Disincentivising overbidding for toll road concessions

REVIEW OF THE HEAVY VEHICLE SAFETY AND PRODUCTIVITY PROGRAM
List of tables
Table 2.1 Errors in toll road traffic forecasts 12
Table 2.2 VfM assessment 22
Table 2.3 Summary of the explanations for overbidding in the literature 28
Table 3.1 International examples of flexible-term highway concessions 37
Table 4.1 Delivery plans in rail franchising 48
Table 4.2 Winning bids in the UK 3G spectrum auctions 53
Table 4.3 Ofwat’s CIS matrix 56
List of figures
Figure 2.1 Stages in the concessions process 21
Figure 4.1 The Department for Transport’s revenue assessment guidelines 49
Figure 5.1 Potential causes of overbidding 60
Figure 5.2 Stages in the concessions process 61
Figure A2.1 The winner’s curse 69
Figure A2.2 The winner’s curse with bid discounting 70
Figure A2.3 Rational bidding to overcome the winner’s curse 70
List of boxes
Box 2.1 Empirical evidence of optimism bias 16
Box 2.2 UK value-for-money assessment guidance 22
Box 2.3 Options for concessions design 23
Box 2.4 Identifying and defining an incentive 26
Box 3.1 UK PPP roads: the rise and fall of availability-based payment mechanisms 31
Box 3.2 Portuguese SCUTs: a lesson in unaffordability 34
Box 3.3 Pass-through tolling: Auto-Estradas do Baixo Tejo 35
Box 3.4 Flexible-term concessions using the least present value of revenues 38
Box 3.5 Construct-then-concession: 407ETR 40
Box 3.6 The North Tarrant Express 42
Box 3.7 The LBJ Express (IH 635) 43
Box 4.1 The Intercity East Coast franchise 51
Box 5.1 Interviews 59
Box A2.1 Empirical evidence of the winner’s curse 71
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