1. Presented by: Alaa Albesher

2.  Objective.  Concession Period.  BOT Concession Model (BOTCcM).  Principles of Bargaining Theory.  Bargaining Process.  Critique.

3.  Concession period is one of the most important decision variables in arranging a BOT-type contract.  This paper introduces a method to enable the identification of a specific concession period.

4.  The granted period of time by government to operate the facility and generate revenue.

5.  Short concession period investor rejects the contract or increase service fees. (Investor or Public Disadvantage)  Prolonged concession period government lose profit. (Government Disadvantage)

6.  The span of the concession period shall protect the basic interests of both the government and the private investor. IR ≤ NPV(T c ) ≤ NPV(T f ) IR: expected return of investment. NPV(T c ): net present value generated during the concession period. NPV(T f ): net present value generated during the project economic life.

8.  Bargaining is a process through which the players try to reach an agreement by making offers and counteroffers.  Principles: 1. Rational behavior. 2. Information sharing. 3. Bargaining payoff. 4. Bargaining cost. 5. Time value (discount factor)

9. T C_L ≤ T C ≤ T C_U

10.  Should make a reasonable offer by analyzing the investor’s position.  This will reduce the chance of further bargaining.  Counteroffer will cause bargaining cost and time cost.  Maximum and minimum concession period values gets closer with bargaining.

11.  Should make a reasonable offer by analyzing the government’s position.  This will reduce the chance of further bargaining.  Counteroffer will cause bargaining cost and time cost.  Maximum and minimum concession period values gets closer with bargaining.

12.  Positive:  There are only few studies regarding the length of the concession period.  Specific agreeable concession period can be identified by using this method.

13.  Negative:  Bargaining will take longer than if concession time is specified in the tender.  Calculations are not easy to follow because of the symbols used.  If the maximum value is at the last year of the project life, this will make a very long time range.

14. Any Questions!