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Compensation Approaches for Early Termination of PPP Projects

In: Proceedings of the 17th International Symposium on Advancement of Construction Management and Real Estate

Author

Listed:
  • Wei Xiong

    (The Hong Kong University of Science and Technology)

  • Xueqing Zhang

    (The Hong Kong University of Science and Technology)

Abstract

Even though a lot of successes had been achieved since the PPP model was applied to deliver public works, many projects were terminated earlier before the expiry date due to the complexity of the nonrecourse financing method and a variety of risks and uncertainties related to project finance. In early termination, fair, effective and operational compensation approaches were required to relieve both parties from the rights and obligations within the concession agreement. This paper introduced two popularly applied compensation approaches including Compensation based on Financial Statement (FS) and Compensation based on Discounted Value of Future Cash Flow (DVFCF). Those approaches were analyzed through four simple cases and their characteristics were various by different allocation strategies of long-term risks. Finally, this paper provided implications for how to choose the most suitable compensation approach in different scenarios.

Suggested Citation

  • Wei Xiong & Xueqing Zhang, 2014. "Compensation Approaches for Early Termination of PPP Projects," Springer Books, in: Jiayuan Wang & Zhikun Ding & Liang Zou & Jian Zuo (ed.), Proceedings of the 17th International Symposium on Advancement of Construction Management and Real Estate, edition 127, chapter 0, pages 721-729, Springer.
    • Handle: RePEc:spr:sprchp:978-3-642-35548-6_75
    DOI: 10.1007/978-3-642-35548-6_75
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    Cited by:

    1. Song, Jinbo & Jin, Lulu & Zhao, Yunpeng & Hu, Wenjin, 2017. "Using bargaining-game model to negotiate compensation for the early termination of BOT highway projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 105(C), pages 197-209.
    2. Marques, Rui Cunha, 2021. "Public interest and early termination of PPP contracts. Can fair and reasonable compensations be determined?," Utilities Policy, Elsevier, vol. 73(C).

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