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Candel, M, Karrbom Gustavsson, T and Eriksson, P (2021) Front-end value co-creation in housing development projects. Construction Management and Economics, 39(03), 245–60.

Loosemore, M, Osborne, J and Higgon, D (2021) Affective, cognitive, behavioural and situational outcomes of social procurement: a case study of social value creation in a major facilities management firm. Construction Management and Economics, 39(03), 227–44.

Møller, J L, Kines, P, Dyreborg, J, Andersen, L L and Ajslev, J Z N (2021) The competences of successful safety and health coordinators in construction projects. Construction Management and Economics, 39(03), 199–211.

Marques, N L, Bastian-Pinto, C d L and Brandão, L E T (2021) Crossing the Brownian Bridge: valuing infrastructure capacity expansion policies as real options. Construction Management and Economics, 39(03), 261–76.

  • Type: Journal Article
  • Keywords: Infrastructure projects; capacity expansion; real options; project valuation; term extension;
  • ISBN/ISSN: 0144-6193
  • URL: https://doi.org/10.1080/01446193.2020.1863439
  • Abstract:
    In countries where transportation infrastructure is underdeveloped, newly built facilities tend to attract and increase demand. This can lead to situations where future traffic levels exceed the concession capacity limit, and additional investments in expansion is required. One common solution is to mandate this investment as a firm obligation in concession contracts, either after a set number of years or when demand reaches capacity. In this article, we show why these policies are suboptimal and propose a model that combines flexible capacity expansion decisions with conditional term extensions. We model this flexibility under the real options approach and the project value uncertainty during the life of the concession as a Brownian Bridge. As a novel contribution, we take into account the fact that concession revenues are bounded by the current traffic capacity of the road, which represents an upper absorbing barrier that has implications for the expansion decision. As a numerical application, this model is applied to a typical toll road project in Brazil. The results show that flexible expansion policies, coupled with conditional term extensions, have significant advantages. These findings can be of use to government officials involved in developing policies to attract private investment in public infrastructure projects.

Sandberg, R, Löwstedt, M and Räisänen, C (2021) Working in a loosely coupled system: exploring practices and implications of coupling work on construction sites. Construction Management and Economics, 39(03), 212–26.