Public-Private Partnerships in Port Areas: Lessons Learned from Case Studies in Antwerp and Rotterdam

Abstract

The cost-benefit analysis (CBA) is a widely used approach for the appraisal of transport projects, but criticisms on it have led to the development of alternatives such as the BENEFIT approach. This book chapter analyzes three cases of infrastructure investments in port areas in Belgium and the Netherlands, by application of the BENEFIT approach. We find inter alia that differences in country performance on internationally accepted indicators can influence differences in infrastructure investments between countries. Moreover, infrastructure projects with larger revenue-generating possibilities will influence the PPP (public-private partnership) potential of this type of projects in a positive way. Applying different appraisal methods to the same infrastructure project might help to arrive at infrastructure project investment approvals that are well-documented.

Appendix

This Appendix operationalizes the various BENEFIT indicators mentioned in “Evaluation Frameworks: CBA, PSC, and BENEFIT” section of the main text, so as to be used in “The Three Infrastructure Projects Compared and Evaluated” section for the concrete case calculations.

FEI

FEI1	The (growth) competitiveness index developed by the World Economic Forum	A score between 1 (weak) and 7 (strong), rescaled to between 0/1
FEI2	Inflation (consumer prices), general government final consumption expenditure, GDP per capita growth and unemployment rate.	Composed by two governance indicators of the World Bank—rule of law and regulatory quality—combined with the aggregated OECD indicators of regulation in energy, transport, and communications (ETCR) on the regulatory restrictiveness (inverse of level of liberalization) of markets, each scaled between 0 and 1 and weighted
FEI3	S&P global equity prices and domestic credit to private sector	publicly available figures, rescaled to between 0 and 1
FEI4	PPP governmental support index as developed	Government effectiveness indicator by the World Bank, each scaled between 0 and 1 and weighted
FEI		(FEI1 + FEI2 + FEI3 + FEI4)/4

INI

INI1	“Political” subdimension “political capacity, support, and policies”	Composed of three main governance indicators of the World Bank: political stability and absence of violence, control of corruption, and voice and accountability, each scaled between 0 and 1 and weighted
INI2	“Regulatory” subdimension “legal and regulatory framework”	Composed by two governance indicators of the World Bank—rule of law and regulatory quality—combined with the aggregated OECD indicators of regulation in energy, transport, and communications (ETCR) on the regulatory restrictiveness (inverse of level of liberalization) of markets, each scaled between 0 and 1 and weighted
INI3	“Administrative” subdimension “public sector capacity”	Government effectiveness indicator by the World Bank, each scaled between 0 and 1 and weighted
FEI		(INI1 + INI2 + INI3)/3

GI

G1	The client selected only one service provider [bidder] to participate in the pricing stage	0 = more than one bidder selected in pricing stage + no collective project cost estimation 0.5 = only one bidder selected in pricing stage/collective project cost estimation 1 = only one bidder selected in pricing stage + collective project cost estimation
G2	The client and the key service providers [bidders] collectively estimated the expected project cost
G3	Encouragement of competition between bidders	0/1
G4	Integration of design and construction	0/1
G5	The key service providers [contractor] to pay a penalty if completion dates were not met	0 = no penalty + no cost risk 0.5 = penalty/cost risk 1 = penalty + cost risk
G6	The key service providers [contractor] solely carried the risk of rising costs
G7	The client and key service providers [contractor] [to share] shared equal proportions of profit due to cost underruns	0/1
G8	Bonding requirements	0/1
G9	All exploitation, commercial/revenue and financial risks are shared	0/1
G10	Clauses enable both updating of service and price changes	0 = no clause present 1 = one of or both clauses present
G11	Clauses indicate that client has an option to terminate the agreement without cause	0/1
GI		(G1 + G2 + G3 + G4 + G5 + G6 + G7 + G8 + G9 + G10 + G11)/11

CSI

x 1	Level of civil works	%
x 2	Capability to construct	%
x 3	Optimal construction risk allocation	%
x 4	Adoption of innovation	0/1
x 5	Capability to manage the application of innovation	1 = ex ante or ex post if successful 0 = ex post if unsuccessful
x 6	Share of other transport infrastructure investment	%
x 7	Life cycle planning	0/1
x 8	Capability to operate	%
x 9	Optimal operational risk allocation	%
CSI		x2x3 – (x1 − x1x2x3) + x4x5 + x7x8x9

RSI

x 10	Share of greenfield	%
x 11	Coopetition (for greenfield)	%
x 12	Capability to manage traffic demand (for greenfield)	%
x 13	Optimal traffic demand risk allocation (for greenfield)	%
x 14	Level of satisfaction (for greenfield)	1 = more than 50% very satisfied 0.5 = more than 50% satisfied 0 = less than 50% satisfied
x 15	Share of brownfield	%
x 16	Coopetition (for brownfield)	%
x 17	Capability to manage traffic demand (for brownfield)	%
x 18	Optimal traffic demand risk allocation (for brownfield)	%
x 19	Level of satisfaction (for brownfield)	1 = more than 50% very satisfied 0.5 = more than 50% satisfied 0 = less than 50% satisfied
x 20	Share of non-transport activities	%
x 21	Capability to manage the non-transport revenue risk	0 / 1
x 22	Optimal other revenue risk allocation	%
x 23	Other economic impacts	Positive impacts: 1 Negative impacts: −1 No influence: 0
x 24	Other environmental impacts	Positive impacts: 1 Negative impacts: −1 No influence: 0
x 23	Social impacts	Positive impacts: 1 Negative impacts: −1 No influence: 0
x 24	Institutional impacts	Positive impacts: 1 Negative impacts: −1 No influence: 0
RSI		1 + x10x11x12x13x14 + x15x16x17x18x19 + x6x11x12x13x14 + x20x21x22 + x23 + x24 + x25 + x26

RAI

RAI1	Cost recovery	%
RAI2	a: Share of income stream i on total revenues	% share of income stream i on total revenues
	b: Risk of income source i	Usage payment: 3 Availability payment: 2 Quality performance payments: 2 Subventions: 1
	Risk of income	s: Σ(a.b)
RAI3	si: score of income (or penalty) stream i on incentives	1 (inadequate incentive) to 4 (adequate incentive)
	wi: % of income stream i on total income	%
	Optimal operational performance	s: Σ(wi.si)
RAI		(RAI1 + RAI2 + RAI3)/3

RRI

RRI1	Cost coverage	% w: 2
RRI2	a: Share of revenue stream i on total revenues	%
	b: Risk of revenue source i	scale: 1 (low risk) to 4 (high risk)
	Risk of revenues	s: Σ(a.b)
RRI		(2RRI1 + RRI2)/2

MEAI

MEAI1	smc1: Adherence of infrastructure use pricing scheme to (social) marginal costs of infrastructure use	1–4 (1, not related; 4, fully related)
	smc2: Application of consistent marginal cost pricing scheme in concurrent infrastructure	0/1
	Market and environmental efficiency	s: smc1 (smc2 cond.)
MEAI2	pa1: Direct benefits of project to funding agent(s)	1–4 (1, no benefits to funding agent(s); 4, full alignment of benefits to funding agent)
	pa2: Perception that pricing revenue is applied toward a desired objective	1–4 (1, application of revenues not transparent; 4, application of revenue transparent and towards a desired objective)
	Public acceptability of funding scheme	s: pa1 + 0.5*pa2
MEAI		(MEAI1 + MEAI2)/2

FSI

D	Debt indicator	Debt A. Investors (debt) with a high aversion against risk taking: the general public (tradable bonds), other institutional investors (e.g., pension funds, insurance companies, other funds), non-leading banks: 4 Debt B. Lead banks: 3 Debt C. International Financial public Institutions IFIs (e.g., EIB): 1, 5 Debt D. Government: 1
E	Equity indicator	Equity A. Investors (equity) with a high aversion against risk taking: the general public (tradable shares), commercial Banks: 4 Equity B. Infrastructure funds and private equity funds, individual affiliated investors (e.g., contractors, operators and other project sponsors): 3 Equity C. Government
FSI		= 0.5 * Ieq * (1 − d) + Idebt * d, d = share of debt

IRA

R	Level of reliability	Reliability was improved fully in line with expectations or even more: 1 Reliability was improved only partially in line with expectations: 0.50 Reliability was not improved or only marginally: 0.0
A	Level of availability	Availability was improved fully in line with expectations or even more: 1 Availability was improved only partially in line with expectations: 0.50 Availability was not improved or only marginally: 0.0
IRA		(1 + IR) * (1 + IA)/4