Risk analysis for revenue dependent infrastructure projects

Anthony Songer, James Diekmann and Roger Pecsok

Construction Management and Economics, 1997, vol. 15, issue 4, 377-382

Abstract: Recent trends in the construction industry indicate continued use of alternative procurement methods such as design-build, construction management, build-operate-transfer, and privatization. Increased use of these evolving methods produces higher levels of uncertainty with respect to long term performance and profitability. The uncertainties inherent in implementing new procurement methods necessitate investigation of enhanced methods of pre-project planning and analysis. This is particularly true for revenue dependent privatization projects such as toll roads. Poor initial performance of toll road projects suggests traditional methods of project analysis are inadequate. Sustaining investor and stakeholder support of privatized revenue dependent projects is dependent upon successful financial performance. Enhanced risk analysis tools provide improved information for pre-project decision making and performance outcome. One such risk analysis method is the Monte Carlo. Monte Carlo methods are especially useful in evaluating which of several uncertain quantities most significantly contributes to the overall risk of the project. This paper demonstrates a Monte Carlo risk assessment methodology for revenue dependent infrastructure projects.

Keywords: Project Finance; Monte Carlo; Privatization; Risk Analysis; Computer (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (1)

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DOI: 10.1080/014461997372935

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