
int.;
adaptation
aut.;
Contract
law
Incentive
int.; adm.
Controls;
adaptation
aut.; adapt.
Coop;
Contract
law
Incentive
int.;
adaptation
aut.;
Contract
law
39 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Contractual Models
… and to material privatization …to formal
…to
fu
nc
tio
nal
pri
va
tiza
tio
n
Ou
tso
urc
ing
of
task
s/s
erv
ice
s
Force account of the administration
100% Public eneterprise
Design
Design+Build
Design+Build+Maintain
Design+Build+Finance
PPP-Models Design+Build+Maintain+Operate+Finance
Without/with temporary transfer of ownership
Private SPC Mixed SPC
PPP
Path of privatization
Public partner as shareholder
… Regulator
Publ
ic p
artn
er a
s cl
ient
(+re
gula
tor)
Step1 Step 1
Step 2
Step 3
Step 4
Step 2
Step 3
100% Public eneterprise under
private law
Step 4
Full Partial
Mixed enterprise with permanent
transfer of ownership
100%
Private eneterprise
From traditional administration i.e New Public Management
Adopted from Weber, Alfen
2010
40 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Contractual Models
… and to material privatization …to formal
…to
fu
nc
tio
nal
pri
va
tiza
tio
n
Ou
tso
urc
ing
of
task
s/s
erv
ice
s
Force account of the administration
100% Public eneterprise
Design
Design+Build
Design+Build+Maintain
Design+Build+Finance
PPP-Models Design+Build+Maintain+Operate+Finance
Without/with temporary transfer of ownership
Private SPC Mixed SPC
PPP
Path of privatization
Public partner as shareholder
… Regulator
Publ
ic p
artn
er a
s cl
ient
(+re
gula
tor)
Step1 Step 1
Step 2
Step 3
Step 4
Step 2
Step 3
100% Public eneterprise under
private law
Step 4
Full Partial
Mixed enterprise with permanent
transfer of ownership
100%
Private eneterprise
From traditional administration i.e New Public Management
Adverse selection and moral hazard
Pro
pe
rty R
igh
ts
Tra
nsa
ctio
n
Property rights
41 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Organizational Models
Vertical
Horizontal
Contractual
PPP
Institutional
PPP
D
DB
DBM
DBF
PPP
models
Transferred
function
Transferred
function
100% Public
100% Public
under private
law
Mixed
100% Private
Ow
ners
hip
Public
Public/P
rivate
Private
Private business model
Private financing
Outsourcing of single
tasks
Outsourcing of
comprehensively
integrated services
Joint venture
Sales of shares to
private
Formal Privatization
Functional privatization
Partial material
privatization
Full material
privatization
Full material
privatization on spot
market
Hierarchy
Hybrid
Market
Ownership
Ownership
Provision
Provision
Transferred
task
Transferred
task
MODEL
MODEL
Governanc
e structure
Governanc
e structure
Adm.
Control;
Adapt.
Coopera
tive
Incentive
int.;
adm.
Controls;
adaptati
on aut.;
adapt.
Coop;
Contract
law
Adm.
Control;
Adapt.
Coopera
tive
Incentive
int.;
adaptation
aut.;
Contract
law
Incentive
int.; adm.
Controls;
adaptation
aut.; adapt.
Coop;
Contract
law
Incentive
int.;
adaptation
aut.;
Contract
law
42 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Financing Models (Germany)
Hybrid
Financing
Public Private
Budget Financed Project finance Forfeiting Corporate Finance Short term payments in the spot
market
Hierarchy Market
43 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Financing Model (Example of Armenia based on Determinants)
Source of Finance
Public Donor/Multinational Private
Asset
Diaspora
44 © Professur Betriebswirtschaftslehre im Bauwesen So2017
General Model
Financing
Budget financed
Public Provision Public/Private Provision Private Provision
Private
business
Private
financing
Outsourcing
single tasks
Outsourcing
integrated
services
Joint venture
Sale of
shares to
private
Formal privatization Functional
privatization Partial privatization Full privatization
Full privatization spot
market
Vertical Horizontal
Contractual PPP
Private SPC
Institutional PPP
Mixed SPC Horizontal
partnerships
Desig
n
Desig
n+
Bu
ild
Desig
n+
Bu
ild
+
Ma
inta
in
Desig
n+
Bu
ild
+
Fin
an
ce
PP
P m
od
els
10
0%
pu
blic
10
0%
pu
blic
un
de
r p
riva
te
law
Mix
ed
En
terp
rise
10
0%
pri
va
te
Hybrid Market Hierarchy
Project finance Forfeiting Corporate finance
Public Private
Short payments spot market
Limited Unlimited Unlimited Unlimited
Public Ownership Public/Private Ownership Private Ownership
Without or temporal
transfer of ownership
Permanent transfer of
ownership
Short
45 © Professur Betriebswirtschaftslehre im Bauwesen So2017
PIP Organizational Models
Identification of the Organizational
Models: Privatization Model, Partnership
Model, Contractual Model, Financial Model
and Business Model
Literature to Read:
1. Weber, B., Staub-Bisang, M., Alfen, H.W. English. (2016). Infrastructure as an
asset class: Investment strategies, project finance and PPP, Second Edition
Wiley., Chapter 3, Chapter 4.
2. Badasyan, N., Alfen, H. W., "Development of the Public Infrastructure Provision
Organizational Models: Examples from the Armenian Transport Sector",
International Journal of Public Administration, Taylor and Francis/Routledge,
(2016), pp. 1-10, DOI: 10.1080/01900692.2015.1136914, ISSN: 0190-0692
(Print) 1532-4265 (Online).
46 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Analysis of the Country, Sector, Project Specifics
47 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Main Components
48 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Development of the Privatization Model in Excel
Ownership Public Public/Private Private
Provision Public Public Public/Private Private
Duration Unlimited Limited
Privatization
Model
Formal Functional Partial
Material
Full Material
Ownership (Own) Option 1 Option 2 Option 3
Provision (Prn) Option 1 Option 1 Option 2 Option 3
Duration (Dun) Option 1 Option 2
Privatization
Model (PMn)
Model 1
Model 2
Model 3
Model 4
1) Ow={1;2;3};
2) Pr={1;2;3};
3) Du={1;2};
4) PM={1;2;3;4}
5) When Ow=1, then Pr=1;
When Ow=2, then Pr={1;2};
When Ow=2, Pr=1, then Du=2;
When Ow=2, Pr=2, then Du=1;
When Ow=3; then Pr=3.
6) PM1=Ow1+Pr1+Du1;
PM2=Ow2+Pr1 or PM2=Du2
PM2=Ow1+Pr1 +Du2;
PM3= Ow2+Pr2;
PM4=Ow3+Pr3.
49 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Development of the Partnership Model in Excel
Privatization Model Formal Functional Partial Material Full Material
Ownership
Transfer Type
Permanent
(Public)
Temporal Permanent
(Public/Private)
Permanent
(Private)
Shareholders Public SPC pure private SPC
mixed
SPC mixed Private
Partnership Model N/A Vertical Horizontal Horizontal N/A
PPP type N/A Contractual Institutiona
l
N/A N/A
Privatization Model
(PM)
PM1 PM2 PM3 PM4
Ownership Transfer
Type (OT)
Option 1 Option 2 Option 3 Option 4
Shareholders (Sh) Option 1 Option 2 Option 3 Option 4 Option 5
Partnership Model
(PAM)
N/A Model 1 Model 2 Model 2 N/A
PPP type (PPP) N/A Model 1 Model 2 N/A N/A
1) When PM=PM1, then OT=1 and Sh=1,
consequently PAM and PPP is not applicable;
2) When PM=PM2, then OT=2, Sh={1;2}, PPP={1;2};
When OT=2, Sh=2, then PAM=1 and PPP=1;
When OT=2, Sh=3, then PAM=2 and PPP=2;
3) When PM=PM3, then OT=3, Sh=4; PAM=2,
consequently PPP model is not available;
4) When PM=PM4, then OT=4, Sh=5, consequently
PAM and PPP are not applicable.
5) PAM1=PPP1=OT2+Sh2;
PAM2=PPP2=OT2+Sh3 or PAM2=OT3+Sh4
(no PPP).
50 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Development of the Contractual Model in Excel
Privatization
Model
Formal Functional Partial Material Full
Material
Transferred
Tasks
B D+B D+B+M D+B+F D+B+M+O+F D+B+M D+B+F D+B+F
Legal Form 100%
Publi
c
100%
Public
100%
Public
under
private
law
100%
Public
100%
Public
under
private
law
100%
Public
100%
Public
under
private
law
SPC (PPP
Models)
Mixed Enterprise
(Joint Venture)
Private
Enterprise
Privatization
Model (PM)
PM1 PM2 PM3 PM4
Transferred
Tasks (TT)
Option
1
Option 2 Option 3 Option 4 Option 5 Option
3
Option
4
Option 4
Legal Form
(LF)
Model
1
Model
1
Model
2
Model
1
Model
2
Model
1
Model
2
Model 3 Model 4 Model 5
1) TT={1;2;3;4;5};
LF= {1;2;3;4;5},
2) When PM=PM1, then TT={1;2;3;4} and LF={1;2},
When PM=PM2, then TT=5; LF=3,
When PM=PM3, then TT= {3; 4}; LF=4,
When PM=PM4, then TT=4; LF=5
51 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Development of the Financial Model in Excel
Financing Part (FP) Public Private
Financial Model (FM) Budget Financed Project Finance Forfeiting Corporate Finance
Financing Part (FP) Option 1 Option 2
Financial Model (FM) Model 1 Model 2 Model 3 Model 4
1) FP={1;2};
FM={1;2;3;4}
2) When FP=1, then FM=1;
When FP=2, then FM={1;2;3}
52 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Development of the Business Model in Excel (e.g. Road)
Business Model (BM) User fees
Budget fees
Source of
Remuneration in
Business Model (RM)
Mileage based
tolls
Time based
charges
Availability
Payment
Active traffic
management
Shadow toll
Business Model (BM) Option 1 Option 2
Source of
Remuneration in
Business Model (RM)
Model 1 Model 2 Model 3 Model 4 Model 5
1) BM={1;2}
RM={1;2;3;4;5}
2) When BM=1; then RM={1;2},
When BM=2; then RM={3;4;5}
53 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Business Models in the Road Sector
Revenue Source
User Financed Budget Financed
Direct Indirect
e.g. Tolls,
Vignettes e.g. Fuel Tax,
Vehicle Ownership
Tax
Availability
Payments Models
Combination of both
54 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Business Models in the Rail Transport Sector
Revenue Source
User Financed Budget Financed
Direct Not Direct
e.g. Ticket Prices
(Fares) both for
passengers and
goods
e.g. Offering transportation
services to regional
companies at a fixed price.
The principal collects the
ticket prices.
Subsidies
55 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Business Models in the Air Transport Sector
Revenue Source
User Financed Budget Financed
e.g. Airlines (take off, landing, aircraft parking,
baggage, etc.) and Passengers,
Commercial Services (Food, Drink, hotels, car
parking and rental
Government
Grants
56 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Business Models in Water Sector
Revenue Source
User Financed Budget Financed
Fixed Charges Variable Charges
e.g. Price per Liter
of Water
e.g. location,
consumption,
volume, season,
etc.
Availability
payments
Prepaid Charges
e.g. prepaid cards
57 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Business Models in Water Sector
Revenue Source
User Financed Budget Financed
Multi-tier Single-tier
e.g. Flate rate
Fees for Land,
Area, Number of
Inhabitants,
Households,
Containers, etc.
Only Based on
one of the Criteria
from Multi-tier
Fees
Subsidies Performance
e.g. Volume of the
Container, Weight
or Volume of the
Collected Waster
58 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Business Models in Energy Sector
Revenue Source
User Financed Budget Financed
e.g. Selling the Electricity into the Grid on the
Wholesale Market to Utility Companies, who then
Sell to Consumers
Subsidies
59 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Map of the PIP as a Decision Making Guide
Ownership Public Public-Private Private
Provision Function Public Public Public-Private Private
Organization
Function
Private Business Model Priv
ate
Fina
ncin
g
Outsour
cing of
single
delegab
le
tasks/se
rvices
Outsour
cing of
compre
hensivel
y
integrat
ed
services
Outsour
cing of
single
delegab
le
tasks/se
rvices
Outsourcing of
comprehensively integrated
services
Joint Venture Sale of shares to
private Investors
Duration Unlimited Limited Limited Unlimited Unlimited
Privatization type Legally Fina
ncia
lly
Outsourcing Outsourcing Partial material Full Material
Privatization Model Formal Functional Functional Material Material
Ownership transfer
type
Permanent (Public) Temporal Temporal Permanent (Mixed) Permanent
(Private)
Shares holder in
organization
Public SP
C
pur
e
priv
ate
SPC mixed SP
C
pur
e
priv
ate
SPC mixed SPC mixed Private
PPP type - Con
trac
tual
Institutional Con
trac
tual
Institutional Institutionalized -
Partnership Model - Vert
ical
Horizontal Vert
ical
Horizontal Horizontal -
Contractual Model Design Design+Build Des
ign+
Buil
d+
Mai
ntai
n
Design+Build+
Operate+Maint
ain
Design+Build+Operate+Maintain+Finance
Financial Model Public Finance Donor Finance Private Finance
Source of paid
charges
Customers/Users Budget Sources
Business Model User Fees Budget Fees
60 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Economic and Financial Analysis
Externalities and Case Study of the
North-South Road Corridor
61 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Conversion of market to accounting prices
Use long term
marginal costs
or willingness to
pay
From Market to Accounting
Prices
Tradable goods Non-tradable goods
Turn directly into border
prices
Real Recourses Economic Flows
Major items Minor items
Output Input
Labor force Input produced
Use SCF
Tradable Non-tradable
Use sector CF Use CF for labor
force based on
shadow wage
Disaggregate
the item or use
SSCV
Source: EC, 2014
Fiscal corrections
(excl. taxes,
subsidies, etc.)
Correction of
externalities
62 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Calculation of Benefits
To identify project costs and benefits the situation without the project
should be compared with the situation with project (ADB, 1997; EU,
2008).
1. Reduction of travel time RT=(Daily Vehicle hours without project-Daily Vehicle hours with project) x Estimated
Cost Hour
2. Reduction of KM travelled Rkm=(Daily Vehicle km without project-Daily Vehicle km with project) x Estimated
Cost per vehicle
3. Accident Reduction AC=(Annual number of accidents by severity with project-Annual number of accidents
by severity without project) x cost of accidents by severity
4. Any other benefit Based on a comparison of without and with project case (e.g. pollution)
63 © Professur Betriebswirtschaftslehre im Bauwesen So2017
From financial to economic values
𝐶𝐹 =𝐸𝑐𝑜𝑛𝑜𝑚𝑖𝑐 𝑝𝑟𝑖𝑐𝑒/𝑆ℎ𝑎𝑑𝑜𝑤
𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑝𝑟𝑖𝑐𝑒 (1) (ADB, 2013)
𝑆𝐶𝐹 =𝑀+𝑋
𝑀+𝑇𝑚 +(𝑋−𝑇𝑥) (2), (EC, 2008)
M-total imports,
X-total exports,
Tm- import taxes,
Tx- export taxes.
𝑆𝐸𝑅𝐹 =𝑅𝐸𝑅
𝑂𝐸𝑅×(1+𝑡−𝑠) , (ADB, 2013)
OER-actual exchange rate,
t-average rate of tax on trade,
s-average rate of subsidy on trade,
RER-long run exchange rate for the economy
𝑆ℎ𝑎𝑑𝑜𝑤 𝑊𝑎𝑔𝑒 = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑊𝑎𝑔𝑒 × (1 − 𝑖𝑛𝑐𝑜𝑚𝑒 𝑡𝑎𝑥𝑎𝑡𝑖𝑜𝑛), (EC, 2014)
Special CF e.g. materials (StnCF=(1-income tax)x(1-VAT)x Market Price
64 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Case Study of the North-South Corridor in Armenia
65 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Organizational Model of the Project
… and to material privatization …to formal
…to
fu
nc
tio
nal
pri
va
tiza
tio
n
Ou
tso
urc
ing
of
task
s/s
erv
ice
s
Force account of the administration
100% Public eneterprise
Design
Design+Build
Design+Build+Maintain
Design+Build+Finance
PPP-Models Design+Build+Maintain+Operate+Finance
Without/with temporary transfer of ownership
Private SPC Mixed SPC
PPP
Path of privatization
Public partner as shareholder
… Regulator
Publ
ic p
artn
er a
s cl
ient
(+re
gula
tor)
Step1 Step 1
Step 2
Step 3
Step 4
Step 2
Step 3
100% Public eneterprise under
private law
Step 4
Full Partial
Mixed enterprise with permanent
transfer of ownership
100%
Private eneterprise
From traditional administration i.e New Public Management
Adopted from Weber, Alfen
2010
66 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Financial Structure of the Project
Source Amount ($ Million) %
A. ADB
1. Ordinary Capital
Recourses
440.0 46
1. Special Fund
Recourses
60.0 6
A. Government and
other Cofinanciers
462.0 48
Total 962.0 100
67 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Economic Analysis of the Project (Chapter 5)
Item Car Minibus Bus 2-axle 3-axle 4+-axle
Economic Cost $'000 17 16 40 20 30 80
Fuel Cost cents/Liter 74 74 57 74 57 57
Oil Cost $/Liter 5,5 4,1 4,1 2,7 2,7 2,7
Tire Cost $/Tire 51 76 144 212 212 255
Maintenance Labor $/Hour 4,9 8,6 8,2 9,6 9,6 11
Crew Wages $/Hour 0 1 1,3 1,7 1,7 2,3
No. of Passengers 2,5 15 40 0 0 0
Passenger Work Time $/Hour 2009 2 2 2 - - -
Non-work Time $/Hour 2009 0,65 0,65 0,65 - - -
Work-related Time % 75 75 75 - - -
Annual Utilization km'000 20 60 70 30 86 86
Vehicle Life Years 10 7 8 12 14 14
ADB, 2010
68 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Economic Output of the Tranche 1,2 (Chapter 5)
Year
Initial Investment
Periodic Maintainance
Total Cost
VOC Saving
Time Saving
Total Benefit
Net Benefit
With Project
Without Project
Without VOC
Without Time
1 8,87 0,00 0,00 8,87 0,00 0,00 0,00 -8,87 -8,87 -8,87
2 14,79 0,00 3,59 11,20 0,79 0,40 1,19 -10,01 -10,80 -10,41
3 5,91 0,00 0,00 5,91 0,94 0,49 1,43 -4,48 -5,42 -4,97
4 0,00 0,00 0,00 0,00 1,27 0,08 1,35 1,35 0,08 1,27
5 0,00 0,00 0,00 0,00 1,62 0,31 1,93 1,93 0,31 1,62
6 0,00 0,00 0,00 0,00 2,04 0,60 2,64 2,64 0,60 2,04
7 0,00 0,00 3,59 -3,59 2,54 0,98 3,52 7,11 4,57 6,13
8 0,00 0,00 0,00 0,00 1,88 0,29 2,17 2,17 0,29 1,88
9 0,00 0,00 0,00 0,00 2,39 0,65 3,04 3,04 0,65 2,39
10 0,00 2,76 0,00 2,76 3,00 1,10 4,10 1,34 -1,66 0,24
11 0,00 0,00 0,00 0,00 3,62 1,69 5,31 5,31 1,69 3,62
12 0,00 0,00 3,59 -3,59 4,48 2,44 6,92 10,51 6,03 8,07
13 0,00 0,00 0,00 0,00 3,15 1,07 4,22 4,22 1,07 3,15
14 0,00 0,00 0,00 0,00 3,95 1,79 5,74 5,74 1,79 3,95
15 0,00 0,00 0,00 0,00 4,92 2,71 7,63 7,63 2,71 4,92
16 0,00 0,00 0,00 0,00 6,06 3,87 9,93 9,93 3,87 6,06
17 0,00 2,76 3,59 -0,83 7,41 5,26 12,67 13,50 6,09 8,24
18 0,00 0,00 0,00 0,00 6,13 2,63 8,76 8,76 2,63 6,13
19 0,00 0,00 0,00 0,00 7,67 4,00 11,67 11,67 4,00 7,67
20 0,00 0,00 0,00 0,00 9,46 5,77 15,23 15,23 5,77 9,46
21 0,00 0,00 0,00 0,00 11,68 7,72 19,40 19,40 7,72 11,68
22 0,00 0,00 3,59 -3,59 14,36 10,46 24,82 28,41 14,05 17,95
23 -8,87 0,00 0,00 -8,87 17,52 13,83 31,35 40,22 22,70 26,39
Total 20,70 5,52 17,95 8,27 116,88 68,14 185,02 176,75 59,87 108,61
EIRR
1 16,77% 7,94% 13,08%
1 At a discount rate of 12%
69 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Economic Output for Tranche 3 (Chapter 5)
Year Capital Costs
Recurrent Maintainance
Total Cost
VOC Saving
Time Saving
Accident Savings
Total Benefit
Net Benefit With Project Without Project
1 0,00 0,03 0,03 0,00 0,03 0,00 0,00 0,03 0,03
2 0,00 0,05 0,05 0,00 0,04 0,00 0,00 0,04 0,04
3 19,35 0,03 0,08 -19,30 -0,04 -0,02 0,00 -0,06 -19,36
4 45,54 0,06 0,09 -45,51 0,23 0,05 0,00 0,28 -45,23
5 48,96 0,06 0,08 -48,94 0,59 0,16 0,00 0,75 -48,19
6 0,00 0,06 0,09 -0,15 1,80 4,77 2,77 9,34 9,19
7 0,00 0,06 0,09 -0,15 2,15 5,26 2,94 10,35 10,20
8 0,00 0,06 0,09 -0,15 2,78 5,85 3,12 11,75 11,60
9 0,00 0,06 0,09 -0,15 3,52 6,54 3,30 13,36 13,21
10 0,00 0,06 0,09 -0,15 4,40 7,35 3,50 15,25 15,10
11 0,00 0,06 0,09 -0,15 5,41 8,28 3,71 17,40 17,25
12 0,00 0,06 0,09 -0,15 6,58 9,35 3,94 19,87 19,72
13 0,00 0,06 0,09 -0,15 7,97 10,60 4,17 22,74 22,59
14 0,00 0,06 1,16 -1,22 9,60 12,03 4,42 26,05 24,83
15 0,00 0,06 0,09 -0,15 10,04 12,97 4,69 27,70 27,55
16 0,00 0,06 0,70 -0,76 12,06 14,73 4,97 31,76 31,00
17 0,00 0,06 7,88 -7,94 13,46 16,27 5,27 35,00 27,06
18 0,00 0,06 1,39 -1,45 4,87 12,90 5,58 23,35 21,90
19 0,00 0,06 1,01 -1,07 4,13 13,20 5,92 23,25 22,18
20 0,00 0,06 0,52 -0,58 3,71 13,71 6,27 23,69 23,11
21 0,00 0,06 3,72 -3,78 4,13 14,64 6,65 25,42 21,64
22 0,00 0,06 0,32 -0,38 -1,68 12,42 7,05 17,79 17,41
23 0,00 0,06 0,07 -0,13 -1,31 13,13 7,47 19,29 19,16
24 0,00 0,06 0,07 -0,13 -0,30 14,19 7,92 21,81 21,68
25 0,00 0,06 0,08 -0,14 0,81 15,37 8,39 24,57 24,43
26 0,00 0,06 0,09 -0,15 2,55 16,75 8,90 28,20 28,05
27 0,00 0,06 0,09 -0,15 4,73 18,74 9,43 32,90 32,75
28 0,00 0,06 1,06 -1,12 7,46 21,12 10,00 38,58 37,46
29 0,00 0,06 0,09 -0,15 6,78 21,55 10,60 38,93 38,78
30 0,00 0,06 0,09 -0,15 9,94 24,81 11,23 45,98 45,83
31 0,00 0,06 0,09 -0,15 18,51 33,87 11,91 64,29 64,14
32 0,00 0,06 0,09 -0,15 23,46 38,41 12,62 74,49 74,34
33 0,00 0,06 0,09 -0,15 28,57 43,42 13,38 85,37 85,22
34 0,00 0,06 0,09 -0,15 37,29 51,31 14,18 102,78 102,63
35 -68,31 0,06 0,09 -68,16 43,45 55,86 15,03 114,34 46,18
EIRR=15,2%
70 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Tranche 2-Option 1 (Chapter 5)
Widening the existing road to
dual 2-lanes by constructing
a new southbound
carriageway,
Rehabilitating/reconstructing
the existing road as a
northbound carriageway
Cost=US$232.8m
including VAT (or US$194.2 w/o
VAT)
Source: ADB
71 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Tranche 2-Option 2 (Chapter 5)
Construction of a new 2-lane road alongside the existing road,
The existing road remains in its current condition
Advantages Disadvantages
A new road with higher
design standards
Less outcomes in terms of
services (lack of bypass,
expensive to connect to
other main roads and etc.)
Higher operating levels
Less expensive solution
than Option 1
Sufficient capacity for the
volume of
forecast traffic
72 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Tranche 2-Option 3 (Chapter 5)
2 lane through stage construction
Stage 1-reconstruction to the design of the northbound carriageway of a
dual carriageway,
Stage 2-complete construction of southbound carriageway (in case there is
a necessity to increase the traffic volume)
Advantages Disadvantages
…timely investment when
traffic levels have reached
levels that make upgrading
more
economically viable
Uncertainty (conditions may
not be as viable at a future
date)
73 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Tranche 2-Option 4 (Chapter 5)
Minimum cost implications,
No provision for the second carriageway,
Rehabilitating/reconstructing existing road,
Road shoulder, resurfacing, and safety improvements
74 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Tranche 2-Option 5 (Chapter 5)
The section between
Ashtarak
and Talin would be
upgraded to a full 4-
lane highway by new
construction, whilst
the existing
2-lane section
between Talin and
Gyumri would be
rehabilitated to a
Class 1, 2-lane
highway
continuing to operate
with two-way traffic.
Mix of the Option 1
and 4
75 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Tranche 2 under PIP models (Chapter 5)
Option Cost ($ million) EIRR
Low Central High
1 194.23 12.4% 15.5% 17.4%
2 140.11 13.2% 16.3% 18.3%
3 99.98 12.9% 15.5% 17.6%
4 72.96 5.6% Negative Negative
5 148.88 13.1% 15.0% 17.1%
ADB and Ministry of the
Transport and
Telecommunication of the RA,
2010
76 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Case Model in the PIP
Toolbox
FIRR EIRR
Low Central High Central
Base Case - 1,8% 4,6% 6,9%
15,5%
Capital Support
BOT
Business Model 9,3% 12,3% 14,8%
Tolls+6,8$ Million
Annuity (1,5$ per
axle)
Business Model 8,2% 10% 11,8%
No Tolls and 19$
Million Annuity
Business Model 10% 6,6% 14,4%
With Operation
and Maintenance
Contract
Contractual Model 7,9% 10,2% 11,6%
Based on ADB and Ministry of
the Transport and
Telecommunication of the RA,
2010
77 © Professur Betriebswirtschaftslehre im Bauwesen So2017
Exercises to practice
Public sector keeps the ownership of the road and transfers BOMF functions to
a private company for 20 years. What privatization model is the case?
Public sector is involved in the SPC of the project. What partnership model
refers the case?
The legislation of country X limits the rights to transfer the ownership of the
airport to the private company on the unlimited bases. What privatization
model should not be considered in the analysis of different options?
The ownership is transferred from unlimited to limited basis. From which
possible privatization models is the shift to functional privatization model?
Provision function of the asset is conducted by both public and private
sectors. What privatization model is used?
78 © Professur Betriebswirtschaftslehre im Bauwesen So2017
YOUR TASKS
1. Choose a Country
2. Choose a Sector
3. Choose a Project
4. Develop the PIP map for the chosen country and sector
5. Choose the organizational model of the chosen project within the developed
PIP map (Task 4)
6. Describe the benefits of the project (Economic Viability)
7. Describe the financial cash flow of the project (Financial Viability)
8. Summarize the results of the project
9. Give your recommendations
10.Summarize all the tasks/findings in a ppt file
11.Make a presentation
79 © Professur Betriebswirtschaftslehre im Bauwesen So2017
THANK YOU!
QUESTIONS?
Contacts:
Norayr Badasyan
E-mail: [email protected]
Address: Marienstrasse 7a, room 112