Challenge 5. Consider a government agency that seeks bids for a PPP where the pr

Question

Challenge 5. Consider a government agency that seeks bids for a PPP where the private partner will construct a major bridge, pay off its debt using tolls, and eventually turn the bridge over to the government agency. The government would like to guarantee that tolls will not bee while the private partner would like to guarantee that it can in fact pay the interest on its bonds (and avoid bankruptcy). The government has provided a traffic study that shows expected traffic growth of 2%per yearover the next 20 years, and it has indicated that bidders should consider the benefits of this traffic growth when deciding what toll levels they will include in their bid. Question 5.a. Which statement better represents the risks of the private firm? a) The private firm can always expect no overruns on construction. b) The private firm might face unexpected increases in interest rates. c) The private firm can expect constant growth traffic. d) The private firm should not bid for this project. xcessive, uestion 5.b. Which of the following statements will help the govermment agency and the private company share risks? a) Fix the price of the tolls during the time it is operated by the private firm. b) Consider subsidies if the projected traffic does not materialize. c) Allow the private firm to abandon the project anytime. d) Allow the private firm to return the infrastructure in any condition.

Explanation / Answer

5.a.) The answer is option (b), i.e., The private firm might face unexpected increases in interest rates.

5.b.) The answer is option (b), i.e., Consider subsidies if the projected traffic does not materialize.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.