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Risk Inclusion in the Reserve Price Estimation for Toll Road Concession Award

Reini D. Wirahadikusumah, Sapitri, B. Susanti, and B. Soemardi
Department of Civil Engineering, Institut Teknologi Bandung, Indonesia
Abstract—Investors’ risks in toll road concession award are related mainly to land acquisition; toll tariff, and tender process. Although the first of two are dominant risks, this study is focused on the risks associated with tender process. The reserve price, as a comparator for investors, bids has been criticized by investors, as it does not include proper cost of risks. There is a need to develop a more equitable reserve price that considers the risks, both at the project and at the business/corporate level. These risks have been identified based on existing regulations, and rom the point of views of both parties, i.e., the investors and the government were identified through semi-structured interviews. The findings indicated that while investors understand the need to estimate the cost of risks, this cost is not fully included because it is not fairly considered the reserve price. There are twelve significant risks identified including: the risk associated with overloading (poorly imposing the limition of heavy vehicles) and the risk related to route/traffic management (lower traffic volume due to changing routes). In theory, these risks can be mitigated by strict regulation and enforcement. However, lack of policy coordination among different parties within the government have been problematic and aggravating risks to the investors.

Index Terms—public-private partnership, risk, reserve price, estimation, toll road, concession

Cite: Reini D. Wirahadikusumah, Sapitri, B. Susanti, and B. Soemardi, "Risk Inclusion in the Reserve Price Estimation for Toll Road Concession Award," Journal of Traffic and Logistics Engineering, Vol. 2, No. 1, pp. 34-39, March 2014. doi: 10.12720/jtle.2.1.34-39
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