Risk in Government’s Estimate for Toll Road: Based on Investors’ Perspective

Abstract

The government's estimate for toll road concession award, as a comparator for investors' bids, has been criticized by investors, as it does not fully include the proper cost of risks. Thus, there is a need to develop a more equitable estimate that considers the risks, both at the project and at the business/corporate level. The study was mainly supported by qualitative data on the probability of occurrences and impact assessment of risks, acquired through interviews with major investors. Probability Impact Matrices were used to identify risks categorized as "high risks." Findings have indicated that the high and dominant risks are: i) Route/traffic management (lower traffic volume due to changing routes); ii) Overloading (poorly imposing the limitations of heavy vehicles); and iii) Inadequate/inaccurate data in feasibility study documents. Recommendation on the mitigation plan for these risks has been corroborated by both parties, the government, and the investors. Parts of the risk are proposed to be incorporated into the government's estimate, while other risks should be adequately addressed in specific contract clauses for Indonesia's PPP scheme.

A Novel Rough Fuzzy Based Delphi Method for Highway Projects Risk Analysis: The Soe Assignment Scheme Case Study

“…Policy Factor Policy Risk includes termination of concessions, tax increases, tariffs not in accordance with implementation, inappropriate rate increases, enforcement of new government policies, and contracts that affect financial performance and project timetables [6][7][8][9].…”

“…Construction Factor Construction Risk contributes to an increase in time and costs during the construction stage that deviates from what was agreed upon at the time of planning, thereby causing the delay of operational services by the project owner to the customer beyond the specified time [7,16].…”

“…Operation Factor Risk caused by ineffective and/or inefficient operational and maintenance systems result in high overhead costs that may affect income during the concession period [7,13,16].…”

The Efficacy of the Tolling Model’s Ability to Improve Project Profitability on International Steel Plants

“…De Borger et al [7] presented strategic owner investment and pricing decisions using game theory to test the differing tolling strategies' impacts on expected capacity, user demand, and associated revenue. Wirahadikusumah et al [8] identified risks associated with the tolling contract including estimation accuracy of future revenue, overloading of the asset, and inadequate feasibility studies. Chung and Hensher [9] investigated the differences in how the private and public sectors valuate risk, presenting a risk profile index to capture the influence as perceived by each sector.…”

Public (Dis)Engagement in Toll Road Project: A Case Study from Indonesia

“…Unfortunately, only 757,470 km (16%) of that length, has been constructed to date. Several studies on toll road construction site show that the problem of low public participation and attendant resistance as a factor that has contributed to the low level of toll road completion (Sandhyavitri, Talha, Fauzi, & Sutikno, 2017;Sihombing, 2017;Wirahadikusumah, Sapitri, Susanti, & Soemardi, 2018). It is the line of thinking that this study takes, by trying to provide a more detailed description of the impact of that non-involvement of the project has on the construction of toll roads in Indonesia.…”