A determining model on total investment, project life, and concession period interval for BOT projects

Abstract

To properly determine the concession period is one of the most important questions of BOT (Build-Operate-Transfer) projects. Project life and total investment are always pre-given in extant models such as ACM and RCM, which needs more discussion. Social benefit is one crucial factor for a host government to accelerate infrastructure construction by the BOT mechanism, which has been much more concerned by scholars. In this article, a determining model on total investment, project life, and concession period interval for BOT projects has been established. We unlock the premise that total investment and project life are pre-given, and aim to maximize the total benefit of the host government including economic and social benefit while ensuring that the private enterprises will receive a certain profit, finally determining the ideal project life and total investment, hence obtaining the concession period interval. The determining model enables a better progress of the negotiation between the host government and private enterprises.