Risk measurement and risk identification for BOT projects: A multi-attribute utility approach

This paper aims to identify and assess the potential risks faced by private sectors in holding BOT projects through the risk assessment model developed herein. The multi-attribute utility function and aggregation utility are established using the multi-attribute utility theory to evaluate the risk state of each uncertainty, and in turn to determine whether such an uncertainty is a risk factor or not from the negotiator group’s viewpoint. This model shows that the uncertainty is regarded as a risk factor only when the aggregation utility value is less than the average aggregation utility value when the outcome, attribute, and states of a factor as well as its occurrence probability are all independent. A numerical example is also utilized to demonstrate the application of the developed risk assessment model. Results of the numerical example reveal that the concession period of a BOT project is the primary risk factor whereas the foreign exchange ratio is the secondary risk factor. Accordingly, the concession period dominates the negotiation results of BOT projects.