According to the risk impact simulation, the case falls into a serious risk scenario when the severity of the demand shortfall or the public rejection of the toll rate is 10%, and when the severity of any risk is 20%. With the same severity, the demand
shortfall and the public rejection of the toll rate have the same impact, which is higher than that of construction cost overrun
and O&M cost overrun. Even though serious risk scenarios may be caused by a combination of risks, this study only analyzes
the risk individually for sample illustration.
Effectiveness Assessment
After the risk impacts of driving risks are evaluated, ex post risk response measures can be taken. Among the available measures, the government has to assess the reduction effectiveness, determine the adjustment values, and select the most suitable
one. Even though the government can also select a combination of measures, this study only analyzes individual measures for
sample illustration. The adjustment values of all the available measures for the illustrative case are calculated when the severity
of driving risks is 20%, as shown in Table 4.
Measures Equations Applied
Driving Risks (M 5 20%)
Demand
Risk
Construction Cost
Overrun
O&M Cost
Overrun
Public Rejection
of Toll Rate
Risk impact (Million US$) ( 2), ( 3) 54. 55 9. 73 14. 18 54. 55
Toll increase (US$) ( 6), ( 11) 0.50 0.07 0.10 NA
Contract extension (year) ( 7), ( 11) 11 3 5 11
Annual subsidy or unitary
payment (*planned amount)
( 8), ( 11) 246% 44% 64% 246%
Tax waiver (*planned tax rate) ( 9), ( 11) NE (7576%) 50% NE (143%) NE (7576%)
Reduction of investment
obligations (Million US$)
( 10),( 11) 75. 76 13. 52 19. 70 75. 76
Compensation of early
termination BV (Million US$)
( 12) 139.44 165.08 139.07 139.44
Compensation of early
termination MV (Million US$)
( 13) 73. 14 153.25 121.83 73. 14
NA 5 Not Applicable; NE 5 Not Effective Enough.
Table 4: Ex post risk response measures evaluation.
Ex Post Risk Response Measures Selection
The selection of most suitable ex post risk response measures depends on their effectiveness in solving problems. The evaluation of ex post risk response measures is shown in Table 4. With regard to renegotiations, a toll increase is very effective in
this case because a US$0.50 toll increase would adjust off all excessive risk impacts, except that a toll increase is not applicable
when the driving risk is public rejection of toll rate; contract extension is also effective, but it is dangerous for the government
to extend the concession by nearly one-third of original length when the driving risk is demand shortfall or public rejection
of toll rate; annual subsidy or unitary payment is direct and effective, but it occupies a huge amount of budget, which is up to
around US$2.5 million per year when the driving risk is demand shortfall or public rejection of toll rate; tax waiver is effective
when the driving risk is construction cost overrun, but is not effective enough when the driving risk is demand shortfall, O&M
cost overrun, or public rejection of toll rate; reduction of investment obligations is effective only if there is such an amount of
investment obligation in agreements. With regard to early terminations, compensation for early termination through the BV
method is applicable, if the driving risk is caused by the government or has been assigned to the government in agreements,
and the compensation is much higher than the capital investment; compensation for early termination through the MV method
is applicable, if the driving risk is caused by the private sector or has been assigned to the private sector in agreements, and
the compensation is lower than the capital investment when the driving risk is demand shortfall or public rejection of toll rate.
