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Frontiers of Engineering Management

Front. Eng    2017, Vol. 4 Issue (2) : 156-170     https://doi.org/10.15302/J-FEM-2017016
RESEARCH ARTICLE |
Mechanism design of reverse auction on concession period and generalized quality for PPP projects
Xianjia WANG, Shiwei WU()
School of Economic and Management, Wuhan University, Wuhan 430072, China
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Abstract

Reverse auctions of PPP projects usually require the bid to specify several characteristics of quality and the concession period to be fulfilled. This paper sets up a summary function of generalized quality, which contributes to reducing the dimensions of information. Thus, the multidimensional reverse auction model of a PPP project can be replaced by a two-dimensional direct mechanism based on the concession period and the generalized quality. Based on the theory of the revelation principle, the feasibility conditions, equilibrium solution and generalized quality requirements of such a mechanism, considering the influence of a variable investment structure are described. Moreover, two feasible multidimensional reverse auctions for implementing such a direct mechanism: Adjusting the scoring function and establishing a special reverse auction rule are built. The analysis shows that in these types of reverse auctions, optimal allocation can be achieved, the social benefit under the incomplete information will be maximized, and the private sector with the highest integrated management level wins the bid. In such a direct mechanism, the investment and financial pressure of the public sector can be reduced.

Keywords PPP project      reverse auction      mechanism design      multidimensional information      scoring function      two-stage bidding     
Corresponding Authors: Shiwei WU   
Just Accepted Date: 13 June 2017   Online First Date: 05 July 2017    Issue Date: 17 July 2017
 Cite this article:   
Xianjia WANG,Shiwei WU. Mechanism design of reverse auction on concession period and generalized quality for PPP projects[J]. Front. Eng, 2017, 4(2): 156-170.
 URL:  
http://journal.hep.com.cn/fem/EN/10.15302/J-FEM-2017016
http://journal.hep.com.cn/fem/EN/Y2017/V4/I2/156
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Xianjia WANG
Shiwei WU
Criterion layer zijElement layer zijk
Financing planFinancing capacity; financing cost; fund using plan; financing options; financial regulatory; financing experience;
Project designDesign conception; designing method; the technology and depth requirements of design; structure, layout, function; feasibility
Forming planning of project companyCapital structure; organization establishment; experience; qualified technician; operating capability; dispatching of rights and obligations
Construction schemeConstruction schedule; equipment; safety program; construction technique; invitation for bids; purchase plan; construction cost; environmental controls; quality surveillance; control of investment
Operation schemeScheme of test run; profitability; operation plan; maintenance measure; transfer plan
Risk factorEconomic risk; legal risk; political risk; environment risk; social risks; market risk; operational risk; construction risk; cooperation risk; management risk
Tab.1  The generalized quality indicator system of PPP project
θiQiλiTi(1λi)CW si
0.800.7369310.69328619.27050.7461325.146345.11461
0.850.7436510.70087919.69240.7264705.160195.12794
0.900.7502490.70834820.11050.7071595.173715.14117
0.950.7567420.71571120.52570.6881625.186935.15420
Tab.2  The results for a direct mechanism of a PPP project
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