System Dynamics Application to PPP Financing

PPP (Public-Private Partnership) projects often incur excessive time overruns during the pre-contract stages, difficulty in reaching agreement on financial proposal being one of the major reasons. The paper focuses on providing a scientific method of analyzing PPP financing schemes so as to facilitate the pre-contract negotiations between the parties. Due to the long period of concession contract, all critical factors should be considered changing over time. Besides, a holistic point of view should be adopted to deal with the interdependences among the factors. Therefore, the paper establishes a prototype with system dynamics software to assess the applicability of PPP financing schemes. To calculate the applicability, three major factors are involved: benefits for public sector, benefits for private sector and benefits for the society.