| The PPP model has important theoretical and practical values for promoting the national governance capacity,the modernization of the governance system,for building a modern fiscal system and a modern budget system.The theoretical value lies in that PPP is not planned supply or market supply,but rather exerts the purchasing power to make the plan and the market combine at the operational level of the mechanism to realize the incentive and compatibility of different operating mechanisms so as to obtain more quality and efficient expectation.Its practical value lies in that PPP is conducive to giving full play to the market’s fundamental role in resource allocation,stimulating private capital,activating existing capital,integrating social capital,guiding various capital elements to actively participate in the market-oriented reform of public goods and public services.And then effectively defuse the Government’s debt risk and provide better services to the public.However,PPP is not an isolated system,which is rooted in traditional government procurement.It is a high-level and complicated form of traditional government procurement,which has the general properties of traditional government procurement and its own particularity.From the perspective of the use of financial funds,the traditional government procurement is "complement construction",while PPP is "complement operation".The transition from " complement construction” to " complement operation " seems to involve different phases of subsidies for public funds,but actually involves major changes in the supply mechanism of public goods and public services.An important goal of this change is to achieve better value for money,that is,using the PPP model to achieve cost savings with the same output delivered.The value for money evaluation is an important decision basis for judging whether the PPP mode can be adopted or not.As the core system design of the current PPP policy,however,such an important system design,its core part of its value for money valuation failed to reach a consensus among the industry and scholars,instead,which is even widely debated and questioned.One of the important reasons is that there is a lot of uncertainty in the PPP project.Accordingly,the traditional PPP-PSC method based on net present value can not handle such uncertainties correctly,causing to underestimate the value of PPP projects and overestimate the realized amount of value-for-money,thus restricting the investment initiative on the social capital of the PPP project.It has become a proposition with theoretical and practical value,how to deal with this uncertainty of the PPP project and how to make a reasonable assessment of the realized amount of value-for-money in the PPP project.Therefore,this article takes the advantages of the real option theory and the PPP-PSC evaluation method,and from a novel perspective studies the quantitative value-for-money valuation method of the PPP project trying to provide a more scientific and accurate basis for the government decision-making and public policy formulation.The PPP-PSC method assumes that the PPP procurement is the same as the traditional government procurement,by comparing the investment,to make a judge which kind of procurement model has the value-for-money.It is also the mainstream quantitative analysis tool for the government procurement model selection.The real option theory is mainly used to evaluate the uncertainty in project investment,which is widely used in corporate investment decisions.From the international experience of PPP value-added development,although the traditional PPP-PSC method has certain flaws in the setting of the discount rate and the future cash flow prediction,the value inherent in the PPP-PSC method,the idea of governance and its position in the valuation of the value-for-money property can not be replaced by the real option evaluation method.The two should be complementary rather than alternative,and they should make full use of their respective advantages to improve the quantitative value-for-money evaluation process.Based on such a logical framework,the research methods of J.H.Park(2014)are mainly used to study the PPP-PSC method and the real option method,extending and expanding the connotation of the traditional PPP-PSC method.It is considered that the value of the weighted PPP investment project is composed of the static NPV and the option value.Based on this,the solution of the weighted VFM is proposed.The improved VFM is a linear combination of the traditional VFM and the weighted VFM.The main theoretical contribution of this improvement is that the linear combination of PPP-PSC and real options can bring an overflow effect of 1 + 1> 2.Because the improved VFM fully considers the uncertainty of the full life cycle of the PPP project,it gives investors the opportunity to seize the risk and profit brought by the uncertainty,and realizes the investment value of the PPP project,and equalizes the value-for-money implementation of the government in the game equilibrium.How to price the risk of uncertainty in PPP projects is a key issue in value-for-money valuation in the improved VFM assessment method.Thereby,the systematic carding of risk types and typical characteristics of PPP projects is the basic work and key step in the construction of option pricing model in PPP context.Therefore,this paper systematically combs the risk types and typical features of PPP projects.The risks of PPP projects are summarized as exogenous risks and endogenous risks.Exogenous risks are not controllable,mainly including political risk,economic risk,environmental risk,force majeure risk and so on.Endogenous risks have certain controllability.They are discretely distributed in different stages of PPP projects,including financing risk,design and approval risk,construction risk,operation and maintenance risk,government payment risk and then negotiation risk.These risks affect the implementation of PPP projects at different levels,which are important references for the selection of discount rates and cash flow forecasts in the traditional PPP-PSC assessment method.They are also the key issues of real option pricing.In addition,the pricing of uncertain risk in PPP project can not be separated from the PPP context.This paper argues that we should consider four typical characteristics of public interest,government commitment,investment irreversibility and renegotiation in the construction of PPP option pricing model.This paper studies the pricing problem of uncertain risk in PPP projects based on B-S,triple-tree and jump-diffusion models respectively.From BS model to jump-diffusion model,it seems that there are only three different real options pricing methods.The essence is the process of relaxation of theoretical models.The B-S model requires that the price movement of the underlying asset is continuous and the movement direction is one-dimensional.The model requires that the price movement of the underlying asset follow Brownian motion,but there are three possible upward,immutable and downward directions of the asset movement at the same time.The jump-diffusion model is mainly designed to fit the peak-thick tail presented in the statistical statistics of price movements,allowing the underlying asset price to jump up or down suddenly.As for the actual PPP project,three different real options pricing methods are to solve the pricing problem of three different types of PPP project uncertainty,BS model is suitable for PPP project pricing of a single real option;triple-tree model is suitable for multistage compound real options,and the jump-diffusion model is applicable to the multistage conforming real-option pricing with renegotiation.From the perspective of econometrics,the three different real option methods are also the test of the robustness of the PPP project to achieve value-for-money and the fundamental value of preventing accidental injury of the result.A PPP-based real option pricing model based on B-S model is established.Considering the typical characteristics of real options in PPP projects,it is considered that the factors such as construction period,concession period,volatility,drift rate,initial investment and risk-free interest rate of PPP project will have substantial impacts on option pricing and integrate these factors into the model construction.The construction of risk-free interest rate environment is a key step in building B-S model.Because the drift rate and volatility risk of cash flow of PPP project are homologous,this paper uses the "portfolio" approach to eliminate the risk-free environment and build a risk-free interest rate environment.This paper also suggests that once the PPP project is in operation,its uncertainty is gradually released,so it is widely considered that the real option of the PPP project is a typical European put option.A PPP-based real option pricing model based on trident tree is established.For a multistage and multitasking PPP project,it is assumed that the price movement direction of a PPP underlying asset is not a single dimension,but there are three dimensions of upward,downward and invariant simultaneously.The concession period for PPP projects is divided into several phases.The value of the real option of PPP project is obtained by iterative method.The PPP real option pricing model based on jump diffusion suggests that the main idea of modeling is to introduce Poisson distribution on the basis of Brownian motion.which is to use Brownian motion to depict the standard Wiener process,and to portray the "jump" with Poisson distribution.The introduction of jump is mainly used to fit the phenomenon of peak and thick tail in the statistical characteristics of the underlying asset price movement.From the statistical perspective,the extreme thick tail is caused by the frequent random extreme values.These extremum values are the jumps.If the normal distribution is used to describe the rate of return,it will underestimate the value of options in a PPP project.On the basis of theoretical modeling,the third batch of PPP demonstration project cases are used to integrate three different theoretical models into a unified empirical research framework.In the process of empirical research,we first focus on the accuracy and scientificalness of the parameter values.The value of the cash drift rate is confirmed by three different methods.Then by using Matlab numerical analysis tools,three different sets of value-for-money will be achieved.The B-S model has the best value-for-money,followed by the triple-tree model and the jump-diffusion model.This conclusion is in line with the theoretical expectation.From the B-S model to jump-diffusion model,both of them are the process of relaxing the assumption,also the process of importing uncertainty.Finally,this study suggests the key parameters of single-factor sensitivity test and multi-factor sensitivity test,draws the main conclusions of empirical research:(1)The improvement of PPP-PSC model with real option theory can well fit the actual movement of underlying asset price and deal with the uncertainty in PPP project correctly.And the realization value of three kinds of real option model is less than The merit of the evaluation report is closer to the realized value of the procurement;This fully demonstrates that the argument in this article not only meets the theoretical expectation,but also meets the PPP value-for-money practice.(2)The drift rate is inversely proportional to the realized amount of value-for-money.As the drift rate increases,the amount of value-for-money realization gradually decreases,and when the drift rate is above a certain threshold,the value is in steady state.This conclusion is of great significance to the definition of the scope of PPP projects.That being said,projects with yields above a certain threshold are not suitable for PPP model.(3)Volatility is proportional to the value of real options and inversely proportional to the realized amount of value-for-money.As the volatility increases,the value-at-value trend gradually approaches zero and then becomes negative,at this time the value-for-money item no longer exists.In other words,the risk can bring the enterprise the value of risk and future value,but the risk is so large that it exceed a certain threshold.thus the government can not realize the value-for-money,the PPP model can not be put into use.The conclusion of this empirical study supports the "stable" requirement of "long-term stability" stipulated in Article 3 of the draft of the PPP Regulation.When the interaction occurs,the government can realize the value-for-money by ironing out the fluctuation of cash flow,and correspondingly more PPP projects have commercial value.(4)The concession period(operating period)is an important boundary condition and decision variable for the government and social capital.During the concession period of PPP projects,the option value of the project gradually becomes smaller,and the realized amount of the corresponding value-for-money gradually becomes larger.If the concession period falls below a certain threshold,there is no value-for-money;only when the concession is greater than a certain threshold,does value-for-money exist.The interesting conclusion drawn from the case is that when the PPP project’s license period is greater than 25 years,the change in value-for-money realization of the PPP project is stabilized.The empirical conclusions support the "PPP Regulations" draft of the PPP cooperation requirements.When interaction happens,the government can realize more value-for-money by extending or shortening the concession period.(5)During the PPP project construction period,the value of the option decreases as the construction period increases,and the social capital can not obtain the option value by extending the construction period.In theory,the government can obtain a little value for money by extending the construction period.However,the PPP project is about the public interest,and the rational government will not try to delay the construction period only for a little value of money.Neither the government nor the social capital should take the construction period as the decision variable for realizing its own interests.However,in the case,the initial investment cost during the construction period has increased by less than double,while the value of the real option has nearly tripled and the corresponding realized amount of value-for-money has been declining.Therefore,the government regulation should focus on the PPP project Cost control in PPP projects.(6)In the contracts that allow for renegotiation,no matter how the probability of a "jump" in the forward direction is,the government can not achieve more value for money from the renegotiation.In order to ensure sustainable realization of value-for-money,the government’s optimal strategy is to reduce the number of re-negotiations over the entire life cycle,to restrain as closely as possible the trigger conditions for resuming negotiations,to strictly regulate the renegotiation of opportunism and prevent the renegotiation from becoming a tool of profit making for social capital.(7)The value of real options rises as long-term interest rates increase,while the realized amount of value-for-money declines as long-term interest rates increase.The underlying mechanism is that long-term interest rates affect the asset allocation of enterprises.Risk-averse enterprises are more inclined to allocate more portfolio investment to government bonds and less PPP investment.Under this circumstance,if the ratio of risk portfolios is adjusted,social capital would require higher rate of return to compensate for the risk taking,and thus would raise the value of real options.The realization value of the three kinds of real options model is less than the realization value of value-for-money provided by the value-for-money valuation report,which would indicate that the method for measuring uncertainty constructed in this paper is more adequate and effective in risk assessment.At this point,this article still lacks a key step of falsification,that is,how to certify that the conclusions drawn from this assessment report provides more scientific and accurate conclusions than the value-for-money evaluation.The basic principles of Marxism theory and practice are unified,and practice is the only standard of testing theory.However,the real option is not financial options with real-time and dynamic data which can be used as the basis of conclusion,moreover,the assessment practice of value-for-money is still in the lack of the similar data.Fortunately,during the implementation of PPP projects,there is a very important stage,that is the project procurement phase.Also,it is during the procurement phase that the final bid price is usually obtained through such competitive approaches as competitive bidding,competitive negotiation and competitive consultations etc.The final price comes into being in competition and also the actual quoted price of social capital.By comparing the public sector comparative value with the actual quoted price of social capital and the sum of the government’s self-retained risk,the cost of purchased goods can be calculated.On the basis of this,drawing on the experience of the valuation variance model in the asset valuation theory,the more scientific and more accurate conclusion should be that the valuation difference rate is the smallest,and the difference between the valuation of the three real options models is less than the value-for-money evaluation report provided by the valuation rate of variation,thus it can be safely verified that the conclusions are scientific and accuracy.The main conclusions of empirical studies points out the direction how to achieve sustainable quantitative value-for-money.(1)The importance of value of options should be fully understood.It is generally recognized that the value of options in achieving PPP value-for-money plays an important role,and that the value of risk options focuses on the management flexibility and growth in the implementation of PPP projects,which can adequately explore the value of projects.Through the case study,we found that the focus on the value of options is closer to the value of the real value of the procurement,that is to say,the concern about the value of options enables the government,more objectively,to understand the risk allocation in PPP and the real amount of value-for-money,which will improve the scientificity of government decision-making.And improving the VFM to consider the uncertainty of the full life cycle of PPP projects provides investors with opportunities to seize the risk premium brought by the uncertainty,and then make a balance between the investment value of PPP projects and the government’s realization of value-for-money in the game equilibrium.(2)The scope of PPP projects should be reasonably defined.The scope of PPP projects should be defined by the combination of a positive list and a negative list.The financial list is in the form of a negative list.The list is advertised in areas where the fiscal deficits are relatively insufficient,the financial creditability is poor,and the financial transparency is low.The list of items is in the form of a positive list.According to the operation of the project itself,the project itself can bring a higher cash flow,and the project is considered to be a good business.Whereas,the project itself can not bring cash flow and mainly relies on government subsidies or feasibility gaps to subsidize the project,and the project is considered to be a worse business.Therefore,by means of this standard,can different types of PPP projects be classified.(3)PPP pricing mechanism and financial support policy should be improved.As for the PPP type of users-pay,the main factor affecting cash flow volatility lies in the user’s demand and service prices.In practice,governments dominate the right of pricing.The speed and frequency of service price adjustment severely lag behind the fluctuation of demand,which brings certain uncertainty to the cash flow of social capital.Therefore,it is necessary to construct a dynamic price adjustment mechanism,to promote the realization of the value-for-money in projects.As for the PPP type of government-pay,the standard of financial payment,the period of financial payment,and the financial payment guarantee are all the major factors that restrict the stability of cash flow of social capital.Therefore,it is necessary to build a sound standard of performance pay,to build performance finance based on performance pay.The PPP financial expenditure should be put into local long-term planning and medium-term budget,thereby enhancing the achievement of PPP projects’ value-for-money.For the PPP type of feasibility gap subsidies,it is under the double binds of financial support policies and pricing mechanism,which is in much higher demand of dynamic price adjustment mechanism so as to improve the financial support policies,making it an important guarantee to the PPP value-for-money.(4)Renegotiate should be strictly managed and renegotiation mechanism should be optimized.The opportunism renegotiation should be curbed by means of information disclosure and dynamic contract management.And information disclosure can reduce the opportunism brought by information asymmetry;while dynamic contracts management can effectively reduce the opportunistic negotiation caused by incomplete,non-standard or unreasonable contract texts.The construction of the renegotiation mechanism should include triggering mechanism and program construction to set flexible terms and conditions such as stage terms of the PPP contract,franchise years,standard of performance pay,return and risk sharing mechanism etc.These terms can be dynamically adjusted after meeting certain conditions;these should be regulated such as renegotiation start-up time,response time,participants,participation methods,the number of negotiations and so on,especially the renegotiation numbers of the entire life cycle,transaction cost,as well as interests balance among all parties,so as to optimize the renegotiation mechanism.(5)Dynamic PPP concession management mechanism should be implemented.The terms of the concession period in PPP contracts are flexible and the specific concession period figures are uncertain,but only the threshold of the concession period is restrained.The core of dynamic management of the boundary conditions is to measure whether the value-for-money can be achieved or not.After the statutory assessment process can not achieve quantitative value-for-money,the government can unilaterally extend or shorten the concession period.On the basis of the value-for-money realization,social capital can not realize a reasonable return on investment.In this case,the concession period should be appropriately extended.(6)The government’s supervision should be strengthened.The government supervision mainly focuses on two indicators,construction period and construction cost.During the procurement stage,the price supervision mechanism can be improved by the means of open prices,price dynamic mechanism,the hearing system of price adjustment.The government not only needs to link the performance with the payment,but also the government should independently serve the regulatory agencies in the operation process of PPP projects.The social capital can not serve as both the service providers and the service regulators.(7)A stable long-term interest rate system environment should be constructed.Through quantitative easing monetary policy to create a long-term,low-interest rate external environment for PPP development.At the same time,it urges policy-making departments to adopt the system of targeted RRR cuts to create a long-term,low-interest-rate institutional environment for the sustainable development of PPPs and the realization of sustainable quantitative value-for-money,in a system environment that is difficult to create overall low interest rates. |
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