Flexible-Term Highway Concessions: How Can They Work Better?

Highway concessions are becoming popular around the world. One of the main issues in adequately designing concession contracts is how best to allocate traffic risk. Many concession contracts, therefore, are incorporating traffic risk mitigation mechanisms to limit the amount of traffic risk ultimately taken on by the concessionaire. One of the most interesting approaches in the mitigation of traffic risk is the design of flexible-term concessions (FTCs) that end automatically when a certain level of accumulated traffic or revenues is reached. The concession duration may be extended if real traffic becomes lower than expected and shortened when real traffic is higher than expected. The aim of this paper is to survey and assess the implementation of FTCs to explore why these mechanisms have so seldom been adopted. The author found that the main reason for the scarce implementation of these mechanisms lies in the strong opposition of the private sector to FTCs because of the asymmetric risk profile that FTCs present. This risk profile means that the potential gains for the concessionaire are substantially limited, while potential losses are not limited to nearly the same degree. The paper ends with some recommendations for improving the acceptability of FTCs.

• Record URL:
  https://doi.org/10.3141/2187-04
• Summary URL:
  http://scholar.google.com/scholar_lookup?title=Flexible-Term+Highway+Concessions%3a+How+Can+They+Work+Better%3f&author=J.+Vassallo&publication_year=2010
• Availability:
  • Find a library where document is available. Order URL: http://www.trb.org/Main/Blurbs/Economics_Demand_Management_and_Parking_Policy_164863.aspx
• Authors:
  • Vassallo, Jose Manuel
• Publication Date: 2010

Language

• English

Media Info

• Media Type: Print
• Features: Figures; References;
• Pagination: pp 22-28
• Monograph Title: Economics, Demand Management, and Parking Policy
• Serial:
  • Transportation Research Record: Journal of the Transportation Research Board
  • Issue Number: 2187
  • Publisher: Transportation Research Board
  • ISSN: 0361-1981

Subject/Index Terms

• TRT Terms: Acceptance; Concessions; Contracts; Financing; Highways; Private enterprise; Risk management
• Uncontrolled Terms: Flexible funding
• Subject Areas: Finance; Highways; I10: Economics and Administration;

Filing Info

• Accession Number: 01154902
• Record Type: Publication
• ISBN: 9780309160605
• Report/Paper Numbers: 10-0654
• Files: TRIS, TRB, ATRI
• Created Date: Apr 20 2010 8:44AM