Journal of Korean Society of Transportation ISSN:1229-1366(Print) 2234-4217(Online) 대한교통학회지

Public-Private-Partnerships tend to be committed high project development cost and recover the cost through future revenue during the operation period. In general, long-term concession can bring on more revenue to private investors, but short-term concession less revenue due to the short recovering opportunities. The concession period is usually determined by government in advance or by the private sectors’s proposal although it is a very crucial factor for the PPPs. Accurate traffic forecasting should be most important in planing and evaluating the operation period in that the forecasted traffic determines the project revenue with user fees in PPPs. In this regards, governments and the private investors are required to consider the traffic forecast risk when determining concession period. This study proposed a model for the optimal concession period in the PPPs transportation projects. Monte Carlo simulation was performed to find out the optimal concession period while traffic forecast uncertainty is considered as a project risk under the expected return of the private sector. The simulation results showed that the optimal concession periods are 17 years and 21 years at 5.5% and 7% discount level, respectively. This study result can be applied for the private investors and/or any other concerned decision makers for PPPs projects to set up a more resonable concession period.