IMPACT OF PUBLIC PRIVATE

PARTNERSHIP (PPP) IN PROJECT

OVERRUNS IN INDIAN ROAD
PROJECTS.
Seminar 1
Construction Management
Guided by,
Submitted by,
Prof. CHINSU MEREENA JOY

HISHAM AJMAL

PC
Dept. of Civil Engineering.

PG1

TKM College of Engineering, Kollam

Roll

SECM
No. C118
09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

Overview

09/10/2015

Introduction

Terminologies

Data description

Analysis

Results

Conclusion

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

What is PPP?
Rewards

Pubic
Sector

Resources

PPP
Risks

Responsibilities
09/10/2015

Public
Need

Private
Sector
Dept. of Civil Engineering, TKM College o
f Engineering, Kollam

PPP in India
PPP Participation Growth in
10th 11th & 12th 5 year plans.

48%
22
%

38%
22%
09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

Cost Overrun
Cost overrun =
Actual expenditure incurred Initial project cost estimate
Expressed also

As a percentage of the total expenditure

As a total percentage including and above

the original budget
As a percentage of the cost overruns to
original budget

09/10/2015

Can be positive, negative or zero

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

Time Overrun
Net duration =
Date of project commencement Date of project approval
Time overrun = Net duration Project duration

09/10/2015

Can be positive, negative or zero

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

Data Sources

A total of 145 projects - 42 PPP projects and 103 non- PPP projects
.
Ministry of Statistics and Program Implementation (MOSPI)

National Highways Authority of India

Central Statistical Organization

Center for Monitoring Indian Economy (CMIE)

Survey of India

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

Variables of Interest

17 independent variables

Three categories:

Project technical variables,

Economic variables, and

State specific context variables

Dummy variables

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

Project Technical Variables

1. Road length (RoadLength)

Project size indicator

Represented in km

2. Number of lanes, (D_Lanes)

Project size indicator

3. Terrain (D_Terrain)

09/10/2015

Construction complexity indicator

1 for any sloping terrain 0 otherwise

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

Project Technical Variables

(Contd...)
3.Foreign Consultant (D_Consultant)

Design effectiveness indicator, 1 for a foreign Consultant,

0 otherwise

4.Contractor (Contractor)

09/10/2015

Execution effectiveness indicator

Contractor grades used as follows:

Grade I 1

Grade II 2

Grade III 3

others 4

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

10

Economic variables
1. Project duration (ProjectDuration)

Project size indicator,

Difference between the time of project approval

and project commencement

Represented in months

2. Cost/km/lane (CostKmLane)

Construction complexity indicator

Total estimated cost/road length/number of lanes

Represented in crores/km/lane

3. Estimated cost (Estimate)

09/10/2015

Project size indicator

Represented in crores
Dept. of Civil Engineering, TKM College o
f Engineering, Kollam

11

Economic variables (Contd...)

4. Multilateral banks (D_Multilateral_Banks)

Financing effectiveness indicator

1 for a Multilateral bank funded project,

0 otherwise

5. PPP (D_PPP )

PPP indicator

1 for PPP, 0 otherwise

6. Land use (D_Land_Use)

Land acquisition effectiveness indicator

1 if any forest /sanctuary land falls within the pathway of

the road, 0 otherwise

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

12

Economic variables (Contd...)

7. Category (D_Category)

Political will indicator

1 for Golden Quadrilateral (GQ), North-South (NS) and
East-West (EW) Corridors, 0 otherwise

8. Multi- state (D_Multi_State)

Tax sensitiveness indicator

1 for roads that cross state borders, 0 otherwise

9. Time lapse (TimeLapse)

Built capacity and recentness indicator

Represented as number of months since Jan. 2000 to the

date of project approval.

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

13

District And State Specific Indicators

1. Per- capita State Gross Domestic Product (GDP), (PerCapitaStateGDP)

State economic effectiveness indicator

Represented in Rupees/person

2. Property rights Index, (PropertyRightsIndex)

Land acquisition effectiveness indicator

State-specific

Ranging from 0 to 1

Averaged for multi-state projects

3. District Infrastructure Index, (InfraIndex)

09/10/2015

District infrastructure effectiveness indicator

District-specific

Averaged for multi- district projects

Dept. of Civil Engineering, TKM College o
f Engineering, Kollam

14

Analysis Tools

Comparison of means

Ordinary Least Square (OLS) regression.

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

15

Comparison of Means

Using Wilcoxon rank-sum mean comparison test

When there is no specific distribution

Null Hypothesis (Ho) = Means are identical

Alternative Hypothesis (Ha) = Means are not identical.

Sum of ranks used to find test statistic.

Ho may be rejected or failed to reject at specified significance

level.

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

16

Comparison of Means (Contd.)

Table 1. Mean Comparison Analysis for Different Variables (Rajan T., 2014)

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

17

Regression Model

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

18

General Cases

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

19

OLS Regression
Costoverrun =c0 + c1 timeoverrun + c2 RoadLength + c3 D Lanes + c4ProjectDuration +
c5 D Terrain + c6 D_Consultant + c7 CostKmLane + c8 Contractor + c9
Estimate + c10 D_Multilateral Banks + c11 D PPP + c1 2D LandUse +c13 D
Category + c14 D Multi State +c15TimeLapse + c16PerCapitaStateGDP
+c17PropertyRightsIndex + i
Timeoverrun = t0 + t1 costoverrun + t2 RoadLength + t3 D Lanes + t4ProjectDuration +
t5 D Terrain + t6 D_Consultant + t7 Contractor + t8 Estimate + t9 D_Multi
lateral Banks + t10 D PPP + t11 D LandUse +t12 D Category +
t13D_Multi State +t14TimeLapse + t15 PerCapitaStateGDP +t16
PropertyRightsIndex + t17 InfraIndex + i

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

20

OLS Regression Results

Table 2. Mean Comparison Analysis for Different Variables (Rajan T., 2014)

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

21

Insignificant Variables

09/10/2015

Road length

Foreign consultant

Cost/km/lane

Terrain

Land use

State GDP

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

22

Significant Variables - Cost Overrun

Positive Impact
Variables

Rank.

Coeff.
Value (+)

Negative Impact
Variables

Coeff.
Value (-)

No. of Lanes

73.43

Multi - State

78.41

PPP

65.37

Category

78.14

Project Duration

1.78

Contractor

9.36

Time Overrun

1.31

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

23

Significant Variables - Time Overrun

Rank.

Positive Impact
Variables

Coeff.
Value (+)

Negative Impact
Variables

Coeff.
Value (-)

Multilateral Banks

9.21

Property Rights Index

20.22

Infrastructure Index

0.05

PPP

11.59

Cost Overrun

0.03

Project Duration

0.39

Estimated Cost

0.03

Time Lapse

0.17

Constant

41.54

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

24

Scope for Future Works

Differences in the operating environments of PPP and non-PPP

Projects.

Use of alternate variables

Improve the data set used for the study

Inclusion of the effects of the contracting method

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

25

Conclusions

PPP projects were worse off than non- PPP projects

in managing project overruns

Use of PPP led to higher cost overruns

It reduced time overruns

09/10/2015

Change in ownership itself cannot mitigate all the problems

with the supply and administration of infrastructure
development
The need for a thorough re look of the PPP agreements and
make it tighter to reduce the incidence of cost overruns.

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

26

Reference
1. Bhargava A, Panagiotis C, Samuel Labi, Kumares C and Fred L (2010)
Three-Stage Least-Squares Analysis of Time and Cost Overruns in
Construction Contracts, J. Constr. Eng. Manage., 136 (11), 207 218.
2. Doloi H. (2013) Cost Overruns and Failure in Project Management:
Understanding the Roles of Key Stakeholders in Construction Projects, J.
Constr. Eng. Manage., 139 (3), 267 - 279.
3. DOrazio M. , et al., Statistical Matching: Theory and Practice, John
Wiley & Sons, Ltd, Rome, 2006.
4. Quium A . , A Guidebook on Public-Private Partnership in Infrastructure,
Economic And Social Commission For Asia And The Pacific, Bangkok,
2011.

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

27

Reference (Contd...)
5. Rajan T Govind G and Monalisa B (2014) PPPs and Project Overruns:
Evidence from Road Projects in India, J. Constr. Eng. Manage., 140 (5),
201- 207.
6. Rosenfeld, Y. (2014) Root-Cause Analysis of Construction-Cost Overruns,
J. Constr. Eng. Manage., 140 (1), 301 - 309.

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

28

Thanks

09/10/2015

Dept. of Civil Engineering, TKM College o

f Engineering, Kollam

29