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Summer 2009

Public-private partnerships in high risk transportation projects

Kiran Rangarajan

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 PUBLIC – PRIVATE PARTNERSHIPS

IN HIGH RISK TRANSPORTATION PROJECTS

by

KIRAN RANGARAJAN

A THESIS

Presented to the Faculty of the Graduate School of the

MISSOURI UNIVERSITY OF SCIENCE AND TECHNOLOGY

In Partial Fulfillment of the Requirements for the Degree

MASTER OF SCIENCE IN ENGINEERING MANAGEMENT

2009

Approved by

Suzanna Long, Advisor

Scott E. Grasman
Steven M. Corns
  2009
Kiran Rangarajan
All Rights Reserved
 iii

ABSTRACT

This research examines Public-Private Partnerships (PPPs) between private firms

and City of Chamois, Missouri to establish a ferry boat service across the Missouri River.

The study illustrates the role of PPPs in managing high risk transportation projects for

rural economic development. The research study was designed to accomplish three

objectives. First, understand and study the high risk transportation industry which

included analyzing other ferry services in and around the region, and identifying potential

risks involved in a ferry boat project. Second, study various models of PPPs, identify the

attributes of each model and select appropriate models based on local and global

variables affecting the risks identified. Third, use mathematical models such as Analytic

Hierarchy Process (AHP) and Quality Function Deployment (QFD) to analyze how each

PPP model mitigates risks identified. These models are also used to determine the most

feasible PPP model considering the project objectives and requirements.

The important contributions made by the research study include, introduction to

success-making and roadmap to developing partnerships, steps required for acceptance of

such plans and also demonstrate consistency with state and local transportation plans, and

provide cost benefit analysis quantifying positive business and economic impacts of the

project.
 iv

ACK OWLEDGME TS

Throughout my stay here at Missouri University of Science and Technology, I

was inspired by several people who have supported me both academically and personally.
I owe my deepest gratitude to Dr. Suzanna Long, who gave me an opportunity to start my
research work. Dr. Long has continuously conveyed a passion for research work and
excitement for teaching. Without her guidance and persistent help this thesis would not
have been possible.
I would also like to thank Dr. Long, Department Chair and Professor Dr. William
Daughton, and the Engineering Management Department for helping me financially with
a fellowship.
I would also like to thank my committee members Dr. Scott Grasman and Dr.
Steven Corns, whose work demonstrated to me the concern for economic development
and infrastructure development using Public-Private Partnerships. They have made
available their support in a number of ways and have helped me understand the subject
and its importance.
I am grateful to all the professors and staff who have added value to my work
along the way in classes or outside with their valuable suggestions and support to
accomplish this work.
I would like to show my gratitude to my parents’ R. Rangarajan and Vatsala
Rangarajan, brother Ashwin and friends who have been supporting me throughout my
masters with their love, and encouragement.
Last but not the least I want to thank this University for all the help and facilities
provided during my stay here in Missouri University of Science and Technology.
 v

TABLE OF CO TE TS

Page
ABSTRACT ....................................................................................................................... iii
ACKNOWLEDGMENTS.................................................................................................. iv
LIST OF ILLUSTRATIONS ............................................................................................ vii
LIST OF TABLES ........................................................................................................... viii
NOMENCLATURE ........................................................................................................... ix
SECTION
1. INTRODUCTION ...................................................................................................... 1
2. CASE STUDY ............................................................................................................ 3
2.1. CHAMOIS, MO ............................................................................................... 3
2.2. CURRENT TOURISM POTENTIAL ............................................................. 6
2.3. BENEFITS OF FERRY BOAT SERVICE ...................................................... 7
2.4. FERRY BOAT SERVICE ............................................................................... 8
2.5. REGULATORY ISSUES ................................................................................ 9
2.6. PUBLIC-PRIVATE PARTNERSHIPS ........................................................... 9
2.6.1. Ameren UE ............................................................................................. 10
2.6.2. United States Department of Agriculture (USDA) ................................. 10
3. PUBLIC-PRIVATE PARTNERSHIPS (PPPs) ........................................................ 12
3.1. GLOBAL PUBLIC-PRIVATE PARTNERSHIP SCENARIO ..................... 14
3.2. BENEFITS OF PUBLIC-PRIVATE PARTNERSHIPS ............................... 15
3.3. CHALLENGES IN PUBLIC-PRIVATE PARTNERSHIPS ......................... 16
3.4. PUBLIC-PRIVATE PARTNERSHIP MODELS .......................................... 16
3.5. GETTING THE PARTNERSHIP RIGHT ..................................................... 17
4. LITERATURE REVIEW ON ANALYTIC HIERARCHY PROCESS .................. 19
4.1. TSAMBOULOS METHOD........................................................................... 20
4.2. APPLICATION OF THE METHOD IN THE CHAMOIS CASE ................ 21
5. RESULTS ................................................................................................................. 29
6. CONCLUSION......................................................................................................... 33
7. FUTURE WORK...................................................................................................... 35
 vi

APPENDICES
A. CITY OF CHAMOIS PROPOSED BUDGET ........................................................ 36
B. AHP and QFD CALCULATIONS .......................................................................... 41
BIBLIOGRAPHY ............................................................................................................. 59
VITA ................................................................................................................................. 61
 vii

LIST OF ILLUSTRATIO S

Page
Figure 2.1. Most Common Occupation for Males (%) (City-data, 2007) ........................... 4
Figure 2.2. Most Common Occupation for Females (%) (City-data, 2007) ....................... 4
Figure 2.3. Educational Attainment (City-data, 2007) ........................................................ 5
Figure 2.4. Establishments by Employment-Size Class (US Census Bureau , 2006) ......... 5
Figure 3.1. PPP Market Maturity Curve (Deloitte, 2007) ................................................ 13
Figure 4.1. AHP Model Developed for the Ferry Boat Project........................................ 23
 viii

LIST OF TABLES

Page
Table 3.1. Worldwide Infrastructure Projects Planned or Completed since 1985 ........... 14
Table 3.2. U.S. Infrastructure Projects Planned or Completed since 1985 ...................... 15
Table 3.3. Summary of Governance Practices .................................................................. 18
Table 4.1. Absolute Number Scale for Pair-wise Comparison ......................................... 19
Table 4.2. Reciprocal Matrix for Meeting the Schedule Risk ........................................... 24
Table 4.3. Normalization of the Reciprocal Matrix .......................................................... 25
Table 4.4. Normalized Matrix ........................................................................................... 26
Table 4.5. Relative Importance of the Risks Identified..................................................... 27
Table 4.6. Relative Importance of the Alternatives .......................................................... 28
Table 4.7. Resultant QFD Approach Indicating an Effective Method .............................. 28
Table 5.1. Feasibility Study Results for Initial Setup Cost ............................................... 30
Table 5.2. Feasibility Study Results for Annual Revenue at $8 per Trip ......................... 30
Table 5.3. Feasibility Study Results for Annual Revenue at $12 per Trip ....................... 31
 ix

OME CLATURE

Symbol Description
Ψ Global Priority
W Weight
Ω Performance of the Alternatives
xp Most Likely Amount
yp Amount Required to Take Part in the PPP
CI Consistency Index
λmax Maximum Eigen Value
n Order of the Matrix
 1

1. I TRODUCTIO

Economic development in rural areas has become a key concern for all
communities. Several entrepreneurs have interests in creating opportunities for new
business development by retaining existing resources. Resources may include
manufacturing facilities, strategic relationships, social networking and human capital.
Retention and creation of businesses help create production and operation jobs
opportunities. These jobs also open up an avenue of opportunities in firms that are a part
of the supply chain and helps create demand for service sector which further stimulates
economic development.
Geography, demographics and overall trends in development pose challenges to
the rural community. A closer analysis from a marketing and supply chain perspective
reveals opportunities for entrepreneurial endeavors due to available natural resources,
opportunities in alternative energy creation and management, and a more decentralized
business system avoiding urban business clusters (Rangarajan, et al. Chamois Ferry Boat
Project, 2008).
Recent economic downturn suggests innovative economic development policies
as a mechanism to address financial risks associated with project funding (Rangarajan, et
al. 2009). Many feel that proactive cooperation between public and private sectors in
planning and management of projects involving high risk due to the level of
technological innovation, would lead to greater economic development (Blatchford,
1994) (Torres, et al. 2003).
Infrastructure deficiencies play an important role in economic growth and
development. A news report, Infrastructure 2008: A Competitive Advantage, suggests
that the United States must quickly develop innovative approaches to its transportation
infrastructure and efficient use of land or risk ending up as one of the laggards in a
reordered and growing global economy. Aging school buildings, waste treatment
facilities that need rework, bridges that badly need repairs, congested roads are examples
which evidently proves deficiencies in infrastructure and are prominent in the rural areas.
Much of these are attributed to lack of funding levels which may cause strategic and
 2

innovative projects in the rural community to end at the planning stage. Growing
awareness and the interest to rebuild or improve public infrastructure and services in the
face of shrinking financial resources has lead governments to explore cooperatives with
private sector to plan and manage projects and help bridge the gap (Deloitte, 2007). This
kind of strategic partnerships are commonly known as Public-Private Partnership (PPP).
Traditional methods of financing and development of infrastructure projects are
unlikely to be completely changed by PPPs, but PPPs are expected to add value to the
development process and benefit all parties involved (Rangarajan, et al. 2009). The
participation and contributions of both private and public sector depends on
opportunities, objectives and economic circumstances. Governments around the world
have taken keen interest in getting the private sector involved in infrastructure
development and to achieve this they offer incentives such as tax benefits, subsidies in
interest, loans, grants, etc.
This research examines a case study of a transportation project in the city of
Chamois, Missouri. The research includes studying existing resources, capabilities, key
statistics, economic information and demographics of Chamois, MO. These resources are
considered and evaluated to make recommendations that may result in the feasibility of
the project and in turn favor the economic development of the community and its
stakeholders. The research also explores the applications of Analytic Hierarchy Process
(AHP), Quality Function Deployment (QFD), and Tsamboulos method in determining an
ideal PPP model for implementation. AHP is used in this case, because of its structured
approach when it comes to decision making, as it reduced the complexity by making
series of comparisons with all the available alternatives and it also provides the solution
that matches the need and the objectives of a project. QFD is a method to transform user
demands into design quality, and is used with AHP to determine the hierarchy and
transform customer’s request into mathematical model. Tsamboulos method is used to
determine the attractiveness of the private sector involvement. But this method is
suggested for implementation in the future.
 3

2. CASE STUDY

2.1. CHAMOIS, MO
Chamois, Missouri is a small river town located along the banks of the Missouri
River. The nearest crossings are at Jefferson City and Hermann, which are approximately
38 miles and 25 miles away from Chamois. The community is exploring an opportunity
to introduce a ferry service across the Missouri River which would shorten the commute
to the other side of the river and this in turn would connect Chamois to a growing
economic region across the river. In order to analyze the potential benefits of the ferry
service, a clear understanding of the Chamois region in Osage county is essential.
The City of Chamois was founded in 1856, and is named after Chamoix in
France, due to the Alpine scenery. The population of Chamois is close to 469 based on
July 2007 records and has seen a growth of 3.7% with an estimated median household
income of $33,634 in 2007.
The statistics in Figure 2.1 and Figure 2.2 clearly shows the impact of service
industry has on the economy (City-data, 2007). The service industry is the major
employer in the region as it is less capital intensive and easy to establish when compared
to other sectors. Tourism and other service industries open an avenue to expand the
economy and offer new jobs within the community.
The statistics in Figure 2.4 gives us the number of establishments and the number
of employees in each industry in Chamois in 2006 (US Census Bureau, 2006). These
statistics emphasizes the fact that service industry will have the highest requirement in
the years to follow.
 4

Figure 2.1. Most Common Occupation for Males (%) (City-data, 2007)

Figure 2.2. Most Common Occupation for Females (%) (City-data, 2007)
 5

Figure 2.3. Educational Attainment (City-data, 2007)

Figure 2.4. Establishments by Employment-Size Class (US Census Bureau , 2006)

 6

2.2. CURRE T TOURISM POTE TIAL

The first task was to discover the current potential of tourism which already
existed and how this can be leveraged to add value to the City of Chamois. Chamois,
Hermann, Jefferson City, and Fulton were examined for their potential to add value to
Chamois and this project.
Chamois, although a small city, boasts several historic tourist attractions. The
Townley House Museum built in 1856 is the oldest building in Chamois and was
converted to a museum in 1991. Another notable attraction is the Chamois School which
was built in 1876, presently playing its part as bed and breakfast. Several other points of
interests include Chamois City Jail built in 1930s and several churches including Most
Pure Heart of Mary Catholic Church built in 1912 and St. John’s United Church of Christ
built in 1894. Civil war battleground just west of Chamois and the landing of Charles
Lindberg in 1929 located south of Chamois are potential tourist attractions near Chamois.
Chamois Public Park is another area of interest to the tourist. Fishing, canoeing, bird
watching, and camping in the Lewis and Clark Discovery Camp Ground are available
activities in the park (Rangarajan, et al. Chamois Ferry Boat Project, 2008).
Hermann, MO located roughly 25 miles east of Chamois attracts several tourists
each year. The popularity stems from a relaxed atmosphere with two breweries, nine
wineries, two spas, numerous shops and galleries, and fine dining restaurants. To add to
these Hermann houses three museums, The Hermann Fire Company Museum, Historic
Hermann’s German School Museum, and The Deutschheim State Historic Site. The
Pommer-Gentner House (built 1840) and Strehly House (built 1842-1869) contain
galleries of artifacts and photographs, tools, and authentic architecture. A period garden
and small barn are also on site.
Jefferson City located nearly 40 miles west of Chamois, is the capital of Missouri
and also one of the most scenic areas of the state. Jefferson City does not disappoint
when it comes to camping and other outdoor events. The Capital Building in Jefferson
City has been an icon for the city and attracts a large number of tourists every year. With
numerous historical museums and parks, finding a part of Missouri’s history should not
be a problem. Some of the museums include Missouri State Museum, and also the Cole
 7

Country Historical Society. After a busy day of sightseeing, Jefferson City has plenty of
hotel accommodations, as well as various day spas.
Along with nearby cities adding value to tourism, The Katy Trail is another
important tourist attraction; it is approximately 225 miles long bike trail that runs
throughout Missouri from Machens to Clinton, with a section directly across the river
from Chamois. On an average there are 2,500 to 3,600 people on the trail each year.
Thus, it is clearly evident that there are multiple opportunities in and around
Chamois region for tourism. The ferry service along with helping the people cross the
river may become an integral part of tourism in the region and the services of this ferry
can be used to raise some tourism dollars which in turn would help in the economic
development of the region (Rangarajan, et al. Chamois Ferry Boat Project, 2008).

2.3. BE EFITS OF FERRY BOAT SERVICE

The community of Chamois would benefit from the ferry service in the following
ways:
• Development of job opportunities for citizens of Chamois and those living around
Chamois
• Access to emergency services in Jefferson City would be reduced by
approximately twenty minutes
• Community growth potential in the areas of tourism, recreation, agriculture and
development
• The trip to Jefferson City would be shortened by 17 miles and shorten the distance
from Chamois to economically viable I-70 corridor by approximately fifty miles
• It provides an easier access for coal trucks to cross the river to the coal plant
located in Chamois
• It also provides easier access to farmers who take livestock to the Callaway
Livestock Center
 8

• If Ameren UE plans to expand their nuclear plant facility, this project would help
them transfer people and construction goods across the river quickly and
efficiently
• This also provides opportunity for temporary construction and permanent job in
the nuclear plant by providing easier access to the citizens of Chamois

2.4. FERRY BOAT SERVICE

The City of Chamois is exploring an opportunity to implement a ferry on the
Missouri River. From a cost benefit analysis, the capital costs of ferries are much lower
than the bridges or tunnels around waterside communities. To add to this, there are
various types of ferries available, these include hydrofoil, catamaran, ro-ro, cable, and
docking. Given the size, distance, and river traffic, the most feasible type of ferry is a
small docking ferry.
Currently, in the 2009 budget year, Missouri is going to reduce its surplus cash in
order to maintain the current services being offered. This fluctuation in cash reserves is
due to decrease in tax revenues and the economic situation sweeping the nation and the
world. Considering the present scenario and the way the cash surplus is being spent, it is
believed in 2010 there could be major cuts in various department funding in an effort to
balance the budget. This information is vital when it comes to considering the
sustainability of a ferry service in Chamois and this also throws some concern over the
feasibility of a ferry service in the region (Rangarajan, et al. 2009).
The major concern for a docking ferry is not just the initial capital cost, but rather
the yearly operational cost. In the Missouri, Mississippi, and Illinois region, there are
several ferry services that have provided transportation across the rivers. Presently many
ferries are either permanently closed or sporadically open due to the fluctuating and
growing fuel prices. The rest which are operating are in part or completely subsidized by
the government. Operating expenses, particularly fuel cost can be attributed as a major
reason for the closure of these ferry services.
 9

Thus, considering these factors, the Chamois ferry service should consider
alternative sources of fuel for operating the ferry and in turn keep the operational costs
low and obtain subsidies from the government for using alternative sources of fuel
(Rangarajan, et al. Chamois Ferry Boat Project, 2008).

2.5. REGULATORY ISSUES

All the necessary permits required for the construction of the terminals and to
operate the ferry has been acquired by the City of Chamois and does not expire for three
years. The tug and barge which is going to be used needs to be inspected by the United
States Coastal Guard (USCG). The US Code of Federal Regulations (CFR) authorizes the
USCG to regulate the manufacture and safety standards of the vessel services in the US.
USCG also issues Navigational and Vessel Inspection Circulars (NVIC) which along
with CFR covers a wide range of criteria ranging from identification of boats, capacity of
passengers, and cargo, safety, floatation, fuel, and electrical systems, safe power,
ventilation, etc. The Missouri State laws are mainly related to licensing of the barge,
taxing, and titling issues (Rangarajan, et al. Chamois Ferry Boat Project, 2008).

2.6. PUBLIC-PRIVATE PART ERSHIPS

Considering all the short comings and financial issues faced by the community in
setting up this project, an alternative to traditional financing model was being explored
which would effectively bridge this gap.
From studying various transportation and infrastructure projects completed
around the world, Public-Private Partnerships (PPPs) appeared as an alternative which
could relieve the community of all the financial issues and other concerns related to the
project.
First step in this process was to evaluate the project as a PPP with local industries
and agricultural growers around the region. This evaluation revealed great, but limited
 10

opportunity for economic development and risk mitigation associated with the project.
Chamois is located near a thermal power plant operated by Associated Electric.
Associated Electric routinely moves coal by truck from Illinois using the route which can
be considerably reduced by strategically placing the crossing. This would save
Associated Electric time and money which can be utilized for other valuable purposes by
the company. Ameren UE operates a nuclear power plant across the Missouri River in the
Callaway County. Ameren UE. Ameren plans to expand and upgrade its facility in the
next few years. With the implementation of the ferry service Ameren can transport goods
and construction materials across the river in a far lesser time and also secure additional
work force from Chamois region.
2.6.1. Ameren UE. In 2005 Ameren Community Development (Ameren CDC)
collaborated with the State of Missouri and launched an economic development grant
cycle in Missouri State from 2005 to 2007. During it existence, Ameren CDC awarded
approximately $9.3 million to 71 projects. In the last cycle in 2007 Ameren CDC
awarded $1,200,000 in funding for 14 new projects to simulate community and economic
development. The whole project resulted in creation of 2,050 new jobs and retention of
2,830 existing jobs for Missourians. These grants helped leverage nearly $248 million in
new project investment in the state.
2.6.2. United States Department of Agriculture (USDA). United States
Department of Agriculture (USDA) Rural Development is committed to help rural
America in economic development and improve quality of life. This is achieved by
helping individuals, communities, and businesses obtain the financial and technical
assistance required to address their diverse and unique needs. USDA Business Program
(USDA-BP) helps in promoting dynamic business environment in rural America. This
unit works in partnership with private sector and community based organizations to
provide financial and business assistance. USDA-BP funds projects that offer to create
and preserve quality jobs and projects which promotes clean rural environment.
Individuals, corporations, partnerships, cooperatives, public bodies, non-profit
organizations, and private companies are all eligible for the USDA-BP grant.
 11

This project has gained support from numerous politicians and communities
around Chamois. It has also obtained an operating permit from the US Corps of
Engineers. A feasibility study was conducted during fall 2008 which included situational
and economic development analysis, and a break even analysis of the project. Various
opportunities for PPPs were thoroughly examined and suitable models of PPPs were
suggested for implementation.
 12

3. PUBLIC-PRIVATE PART ERSHIPS (PPPs)

Public-Private Partnerships are perceived in different ways due to the wide range
of projects being executed around the world using PPPs. The United Kingdom has
pioneered this mode of contractual agreement through Private Finance Initiative (PFI).
The UK government uses this model to plan and execute various infrastructure projects
which span from building schools to defense facilities. This involvement of private sector
in assisting UK government in infrastructure development represents ten to thirteen
percent of all UK investment in public infrastructure (Deloitte, 2007).
Public-Private Partnerships can be defined as: “a risk-sharing relationship
between the public and private sectors based upon a shared aspiration to bring about a
desired public policy outcome” (AECOM Consult Team, 2005). Or
“A contractual agreement formed between public and private sector partners,
which allows more private sector participation than is traditional. The agreements
usually involve a government agency contracting with a private company to renovate,
construct, operate, maintain, and/or manage a facility or system. While the public sector
usually retains ownership in the facility or system, the private party will be given
additional decision rights in determining how the project or task will be completed.”
(United States Department of Transportation, Federal Highway Administration, 2004).
PPP is looked at by several as an approach that is used to “move the funding
process from a single strategy of governmental aid through grants to regional and local
authorities, to a more diversified approach involving increased utilization of private
capital markets.” (American Public Transportation Association Task Force, 2008).
Regardless of the various definitions offered, several PPPs in the past have
repeatedly shown that their success primarily depends on the ability of both the sectors to
work together with shared information and objectives. Both the parties should devote
their attention to more holistic aims than merely fulfilling the agreement
(PricewaterhouseCoopers, 2004).
According to researchers at Deloitte, one offshoot for the rapid growth in
infrastructure PPPs is that countries remain at various stages of understanding and
 13

implementing the sophisticated innovative partnership models. Three different stages of

PPP maturity across the world is shown in the Figure 3.1below.

Figure 3.1. PPP Market Maturity Curve (Deloitte, 2007)

Several states and localities in the US are still in the first stages of development
which includes designing the partnership policy and legislative frame work, getting the
contract and procurements right, and encouraging the private sector to involve themselves
in such partnerships and in turn building the marketplace. The slack in the progress in
implementing PPPs can be attributed to various states and communities charging into
PPPs without a deep understanding of the best practices, and putting themselves and
others at risk of repeating the mistakes made earlier in other states and communities.
 14

To avoid these risks, governments at the infant stage of the PPP development
could learn from other countries such as UK, Australia, and Ireland who have propelled
to advanced stages in PPP development projects. Doing so will allow the states and
communities to leap into advanced stages and implement best practices and avoid
common errors such as one size fits for all infrastructure projects. It is also important for
states that are higher in the maturity curve, to have a deep understanding of various
challenges and potential solutions particular to each area before they expand their use of
PPP models into new sectors such as military, education, etc. (Deloitte, 2007).

3.1. GLOBAL PUBLIC-PRIVATE PART ERSHIP SCE ARIO

The use of PPPs for infrastructure projects around the world is prominent. Despite
challenges faced in procuring and implementing the projects, PPPs are becoming an
increasingly important source in providing funding and support for economic
development projects around the world. According to the study by AECOM in 2005,
2096 projects of all kinds have been planned and/or financed by PPPs. This includes
projects planned since 1985 equaling $887 billion, of which projects worth $451 billion
were completed by October 2004 see Table 3.1 (AECOM Consult Team, 2005).

Table 3.1. Worldwide Infrastructure Projects Planned or Completed since 1985

(AECOM Consult Team, 2005)
 15

In the US, the total cost of PPP projects planned or funded since 1985 has
accounted to $104 billion of $364 billion planned since 1985. Table 3.2 shows project
funding by project type.

Table 3.2. U.S. Infrastructure Projects Planned or Completed since 1985 (AECOM
Consult Team, 2005)

3.2. BE EFITS OF PUBLIC-PRIVATE PART ERSHIPS

The benefits that can be achieved from close interactions between the public and
private sectors are listed below.
• PPPs allows cost of investment to be spread across the life cycle of the project
and thus allowing the project to the implemented earlier when compared to the
pay-as-you-go financing model
• PPPs transfers certain risks to the private sector and also mitigates the same
• The projects are delivered on time and the cost is within the specified budget
• PPPs focus on the final outcome of the public infrastructure or the service being
offered in turn encouraging a strong customer service orientation
• With the use of PPPs, best practices are exchanged between the parties involved
and this helps PPP to gain greater depth in the market and create innovative and
flexible approaches to projects (Rangarajan, et al. 2009) (Deloitte, 2007)
 16

3.3. CHALLE GES I PUBLIC-PRIVATE PART ERSHIPS

While there are several benefits in PPPs, they also present formidable challenges
not only in the initial stages, but throughout the entire life cycle of the project.
• When compared to the traditional procurement process, PPPs are complicated and
the need to establish policy and legislative frame work is of high necessity
• Given the length of the project and the difficulty in anticipating the contingencies,
re-negotiation of certain terms and conditions is usual and necessary
• Performance specifications are very hard to formulate in a service based industry,
thus a poor or soft performance would affect its reputation and in turn affects its
ability to retain or obtain new contracts
• Considering length of the project, it is always difficult to estimate the financial
outcomes of a project and is considered as a huge risk in any PPP project
(Rangarajan, et al. 2009) (Deloitte, 2007)

3.4. PUBLIC-PRIVATE PART ERSHIP MODELS

PPP models suggested for implementation are described below.
Build Operate Transfer (BOT): The facility is built and operated for a specific period
of time by the private partner according to the specifications agreed between the partners,
and then transferred to the public agency at the end of the specified period of time.
Build Transfer Operate (BTO): This model is similar to the BOT model except that the
transfer of the facility to the public agency takes place immediately after the construction
is completed.
Contract Services: The public partner contracts with a private partner to operate,
maintain, and manage a facility. The ownership is still retained by the public partner, but
the private partner may invest its own capital in the facility or the system.
Developer Finance: The private partner finances the construction in exchange for the
right to build residential housing, commercial stores, and/or industrial facilities at the site.
The facility can be operated by the private partner under the oversight of the public
 17

partner. The developer gains the right to use the facility and may receive future income
from the facility.
Turnkey: The public agency contracts with the private partner to design and build the
facility in accordance to the standards and the criteria agreed. The private partner
commits to build the facility within a fixed budget and absorbs the construction risk in
meeting the budget commitment. The financing and the ownership can rest with either
public or private partner. (The National Council for Public-Private Partnerships, 1999)
(Grasman, et al. 2008)

3.5. GETTI G THE PART ERSHIP RIGHT

Several parameters should be considered when determining how to execute a new
infrastructure development project. The two most important ones are time and availability
of funds.
PPPs are unlikely to replace the traditional procurement and financing process
completely in the near future. In PPP projects, risks are transferred to the party that can
handle and manage it the best. Projects that are considered high risk due to high levels of
innovation and technology seldom find funding to execute the projects. PPP models that
can address such issues will be extremely beneficial to communities that cannot afford
such projects through traditional procurement process (Rangarajan, et al. 2009).
Table 3.3 summarizes some of the best practices in Public-Private Partnerships,
and the practices to be avoided to ensure the success of the project.
 18

Table 3.3. Summary of Governance Practices (Koppenjan & Enserink, 2009)

Key Issues Good Practices Practices to be Avoided

• Setting appropriate user charges
for balancing investment and • Inefficient use of resources,
Return on
return on investment under investment, and wrong
investments
• Identifying projects with cash estimation
flow potential
• Missing reconciling business
opportunities and sustainability
Understanding and • Cross – subsidizing the profitable
due to lack of scope
managing scope of and non profitable parts of the
management
the project project
• No clear vision of reliable
partners
• Identifying risks at the planning
stage • Private partners shift risks to
Managing risks • Preventing transfer of government, tax payers, and
commercial risks to the users
government
• Lack of government
• Public – public coordination
Reducing political coordination
• Clear institutional and legislative
uncertainty • Absence of legislative frame
framework
work and policies
• Contract suits the strategic
Contract type project setting, and the • One size fits all
technology used
• No provision for financial
capacity building
Financial capacity
• Beneficial sharing agreements • Failure to prevent excessive
building
profits made by the private
sector
• Failure to prevent realization of
• Income measures and credit
expenses, standardized services,
facilities
Affordability issues unequal access, limited
• Differentiation in services,
coverage, and political
tariffs, and management
instability
• Competitive and transparent
• Single bid concessions
bidding or negotiation
Contract • Late entry of the private sector
• Early involvement of the private
procurement • Lack of local interest and
sector, local organizations,
sustainability targets
stakeholders, and users
• Get the right mix of expertise
• Inappropriate mix of skill and
• Provide guidelines, training, expertise
Preventing knowledge banks, and standards
• Lack of knowledge sharing and
regulatory capture • Enhance transparency, develop
in-house expertise
and rent seeking strong corporate spirit, reduce
• Lack of transparency, and
asymmetries in salaries, and
asymmetries in salaries
create codes of conduct
 19

4. LITERATURE REVIEW O A ALYTIC HIERARCHY PROCESS

The Analytic Hierarchy Process (AHP) was developed by Thomas L. Saaty in the
1970s. It is a structured approach to decision making which, rather than recommending
the right solution, provides the decision makers with the solution that best matches the
need and variables around a project. AHP reduces the complexity in decision making by
making a series of comparisons which are generally one-on-one and consider both
quantitative and qualitative aspects (Clements & O'Mahony, 2005).
The risk and the outcomes of these risks need to be enumerated to determine
maximum profit or loss. AHP uses a single number drawn from a scale of 1-9 to
determine the dominance in making comparisons, especially when the comparisons are
intangible. The scale is derived based on generalization of comparisons to the continuous
case, obtaining a functional equation and later solving the equation in the real and
complex domains (Saaty, 2008). The Table 4.1 below describes the absolute numbers
used to make comparisons.

Table 4.1. Absolute Number Scale for Pair-wise Comparison (Saaty, 2008)

Value Definition
1 Equal Importance
2 Weak or Slight
3 Moderate Importance
4 Moderate Plus
5 Strong Importance
6 Strong Plus
7 Very Strong or Demonstrated Importance
8 Very Strong Plus
9 Extreme Importance
0 No Relationship
 20

4.1. TSAMBOULOS METHOD

As cited by Clements, and O’Mahony in their work, Tsamboulos developed a
method to study the attractiveness, and to highlight the factors that tend to reduce such
attractiveness of transportation infrastructure projects to private sector (Clements &
O'Mahony, 2005). Along with the stated advantages, it also provides the means for
alternative risk allocation scenarios based on the risks to be shared between the private
and the public sector. This method is based on AHP, and reduces complex risks and
decisions to one-to-one pair-wise comparisons considering both qualitative and
quantitative aspects. This method organizes various variables and risks into a hierarchy in
turn developing priorities according to AHP.
The risks are selected in an ad-hoc manner considering both local and global
variables and are organized based on the following rules: (1) the hierarchy should contain
risks which are considered important from the perspective of private sector (2) the
hierarchy should consider various investment methods, countries, and other variables (3)
various conditions and level of aggregation at which private sector is required to work
must be considered (4) the method should make sure that it avoids double counting
(Clements & O'Mahony, 2005). This structures the hierarchy in such a manner that it can
be traced either as top-down or bottom-up approach.
Once the hierarchy is structured, the principle of comparative judgment
introduces a matrix, where aij are the elements of the matrix and signifies the importance
of alternative i over alternative j. Relative pair-wise comparisons between the second
level elements with respect to the first level objectives are made, based on quantitative
values provided in the Table 4.1.
The priorities for the levels two and lower are found by multiplying the local
priorities by their corresponding cluster component priority at the level above and then
adding them to each element in that level according to the elements it affects. This
provides the global priority (ψ) of that element which is later used to find the local
priorities of elements in the next lower level. The global priority (ψ) of each alternative
risk scenario, i, can be computed using the formula:
 21

Ψj = Σj (wjΩij) (1)

Here, wj is the weight of the jth criterion and Ωij is the performance of alternative i with
respect to criterion j(Clements & O'Mahony, 2005).
After the completion of computing the weights, the method then assesses the
private financing attractiveness. This is obtained by identifying the range of losses (ci –cj)
that corresponds to each variable (Clements & O'Mahony, 2005). It is then used to
determine the most likely amount, xp, which the investor would be risking for the specific
project. xp can be determined by the formula:

(2)

Here, wi represents the weights of the risk scenarios, and ci the alternative proportions of
the capital being invested. Once the largest possibility of loss, xp, is determined, the
certainty, yp, required by the investor to take part in a PPP can be deduced for an amount
of capital equal to xp (Clements & O'Mahony, 2005).

4.2. APPLICATIO OF THE METHOD I THE CHAMOIS CASE

There are several PPP models available for implementation based on project
requirements and objectives. Selecting an appropriate PPP model becomes a key process
when evaluating a project as PPP project.
To solve this problem, AHP is used to determine the most feasible PPP model for
the ferry boat project in Chamois, MO with the help of corresponding Quality Function
Deployment (QFD). This method involves several steps, first being to produce a
 22

hierarchy of risks see Figure 4.1. Several alternatives or PPP models were then selected
based on the project objectives, needs, and assumptions. In making the decision several
assumptions were made which included Chamois conditions, present global economic
crisis, planning regulations, present trend in transportation sector, and the attitude of the
public and private sector. These conditions were specific to the project and are subject to
changes if the project was executed in a different location. Following are a list of risks
identified to be affecting the ferry boat project:
• Meeting the Schedule
• Meeting the Budget
• Design Followed
• Performance Quality
• Level of Design
• Level of Maintenance
• Sustainability
The various alternatives (PPP models) considered for implementing the project
are listed below:
• Build-Operate-Transfer (BOT)
• Build-Transfer-Operate (BTO)
• Build-Own-Operate (BOO)
• Contract Services
• Developer Finance
• Turnkey
 23

Figure 4.1. AHP Model Developed for the Ferry Boat Project

The comparison reciprocal matrices were developed for risks level. The diagonals
of the matrices were assigned value 1, since each cell is compared with the like and 1
represents equal importance according to the pair-wise comparison Table 4.1 designed by
Saaty. Similar reciprocal matrices were developed for each risk level and the diagonals
were assigned value 1 to represent equal importance, with reciprocals assigned to the
 24

remaining elements so that the product of the mirror cells always results in 1. The
weights of the risk elements were assigned using Table 4.1 developed by Saaty. Find
below Table 4.2, an example of the matrix developed for meeting the schedule risk:

Table 4.2. Reciprocal Matrix for Meeting the Schedule Risk

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 1/1 1/2 2/1 3/1 2/1 ¼

BTO 2/1 1/1 2/1 3/1 2/1 1/2

BOO 1/2 1/2 1/1 2/1 2/1 1/3

Contract
1/3 1/3 1/2 1/1 2/1 1/3
Services
Developer
1/2 1/2 1/2 1/2 1/1 1/3
Finance

Turnkey 4/1 2/1 3/1 3/1 3/1 1/1

The consistency of each matrix was then checked using the consistency index
formula which is defined as

CI = (λmax – n) / (n – 1) (3)

Here, λmax represents the maximum eigenvalue of the matrix while n represents
the order of the matrix under consideration. For the matrix to be consistent the value of
 25

CI should be less than 0.1. This procedure was followed for all the alternatives (PPP
models) under consideration and consistency index were calculated. Based on the
example matrix above the eigenvalues are (-0.1283 + i0.1928), (-0.1283 - i0.1928), (-
0.0620), (-0.0027 + i1.4068), (-0.0027 - i1.4068), (6.3242). The maximum eigenvalue of
this matrix is λmax = 6.3242.
Using equation 3 to calculate the consistency index (CI) with λmax = 6.3242 and
the order of the matrix n = 6, the value of CI = 0.0648, which is less than 0.1 and thus
indicating that the matrix chosen is consistent. Once the consistency was calculated, the
next step was to assess the relative importance of the alternatives considered. The
reciprocal matrices were normalized, and the relative importance of alternatives summed
up to 1. The corresponding QFD approach was used to determine the most optimum
model for the project. Consider the same example matrix listed above. The first step is to
calculate the sum of each column of the matrix as shown in Table 4.3.

Table 4.3. Normalization of the Reciprocal Matrix

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 1.0000 0.5000 2.0000 3.0000 2.0000 0.2500

BTO 2.0000 1.0000 2.0000 3.0000 2.0000 0.5000

BOO 0.5000 0.5000 1.0000 2.0000 2.0000 0.3333

Contract
0.3333 0.3333 0.5000 1.0000 2.0000 0.3333
Services

Developer
0.5000 0.5000 0.5000 0.5000 1.0000 0.3333
Finance

Turnkey 4.0000 2.0000 3.0000 3.0000 3.0000 1.0000

 26

Table 4.3. Normalization of the Reciprocal Matrix (Cont.)

Sum of
each 8.3333 4.8333 9.0000 12.5000 12.0000 2.7500
column

Each element of the matrix is then divided by their respective sum of the columns
giving us the matrix (Table 4.4) which is listed below.

Table 4.4. Normalized Matrix

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 0.1200 0.1034 0.2222 0.2400 0.1667 0.0909

BTO 0.2400 0.2069 0.2222 0.2400 0.1667 0.1818

BOO 0.0600 0.1034 0.1111 0.1600 0.1667 0.1212

Contract
0.0400 0.0690 0.0556 0.0800 0.1667 0.1212
Services
Developer
0.0600 0.1034 0.0556 0.0400 0.0833 0.1212
Finance

Turnkey 0.4800 0.4138 0.3333 0.2400 0.2500 0.3636

 27

Average of each row of the matrix is calculated which gives us the relative
importance of the alternatives with respect to meeting the schedule risk.
Similar approach is used to calculate the relative importance of the alternatives
with respect to the various risks (Meeting the Schedule, Meeting the Budget, Design
Followed, Performance Quality, Level of Design, Level of Maintenance, and
Sustainability) identified to affect the project. The relative importances of various risks
are also calculated using a similar approach and it is listed in the Appendix B.
In the next steps the relative importance of the risks matrix Table 4.5 is multiplied
with the relative importance of the alternatives matrix Table 4.6 resulting in a matrix
Table 4.7 with the highest value indicating an effective PPP model which can be
considered for implementation if all the factors affecting the decisions fall in place. The
corresponding AHP/QFD approach is shown below in Table 4.5, Table 4.6, and Table
4.7.

Table 4.5. Relative Importance of the Risks Identified

Meeting the
Schedule 0.0659
Meeting the
Budget 0.2040
Design
Followed 0.0481
Performance
Quality 0.1125
Level of
Design 0.0504
Level of
Maintenance 0.1568

Sustainability
0.3622
 28

Table 4.6. Relative Importance of the Alternatives

Contract Developer
BOT BTO BOO Turnkey
Services Finance
Meeting the
0.1572 0.2096 0.1204 0.0887 0.0773 0.3468
Schedule
Meeting the
0.1124 0.1592 0.1026 0.0548 0.3749 0.1962
Budget
Design
0.1617 0.3285 0.1208 0.0621 0.0992 0.2277
Followed
Performance
0.3360 0.1813 0.2337 0.0608 0.1045 0.0836
Quality
Level of
0.1750 0.2997 0.1226 0.0673 0.1003 0.2350
Design
Level of
0.1921 0.1130 0.1323 0.4015 0.0636 0.0975
Maintenance

Sustainability 0.2085 0.1222 0.2126 0.3047 0.0798 0.0722

Table 4.7. Resultant QFD Approach Indicating an Effective Method

Contract Developer
BOT BTO BOO Turnkey
Services Finance
0.1934 0.1596 0.1649 0.2036 0.1420 0.1365

The highest value in the resulting QFD approach is 0.2036 indicating Contract
Services is an effective approach to implement this problem. But BOT method was
suggested for implementation and the reasons for the same are explained in the results
chapter. The various other matrices developed for the study, the calculations and results
of the analyses are listed in the Appendix B.
 29

5. RESULTS

Traditionally in the US, financing for public infrastructure projects are either
raised or supplemented through gas taxes and other related taxes. At present, the need for
infrastructure and transportation projects exceeds what can be raised through traditional
means. One of the approaches that many governments have used across the globe is
cooperatives with private sector.
The Chamois Industrial Development Corporation had proposed an estimate of
costs for the ferry boat project in 2006 which is listed in Appendix A. These estimates
state that the approximate project cost would be $2,370,451 with an additional $692,000
for the equipment and incidental cost for the same. These figures are subject to change
when inflation is considered. The average inflation in 2007 was 2.85% and in 2008 it was
3.85%. After adjusting inflation the total cost of project including equipment costs in
2009 will be $3,270,994.
The corporation also estimated the operation and maintenance cost for year one at
$217,790. As stated above these were figures estimated in 2006, when inflated to 2009,
the total operation and maintenance cost for year one would be $232,620. It is believed
that this number is fairly low and several costs have not been accounted for. US Coast
Guard licensed pilot cost, advertisement and promotion cost, marketing cost, and
contingencies for repair of the loading dock/approach ramp system in the event of serious
flooding during the first year have not been considered in the estimates. Based on these
factors the operation and maintenance cost for the Chamois would be in the order of
$300,000 annually.
With respect to the revenues, several scenarios were considered to obtain dollar
amounts. First, 15% usage rate (approximately 16,575 trips) was considered based on the
population of the two counties with $8 per trip. The revenue obtained by operating the
ferry based on these was $132,600. With an additional $34,000 coming in from the
tourism would result in annual revenue of $166,600. With operating cost around
$200,000 to $250,000 the sensitivity range is around - $33,400 to - $83,400. This figure
is large, when we consider the fact that there are going to be no subsidies from the
government. To compensate for this, $12 per trip was considered which resulted in an
 30

annual revenue of $198,900 with revenue from tourism $34,000 the total annual revenue
of $232,900 which resulted in a fairly acceptable sensitivity range of + $32,900 to -
$17,100. As mentioned earlier various ferry services operating in the state of Missouri
have previously approved subsidies which will not be available for Chamois project.
Additionally, $12 per trip is not feasible based on the results obtained from the surveys
conducted in and around the Chamois region. Even with considerable sponsorship from
the community through ridership, fares less than $12 one way will not be sufficient to
finance the operation. This shortfall in operating costs needs to be addressed and remains
a formidable challenge when it comes to sustainability of the project. Table 5.1 describes
the initial setup cost required for the project and Table 5.2 and Table 5.3 shows the
minimum operating and maintenance cost per year required to run the ferry. These
figures indicate the minimum amount required to get this ferry boat project up and
running.

Table 5.1. Feasibility Study Results for Initial Setup Cost

Construction and Equipment Cost $1,166,000 to $1,300,000

Available Funds for Initial Setup $1,190,000
Sensitivity Range (+) $24,000 to (-) $110,000

Table 5.2. Feasibility Study Results for Annual Revenue at $8 per Trip

Operational Costs $200,000 to $250,000

15% Usage Rate and Approx. 16,575 Trips at $8 per Trip $132,600
Annual Revenue from Tourism $34,000
Total Annual Revenue $166,600
Sensitivity Range (-) $33,400 to (-) $83,400
 31

Table 5.3. Feasibility Study Results for Annual Revenue at $12 per Trip

15% Usage Rate and Approx. 16,575 Trips at $12 per Trip $198,900
Annual Revenue from Tourism $34,000
Total Annual Revenue $232,900
Sensitivity Range (+) $32,900 to (-) $17,100

To tackle these issues and risks in the setup and operations and maintenance cost,
PPP was considered over traditional procurement process. Detailed study of PPP models
and best practices revealed BOT, BTO, BOO, Contract Services, Developer Finance, and
Turnkey models of PPP are more suitable to implement in this project when compared to
the several others which are available.
AHP and QFD mathematical approaches were used to identify the most feasible
PPP model that would mitigate all the identified risks in the project. From Table 4.7 it is
clear that Contract Services has the highest value when compared to other alternatives,
indicating that Contract Services is highly recommended as it can mitigate most of the
risks identified in the project. The most important risks identified in this project were
sustainability of the ferry boat service, followed by the initial setup cost and operation
and maintenance cost. Another important point to be considered here is the fact that,
public agencies after their analysis are not willing to execute this project. Contract
Services model of PPP fails if the public sector is not willing to cooperate and build the
facility. Considering these risks the next suitable option was BOT. The difference in AHP
and QFD analyses value is marginal when these two alternatives are considered.
Thus, considering the overall picture of managing risks, taking into account the
resistance offered by the public agency to execute this project and considering the current
economic issues, BOT model of PPP is the most feasible option to execute this project.
The implementation of the ferry boat service will open up several opportunities
for the community in trade, tourism, business and agriculture. This service would provide
employment opportunities to the local people and also transport people and goods quickly
 32

across the river which would save a lot of money and time that can be utilized for various
beneficial purposes and thus, adding value to the people and the community. The project
is worthwhile when you look at it from a quality of life perspective and has limited
opportunities for economic development from the PPP perspective. But, even these do
not present a favorable outcome which suggests the community move forward. The
involvement of the public and private sector to execute this project still remains a
formidable challenge. There needs to vested interest from the stake holders to execute
such innovative outcomes when it comes to economic development of rural communities.
There has to be a proactive cooperation from the public and private sector and should
consider such projects more from a economic development, quality of life, and
development of rural community perspective rather than looking at them from a business
perspective.
 33

6. CO CLUSIO

This research summarizes the need and the process for a collaborative effort to
identify new economic development opportunities for Chamois, MO and the areas
surrounding Chamois. This research looks at regional resources and alliances that can
serve as foundations for exploring and examining new opportunities.
This work also uses well established mathematical models such as AHP,
Tsambolos method, and QFD techniques which have evolved over time and have solved
several complex decisions in various projects around the globe. These mathematical
models can be used to solve several complex decisions in a project involving PPP, a few
being, identifying the best alternative for the project given the risk, and public and private
sector involvement, identify area of investment and the amount to be invested from
private sector side, selecting the best PPP model/s given the risks, local and global
variables, etc. These inputs are essential when it comes to establishing success on the
current project and will also serve as a benchmark for future projects in Chamois and
around the nation.
After conducting preliminary research and analyses based on the data available,
valuable information, findings, and range of potential options were considered to benefit
the overall effort. Even though analyses revealed that the best option for the community
right now is to look at other opportunities for development, ferry boat project holds many
positive and desirable outcomes. However, ferry boat project is not economically feasible
option at this point of time.
This research explores PPPs for rural economic development, but does not
suggest or recommend them as panacea for all the infrastructure and economic
development issues. PPP should be looked at as a tool to bridge these gaps, and PPPs can
be used in various kinds of development projects, especially in engineering based
projects such as transport, waste water treatment, building schools and hospitals, etc. By
clearly understanding the various PPP delivery models, and continuously learning and
improving these models, public and private sectors can manage and mitigate risks and
can involve themselves effectively from a management of technology perspective.
 34

Transparency and ethical approach from both sectors are essential in realizing successful
completion of any project.
Finally, PPPs may hold the key for unlocking entrepreneurial outcomes when it
comes to commercializing rural economic development initiatives.
 35

7. FUTURE WORK

In the future, this research may be extended to explore alternate PPP models
depending on the project specifications. The uncontrollable and intangible environmental
variables such as political structure, culture, value of life should be further explored.
Other economic development opportunities should be studied and possibilities of PPP to
execute these projects should be analyzed. The effectiveness of global partnerships in line
with/as opposed to local partnerships is a question with deep interest and various
possibilities for the same can be considered in the future.
Finally, means to attract public and private sector to form a cooperative and
execute such innovative rural economic development projects needs to be analyzed
further and the best practices should be benchmarked.
 36

APPE DIX A

CITY OF CHAMOIS PROPOSED BUDGET

 37

CITY OF CHAMOIS PROPOSED BUDGET

City of Chamois Proposed Operating Budget

 38

City of Chamois Proposed Capital Budget

39
40
 41

APPE DIX B

AHP and QFD CALCULATIO S

 42

AHP and QFD CALCULATIO S

Pair-wise Comparison of Risks

Meeting Meeting Level

Design Performance Level of
the the of Sustainability
Followed Quality Maintenance
Schedule Budget Design
Meeting the
1/1 1/4 2/1 1/3 2/1 1/4 1/5
Schedule
Meeting the
4/1 1/1 4/1 2/1 4/1 2/1 1/3
Budget
Design
1/2 1/4 1/1 1/3 1/1 1/3 1/5
Followed
Performance
3/1 1/2 3/1 1/1 2/1 1/2 1/4
Quality
Level of
1/2 1/4 1/1 1/2 1/1 1/3 1/5
Design
Level of
4/1 1/2 3/1 2/1 3/1 1/1 1/3
Maintenance
Sustainability 5/1 3/1 5/1 4/1 5/1 3/1 1/1

Sum of each 18.0000 5.7500 19.0000 10.1667 18.0000 7.4167 2.5167

column

Meeting Meeting Level

Design Performance Level of
the the of Sustainability
Followed Quality Maintenance
Schedule Budget Design
Meeting the
0.0556 0.0435 0.1053 0.0328 0.1111 0.0337 0.0795
Schedule

Meeting the
0.2222 0.1739 0.2105 0.1967 0.2222 0.2697 0.1325
Budget

Design
0.0278 0.0435 0.0526 0.0328 0.0556 0.0449 0.0795
Followed

Performance
0.1667 0.0870 0.1579 0.0984 0.1111 0.0674 0.0993
Quality

Level of
0.0278 0.0435 0.0526 0.0492 0.0556 0.0449 0.0795
Design

Level of
0.2222 0.0870 0.1579 0.1967 0.1667 0.1348 0.1325
Maintenance

Sustainability 0.2778 0.5217 0.2632 0.3934 0.2778 0.4045 0.3974

 43

Average of
each row

Meeting the
0.0659
Schedule

Meeting the
0.2040
Budget

Design
0.0481
Followed

Performance
0.1125
Quality

Level of
0.0504
Design

Level of
0.1568
Maintenance

Sustainability 0.3622

λ 7.29885

7.0000

CI 0.049808
 44

Pair-wise Comparison of Alternatives with Respect to Schedule

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 1/1 1/2 2/1 3/1 2/1 1/4

BTO 2/1 1/1 2/1 3/1 2/1 1/2

BOO 1/2 1/2 1/1 2/1 2/1 1/3

Contract
1/3 1/3 1/2 1/1 2/1 1/3
Services

Developer
1/2 1/2 1/2 ½ 1/1 1/3
Finance

Turnkey 4/1 2/1 3/1 3/1 3/1 1/1

Sum of each 8.3333 4.8333 9.0000 12.5000 12.0000 2.7500

column

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 0.1200 0.1034 0.2222 0.2400 0.1667 0.0909

BTO 0.2400 0.2069 0.2222 0.2400 0.1667 0.1818

BOO 0.0600 0.1034 0.1111 0.1600 0.1667 0.1212

Contract
0.0400 0.0690 0.0556 0.0800 0.1667 0.1212
Services

Developer
0.0600 0.1034 0.0556 0.0400 0.0833 0.1212
Finance

Turnkey 0.4800 0.4138 0.3333 0.2400 0.2500 0.3636

 45

Average of
each row

BOT 0.1572

BTO 0.2096

BOO 0.1204

Contract
0.0887
Services

Developer
0.0773
Finance

Turnkey 0.3468

λ 6.324229

6.0000

CI 0.064846
 46

Pair-wise Comparison of Alternatives with Respect to Budget

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 1/1 1/2 1/1 3/1 1/3 1/2

BTO 2/1 1/1 2/1 3/1 1/3 1/2

BOO 1/1 1/2 1/1 2/1 1/3 1/2

Contract
1/3 1/3 1/2 1/1 1/5 1/3
Services
Developer
3/1 3/1 3/1 5/1 1/1 3/1
Finance

Turnkey 2/1 2/1 2/1 3/1 1/3 1/1

Sum of each 9.3333 7.3333 9.5000 17.0000 2.5333 5.8333

column

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 0.1071 0.0682 0.1053 0.1765 0.1316 0.0857

BTO 0.2143 0.1364 0.2105 0.1765 0.1316 0.0857

BOO 0.1071 0.0682 0.1053 0.1176 0.1316 0.0857

Contract
0.0357 0.0455 0.0526 0.0588 0.0789 0.0571
Services

Developer
0.3214 0.4091 0.3158 0.2941 0.3947 0.5143
Finance

Turnkey 0.2143 0.2727 0.2105 0.1765 0.1316 0.1714

 47

Average of
each row

BOT 0.1124

BTO
0.1592

BOO
0.1026

Contract
Services
0.0548

Developer
Finance
0.3749

Turnkey
0.1962

λ 6.174918

6.0000

CI 0.034984
 48

Pair-wise Comparison of Alternatives with Respect to Design Followed

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 1/1 1/3 2/1 3/1 2/1 1/2

BTO 3/1 1/1 3/1 4/1 2/1 2/1

BOO 1/2 1/3 1/1 2/1 2/1 1/2

Contract
1/3 1/4 1/2 1/1 1/2 1/3
Services
Developer
1/2 1/2 1/2 2/1 1/1 1/3
Finance

Turnkey 2/1 1/2 2/1 3/1 3/1 1/1

Sum of
each 7.3333 2.9167 9.0000 15.0000 10.5000 4.6667
column

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 0.1364 0.1143 0.2222 0.2000 0.1905 0.1071

BTO 0.4091 0.3429 0.3333 0.2667 0.1905 0.4286

BOO 0.0682 0.1143 0.1111 0.1333 0.1905 0.1071

Contract
0.0455 0.0857 0.0556 0.0667 0.0476 0.0714
Services

Developer
0.0682 0.1714 0.0556 0.1333 0.0952 0.0714
Finance

Turnkey 0.2727 0.1714 0.2222 0.2000 0.2857 0.2143

 49

Average of
each row

BOT 0.1617

BTO 0.3285

BOO 0.1208

Contract
0.0621
Services

Developer
0.0992
Finance

Turnkey 0.2277

λ 6.228395
n 6.0000
CI 0.045679
 50

Pair-wise Comparison of Alternatives with Respect to Performance Quality

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 1/1 3/1 2/1 4/1 3/1 3/1

BTO 1/3 1/1 1/2 3/1 3/1 3/1

BOO 1/2 2/1 1/1 3/1 3/1 3/1

Contract
1/4 1/3 1/3 1/1 1/2 1/2
Services

Developer
1/3 1/3 1/3 2/1 1/1 2/1
Finance

Turnkey 1/3 1/3 1/3 2/1 1/2 1/1

Sum of each 2.7500 7.0000 4.5000 15.0000 11.0000 12.5000

column

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 0.3636 0.4286 0.4444 0.2667 0.2727 0.2400

BTO 0.1212 0.1429 0.1111 0.2000 0.2727 0.2400

BOO 0.1818 0.2857 0.2222 0.2000 0.2727 0.2400

Contract
0.0909 0.0476 0.0741 0.0667 0.0455 0.0400
Services

Developer
0.1212 0.0476 0.0741 0.1333 0.0909 0.1600
Finance

Turnkey 0.1212 0.0476 0.0741 0.1333 0.0455 0.0800

 51

Average of
each row

BOT 0.3360

BTO 0.1813

BOO 0.2337

Contract
0.0608
Services

Developer
0.1045
Finance

Turnkey 0.0836

λ 6.279277

n 6.0000

CI 0.055855
 52

Pair-wise Comparison of Alternatives with Respect to Level of Design

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 1/1 1/2 2/1 3/1 2/1 1/2

BTO 2/1 1/1 3/1 3/1 2/1 2/1

BOO 1/2 1/3 1/1 2/1 2/1 1/2

Contract
1/3 1/3 1/2 1/1 1/2 1/3
Services

Developer
1/2 1/2 1/2 2/1 1/1 1/3
Finance

Turnkey 2/1 1/2 2/1 3/1 3/1 1/1

Sum of each 6.3333 3.1667 9.0000 14.0000 10.5000 4.6667

column

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 0.1579 0.1579 0.2222 0.2143 0.1905 0.1071

BTO 0.3158 0.3158 0.3333 0.2143 0.1905 0.4286

BOO 0.0789 0.1053 0.1111 0.1429 0.1905 0.1071

Contract
0.0526 0.1053 0.0556 0.0714 0.0476 0.0714
Services

Developer
0.0789 0.1579 0.0556 0.1429 0.0952 0.0714
Finance

Turnkey 0.3158 0.1579 0.2222 0.2143 0.2857 0.2143

 53

Average of
each row

BOT 0.1750

BTO 0.2997

BOO 0.1226

Contract
0.0673
Services

Developer
0.1003
Finance

Turnkey 0.2350

λ 6.222302

n 6.0000

CI 0.04446
 54

Pair-wise Comparison of Alternatives with Respect to Level of Maintenance

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 1/1 3/1 1/1 1/3 3/1 3/1

BTO 1/3 1/1 1/2 1/4 3/1 2/1

BOO 1/1 2/1 1/1 1/3 2/1 1/2

Contract
3/1 4/1 3/1 1/1 5/1 5/1
Services

Developer
1/3 1/3 1/2 1/5 1/1 1/1
Finance

Turnkey 1/3 1/2 2/1 1/5 1/1 1/1

Sum of each 6.0000 10.8333 8.0000 2.3167 15.0000 12.5000

column

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 0.1667 0.2769 0.1250 0.1439 0.2000 0.2400

BTO 0.0556 0.0923 0.0625 0.1079 0.2000 0.1600

BOO 0.1667 0.1846 0.1250 0.1439 0.1333 0.0400

Contract
0.5000 0.3692 0.3750 0.4317 0.3333 0.4000
Services

Developer
0.0556 0.0308 0.0625 0.0863 0.0667 0.0800
Finance

Turnkey 0.0556 0.0462 0.2500 0.0863 0.0667 0.0800

 55

Average of
each row

BOT 0.1921

BTO 0.1130

BOO 0.1323

Contract
0.4015
Services

Developer
0.0636
Finance

Turnkey 0.0975

λ 6.502412

n 6.0000

CI 0.100482
 56

Pair-wise Comparison of Alternatives with Respect to Sustainability

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 1/1 3/1 1/2 1/2 4/1 3/1

BTO 1/3 1/1 1/2 1/3 3/1 2/1

BOO 2/1 2/1 1/1 1/2 3/1 2/1

Contract
2/1 3/1 2/1 1/1 3/1 3/1
Services

Developer
1/4 1/3 1/3 1/3 1/1 2/1
Finance

Turnkey 1/3 1/2 1/2 1/3 1/2 1/1

Sum of each 5.9167 9.8333 4.8333 3.0000 14.5000 13.0000

column

Contract Developer
BOT BTO BOO Turnkey
Services Finance

BOT 0.1690 0.3051 0.1034 0.1667 0.2759 0.2308

BTO 0.0563 0.1017 0.1034 0.1111 0.2069 0.1538

BOO 0.3380 0.2034 0.2069 0.1667 0.2069 0.1538

Contract
0.3380 0.3051 0.4138 0.3333 0.2069 0.2308
Services

Developer
0.0423 0.0339 0.0690 0.1111 0.0690 0.1538
Finance

Turnkey 0.0563 0.0508 0.1034 0.1111 0.0345 0.0769

 57

Average of
each row

BOT 0.2085

BTO 0.1222

BOO 0.2126

Contract
0.3047
Services

Developer
0.0798
Finance

Turnkey 0.0722

λ 6.401664

n 6.0000

CI 0.080333
 58

Corresponding QFD Approach

Contract Developer
BOT BTO BOO Turnkey
Services Finance

Meeting the
0.1572 0.2096 0.1204 0.0887 0.0773 0.3468
Schedule

Meeting the
0.1124 0.1592 0.1026 0.0548 0.3749 0.1962
Budget

Design
0.1617 0.3285 0.1208 0.0621 0.0992 0.2277
Followed

Performance
0.3360 0.1813 0.2337 0.0608 0.1045 0.0836
Quality

Level of
0.1750 0.2997 0.1226 0.0673 0.1003 0.2350
Design

Level of
0.1921 0.1130 0.1323 0.4015 0.0636 0.0975
Maintenance

Sustainability 0.2085 0.1222 0.2126 0.3047 0.0798 0.0722

0.0659 0.1572 0.2096 0.1204 0.0887 0.0773 0.3468 0.1933543

0.2040 0.1124 0.1592 0.1026 0.0548 0.3749 0.1962 0.1595885
0.0481 0.1617 0.3285 0.1208 0.0621 0.0992 0.2277 0.1649154
0.1125 0.3360 0.1813 0.2337 0.0608 0.1045 0.0836 0.2035867
0.0504 0.1750 0.2997 0.1226 0.0673 0.1003 0.2350 0.1420297
0.1568 0.1921 0.1130 0.1323 0.4015 0.0636 0.0975 0.1365294
0.3622 0.2085 0.1222 0.2126 0.3047 0.0798 0.0722

[1X7] [7x6] [1X6]

Contract Developer
BOT BTO BOO Turnkey
Services Finance
0.1934 0.1596 0.1649 0.2036 0.1420 0.1365
 59

BIBLIOGRAPHY

AECOM Consult Team. (2005). Synthesis of Public-Private Partnership Projects for

Roads, Bridges, & Tunnels from Around the World - 1985-2004. AECOM Consult, Inc.

American Public Transportation Association Task Force. (2008). Public-Private

Partnerships in Public Transportation: Policies and Principles for the Tansit Industry.
American Public Transportation Association Task Force on Public-Private Partnerships.

Blatchford, E. (1994, 12 1). Working Together for Community Economic Development

in Rural Alaska. Economic Development Review , p. 41.

City-data. (2007). Retrieved March 17, 2009, from City-data Website: http://www.city-
data.com/city/Chamois-Missouri.html

Clements, C., & O'Mahony, M. (2005). Traditional or Public-Private Partnerships for

Procurement of Light rail transit? Transportation Research Board of the 5ational
Academies. Washington D.C.: Transportation Research Board of the National
Academies.

Eggers, W. D., & Dovey, T. (2007). Closing America's Infrastructure Gap: The Role of
Public-Private Partnerships. Deloitte Development LLC.

Grasman, S.E., Faulin, J., and Lera, F., "Public-Private Partnerships for Technology
Growth in the Public Sector", IEEE International Engineering Management Conference,
Estoril, June 2008.

Koppenjan, J. F., & Enserink, B. (2009, March). Public-Private Partnerships in Urban

Infrastructures: Reconciling Private Sector Participation and Sustainability. Public
Administration Review , pp. 284 - 296.

PricewaterhouseCoopers. (2004). Partnering in Practice: 5ew Approaches to PPP

Delivery. PricewaterhouseCoopers.

Rangarajan, K., Ziemer, N. L., & Long, S. (2009). Public-Private Partnerships and Rural
Economic Development. IERC Annual Conference. Miami, FL.

Rangarajan, K., & Long, S. (2008). Chamois Ferry Boat Project. Rolla.

Saaty, T. L. (2008). Relative Measurement and Its Generalization in Decision Making

Why Pairwise Comparisons are Central in Mathematics for the Measurement of
Intangible Factors The Analytic Hierarchy/Network Process. RACSAM , Vol. 102(2), Pg.
251 - 318.
 60

The 5ational Council for Public-Private Partnerships. (1999). Retrieved October 06,
2008, from The National Council for Public-Private Partnerships Website:
http://www.ncpp.org/howpart/ppptypes.shtml

Torres, L., Pina, V., & Acerete, B. (2003). Public-Private Partnership in Spanish Local
Governments. European Business Organization Law Review 4 , pp. 429 - 451.

United States Department of Transportation, Federal Highway Administration. (2004).

Report to Congress on Public - Private Partnerships. Washington D.C.: Federal Highway
Administration.

US Census Bureau. (2006). Retrieved November 17, 2008, from US Census Bureau
Website: http://www.census.gov
 61

VITA

Kiran Rangarajan was born on February 1, 1983 in Bhadravathi, Karnataka in the

southern part of India. He completed his Bachelor of Engineering degree in Electrical and
Electronics Engineering from M.S. Ramaiah Institute of Technology – Bangalore, India
in July 2005. He worked with Infosys Technologies Ltd. – Bangalore, India as a Software
Engineer from September 2005 to June 2007. He started his Master of Science program
with Engineering Management Department at Missouri University of Science and
Technology in January 2008. His primary areas of interests are in Business Marketing,
Marketing Research, Project Management, and Strategic Management of Technology and
Innovation. He received his Masters in Engineering Management in August 2009.
62