A Risk-based Bid/No Bid Decision Model For International Public-Private Partnership Projects

Public-Private Partnerships has been widely used in the world of large infrastructure,the international market gradually shift from the traditional mode of contracting tendersfor infrastructure projects to the PPP model. Huge demand for foreign infrastructureprojects provides for China’s enterprises to invest in international PPP project supportand opportunities. However, PPP projects have large-scale, long-term investments, andmulti-stakeholder characteristics lead to uncertainty and more risky, which make thepresence of problems or even ultimately failure for many PPP projects in theimplementation process. Bidding companies need to conduct risk identification andanalysis of the project, and choose the right projects for investment, in order to avoidthat the risk affect the expected revenue. And PPP projects can take a long time andcosts before signing the contract, bidding companies to make decisions as soon aspossible to avoid wasting a lot of the cost of inputs. How to conduct a detailed riskanalysis and make the right decisions bidding has become an important issue should besolved first for investment of Chinese enterprises to go abroad.A standardized bidding decision model is believed to be of great help for makingscientific and effective bid/no bid decision by the international Public-PrivatePartnership (PPP) projects bidders. In this paper, we propose a risk-based bid/no biddecision model for such projects based on the characteristics of international PPPprojects and the systematic analysis of factors affecting the bid/no bid decision fromrisk management perspective. The factors that affect PPP projects are divided into threecategories: including target of bidding companies, project risk, and corporate controland the ability to withstand risks. This model contains two parts: the ability assessmentto bear and control risk and risk assessment. Through comparative analysis of riskassessment approach, we select fuzzy analytic network process to evaluate the risk ofthe project, to get the overall risk level and the importance of risk factors. Next, throughliterature review and classification, we build the capacity evaluation index system ofrisk control and bear ability, and determine the ability of the enterprise to meet theproject’s risk level, which evaluated the corporate risk control and bear ability level. Inthis model, we decide whether to bid based on the results of these two assessments.Finally, we give a numerical example to demonstrate the feasibility and applicability of our model.