A decision method of concession period for traffic projects in a build-operate-transfer scheme

Concession period is one of the most important issues in a build-operate-transfer (BOT) scheme and has become the focus in fields of both academy and practice. Current decision methods of concession period commonly face to the difficulties in estimating the wider-risk profiles and long-term uncertainties for traffic projects. This paper proposes a simulation-based methodology which aims to determine a reasonable concession period. The construction period, construction cost, traffic volume, operation revenue and operation cost are considered as key risks affecting the concession period and assumed to be uncertain parameters following certain statistical distributions in the simulation process. A case study of a highway project is provided to demonstrate the application of the proposed methodology and simulation techniques. With the help of the methodology, the impact of risks could be taken into account in the negotiation of concession period between the government and private sector.