KOTI - Korea Transport institute

Public-private partnerships (PPP) allow the private sector to construct and operate infrastructure utilizing its capital which has traditionally been carried out with public finance. The system has been implemented with the purpose of enhancing the quality of people’s lives by providing public services at the right time through creativity and efficiency of the private sector while covering budget shortfalls. Since the introduction of a new PPP scheme in April 2015, railway PPP projects based on the principle of risk sharing between the public and private sectors have been pushed forward in earnest. However, specific guidelines for performance assessment of the project operator have not been in place, although the evaluation is mandatory under the new scheme as it involves financial support of the government.
Thus, this research aims to set the goal and direction of such performance appraisal reflecting future prospects and trends on PPP railway projects and subsequently develop a performance assessment system which encompasses evaluation indices and methods. The main goal is to build a system that enables a comprehensive appraisal of the required performance level of railway facilities built through PPP projects, as well as public services by considering user convenience with a particular focus. Based on this system, more objective and reasonable criteria to determine the amount of government support could be developed since the government is able to increase or decrease its financial support for private project operators according to the results of performance measurement for PPP railway projects. In addition, it is expected to be helpful in improving user convenience by driving better performance of private project implementers and conducive to addressing negative public opinion of PPP projects caused by minimum revenue guarantee and higher fees.
With the intention of raising the level of contribution to policy-making, this research drew a conclusion based on cooperation with a railway PPP project management organization and consultation with a third-party professional. I would like to express my gratitude to Korea Railway Network Authority and Professor Dong-kyu Park of Hangyang University for sharing abundant data for the establishment of the performance assessment system and simulation. I would also like to express my appreciation to advisers in and out of the institute who provided valuable suggestions at expert workshops and research review meetings. I hope that findings of this research will be useful in carrying out railway PPP projects.