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Risk analysis for revenue dependent infrastructure projects

Author

Listed:
  • Anthony Songer
  • James Diekmann
  • Roger Pecsok

Abstract

Recent trends in the construction industry indicate continued use of alternative procurement methods such as design-build, construction management, build-operate-transfer, and privatization. Increased use of these evolving methods produces higher levels of uncertainty with respect to long term performance and profitability. The uncertainties inherent in implementing new procurement methods necessitate investigation of enhanced methods of pre-project planning and analysis. This is particularly true for revenue dependent privatization projects such as toll roads. Poor initial performance of toll road projects suggests traditional methods of project analysis are inadequate. Sustaining investor and stakeholder support of privatized revenue dependent projects is dependent upon successful financial performance. Enhanced risk analysis tools provide improved information for pre-project decision making and performance outcome. One such risk analysis method is the Monte Carlo. Monte Carlo methods are especially useful in evaluating which of several uncertain quantities most significantly contributes to the overall risk of the project. This paper demonstrates a Monte Carlo risk assessment methodology for revenue dependent infrastructure projects.

Suggested Citation

  • Anthony Songer & James Diekmann & Roger Pecsok, 1997. "Risk analysis for revenue dependent infrastructure projects," Construction Management and Economics, Taylor & Francis Journals, vol. 15(4), pages 377-382.
    • Handle: RePEc:taf:conmgt:v:15:y:1997:i:4:p:377-382
    DOI: 10.1080/014461997372935
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    Cited by:

    1. Abraham Park & Chen Yu Chang, 2013. "Impacts of Construction Events on the Project Equity Value of the Channel Tunnel Project," ERES eres2013_97, European Real Estate Society (ERES).

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