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Comparing Life Cycle Cost of Public and PPP Transportation Infrastructure in Thailand :
An Empirical Evidence
Nakhon Kokkaew1 and Veerasak Likhitruangsilp2
1
Lecturer, Dept. of Civil Engineering, Chulalongkorn Univ., Bangkok, Thailand 10330
(corresponding author). E-mail: nakhon.k@chula.ac.th
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2
Associate Professor, Dept. of Civil Engineering, Chulalongkorn Univ., Bangkok, Thailand
10330. E-mail: VeerasakL@gmail.com

ABSTRACT
Infrastructure plays an important role in promoting short and long -term economic growth.
However, due to the nature and characteristics of infrastructure projects which requires large
amount of capital, private involvement in infrastructure development, also known as public-
private-partnership or PPP, has therefore become an alternative to traditional public procurement .
The main arguments for deploying PPP are three folds. First, PPP helps governments tap private
resources for funding needed investment in infrastructure projects . Second, private’s expertise in
managing an infrastructure project is highly recognized . And, finally, PPP is believed by many to
be delivered in a manner that is more cost-effective than the traditional methods. However, the
perception that PPP provides value for money (VfM) over traditional procurement still lacks
empirical evidence, especially in Thailand. Accordingly, the main objective of this research
project is to develop a computational model that can compare the life cycle cost (LCC) of public
and PPP infrastructure projects. Data collection from a group of public and private transportation
projects in Thailand will be employed to compare the average life cycle cost between them. The
results of this study will provide additional empirical evidence to the body of knowledge in the
field of infrastructure management .

INTRODUCTION
Demand for infrastructure investments in Thailand has increased significantly over the last
decade and this trend will continue over the coming years, as Thailand wants to position itself as
transportation hub and to attract the flow of foreign direct investment (FDI) into a designated
region in the eastern Thailand called “eastern economic corridor or EEC”. Some of the needed
investment will come from the private through a program called “Public Private Partnership ” or
“PPP.” Thailand is no stranger to PPP. Examples of PPP projects in Thailand include Bangkok ’s
BTS, MRT Blue Line, the Second Stage Expressway System (SES), and the Don Muang
Tollway (Kokkaew 2015).
As seen by many, private participation in large -scale infrastructure projects essentially helped
promote the country’s long-term economic growth (Hong et al. 2011; Rashidi and Samimi 2012).
Sectors most active for PPP implementation in Thailand are energy and transportation . It is
believed, as appeared on literature, that private sector ’s life cycle approach to design and
construction results in operational cost efficiencies (Zhang et al. 2013; The World Bank 2006;
Martinez et al. 2014; Liu et al. 2015; Chasey et al. 2012). For example, some argue that PPP may
help lower lifecycle cost of implementing infrastructure projects, and with well-specified
performance specifications, PPP operators are encouraged to employ innovation so as to reduce
O&M costs in the long run. However, as pointed out by Martinez and Walton (2014), empirical
evidence for such a claim is lacking.

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For Thailand, as reported in Thailand Infrastructure Report Q4 2017 by Business Monitor

International (BMI), the infrastructure industry was valued in 2016 about 104 billion Thai baht
(THB), representing about a quarter of construction industry’s value (valued at THB 400 billion).
For transport infrastructure, in 2016 it was valued about THB 55 billion, and is estimated to
increase to over THB 120 billion over the next decade (2017-2026). About 30% of this total
investment in the country’s infrastructure will be in the form of PPPs . The main argument of
employing PPP for these infrastructure projects is based on the ground that government cannot
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provide needed fund using its limited fiscal budget alone. As for the perception that private
operators in Thailand tend to deliver the project more efficiently, there is no hard evidence
provided.
Therefore, the aim of this paper is to examine cost efficiency measured using life cycle costs
between public and private transport projects, e .g., tolled road projects. In addition, we present
how the life cycle cost (LCC) of public and private infrastructure can be correctly compared,
using historical data from the project construction to the costs associated with the operation of
the project. It is important that the time of comparison should be similar, and construction and
operation and maintenance costs should be adjusted using inflation. The results of this LCC
comparison shall provide additional empirical evidence about the “efficiency” claim of PPP
infrastructure project delivery.

LIFE CYCLE COST OF INFRASTRUCTURE

The general concept of life cycle cost is not new, as it had been applied by the US
Department of Defense since the 1960s (Sherif and Kolarik 1981). Life cycle costing (LCC), by
definition, refers to an analysis technique which encompasses all costs associated with a product
from its inception to its disposal (Sherif and Kolarik 1981). Life cycle cost analysis (LCCA) is a
data-driven tool that provides a detailed account of the total costs of a project over its expected
life. Life cycle cost will consider the cost of developing or acquiring the asset, the cost of
running, operating, and maintaining, and the cost of disposal. In other words, LCC is the practice
of obtaining over their lifetime the best use of the physical assets at the lowest cost to the entity.
More comprehensive review on life cycle cost can be found in, for example, Fwa and Sinha
(1991), Ravirala and Grivas (1995), and Sherif and Kolarik (1981).
Costs associated with one phase may have an influence on the costs in the subsequent phase .
For instance, construction cost and quality (or operation and maintenance cost ) are, in theory,
strongly correlated, i.e., the higher quality of the structure required, the greater cost of
construction needed (Kunishima and Shoji 1996; Kuprenas 2008; Rosenfeld 2009). However,
different level of usage definitely affects the cost of operating and maintaining facility.
Nevertheless, all thing being equal, construction and operation and maintenance costs are likely
to be correlated.

COMPUTATIONAL MODEL OF LIFE CYCLE COST COMPARISON

This section provides computation model of how life cycle cost between public and private
shall be compared. As can be seen in Figure 1, life cycle cost of public project (Project A) and
private project (Project B) has to be compared at the same time period. In this paper, we use
present time as the reference for cost adjustment due to time value of money.

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Ut< p
U t <3
Ut< j LCC[A
LCC [A]
Ut<2 ]
U t <1

Public
Public
Model
Model
A
A
IA
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OM t <1
OM t < 2
OM t <3
OM t < j OM t < p

Rt < p
Rt < j
Rt < 3 LCC[B]
LCC [B]
Rt < 2
Rt <1

PPP
PPP
B
B
Model
Model IB OM t <1
OM t < 2
OM t <3
OM t < j OM t < p

Construc Operation
Construction stage Operation stage
tion stage stage
Present
Present time
time
Figure 1. Life cycle cost computational model of public and PPP transport infrastructure
projects.

Accumulated (ex post) life cycle cost of Project A ( LCC[ A] ) procured using traditional
public method can be then computed by the following equation.
t< p

I A ≥ (1 ∗ i f ) t< p OM A,t (1 ∗ i f ) p,t

LCC[ A] < ∗ t <1
(1)
LA ≥ nl , A LA ≥ nl , A
where I A is the initial investment of the project, i f is the average inflation rate over the
operation period, LA is the length of the project, nl , A is the number of lanes, OM A,t is the
operation and maintenance costs of the project in year t and p is the number of year since the
beginning of project ’s operation. Using similar algorithm for PPP project, current life cycle cost
of Project B ( LCC[ B ] ) using PPP arrangements can be calculated as
t< p

I B ≥ (1 ∗ i f )t < p  OM B ,t (1 ∗ i f ) p,t
LCC[ B] < ∗ t <1
(2)
LB ≥ nl ,B LB ≥ nl ,B
Average yearly operation and maintenance cost per lane -km ( COM ) can be computed using
the following equation
t< p

OM B ,t (1 ∗ i f ) p,t
COM < t <1
(3)
p ≥ ( LB ≥ nl , B )

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From historical data obtained from the Ministry of Commerce, average inflation over the last
three decades (1984-2017) is about 3% (i.e., i f < 3% ).

DATA COLLECTION
Important data of publicly-owned tolled roads and PPP tolled roads in Thailand is shown in
Table 1 to Table 4.
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Table 1. Construction Cost and Average Annual Operation and Maintenance Cost of
Publicly-owned Tolled Roads in Thailand.
Project Average yearly
Design Construction cost (Year)
(Responsible agency) O&M
(1) M9 (Department of Asphaltic THB 12,000 million (1996- THB 697
Highway) pavement 1998) and THB 6,083 million million*
(2009-2010) for a 64-km and 8-
lane controlled-access highway
(2) Burapha Withi Precast THB 25,193 (1998) for a 55-km THB 1,989
Expressway (The concrete box and 6-lane elevated expressway million
Expressway Authority of girder bridge
Thailand: EXAT)
Note: *Averaged using data from year 2011–2016 as reported by Intercity Motorway’s Annual Financial Report.

Table 2. Traffic Volume of Publicly -owned Tolled Roads in Thailand.

Average daily Initial traffic Current Average
Total traffic
Project traffic volume volume traffic volume growth rate %
volume
(ADDT) (vpd) (vpd) (Per year)
(1) M9 981,383,072 149,373 40,889 268,493 11
(1999-2016)
(2) Burapha Withi 322,491,370 51,973 15,501 139,808 11
Expressway (2000-2016)

Table 3. Construction Cost and Average Annual Operation and Maintenance Cost of PPP
Tolled Roads in Thailand.
Project Design Construction cost (Year) O&M
(1) Don Muang Precast concrete THB 12,000 million (1989- THB 344 million in
Tollway (Don box girder bridge 1994) for a 15.4-km and six- 2016
Muang Tollway lane elevated expressway
Plc)
(2) Second Stage Precast concrete THB 27,500 million* (1990- THB 594 million in
Expressway box girder bridge 1993) for a 38.5-km and six- 2016**
(BECL) lane elevated expressway
(3) SOE Precast concrete THB 24,145 million (2012- THB 258 million in
box girder bridge 2016) for a 16.7-km and six- 2016**
lane elevated expressway
Note: *Equivalent of $1,100 million using pegged exchange rate at that time of 25 baht per $1 dollar
**Calculated using prorate O&M cost of THB 1,346 million for 87 .2 km under the operation of the concession
company (source: Bangkok Expressway and Metro Public Company Limited )

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Table 4. Traffic Volume of PPP Tolled Roads in Thailand.

Average
Initial traffic Current Average
Total traffic daily traffic
Project volume traffic growth rate
volume volume
(vpd.) volume (vpd.) (Per year)
(ADDT)
(1) Don 218,886,850 74,961 - 96,265 -
Muang (2009-2016)
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Tollway
(2) Second 3,772,781,620 469,836 120,023 714,554 8. 5%
Stage (1994-2016)
Expressway
(3) SOE - 33,747 33,747 33,747 -

COMPARING LCC OF PUBLIC AND PPP TOLLED ROADS

From the data presented in Table 1 to Table 4 and with Equations (1) to (3), LCC of public
and PPP tolled roads can be estimated. The results are presented as shown in Table 5.

Table 5. Comparison of Construction and O&M Costs of Public and PPP Tolled Roads in
Thailand (Unit in Million Thai Baht).
Average annual
Life cycle cost Construction cost O&M cost
Project per lane-km per lane-km per lane-km
(in present value) (in present value) (in present
value)
Public tolled roads
1) M9 81.86 57.38 1.36
2) Burapha Withi 239.72 134.42 5.85
Expressway
PPP tolled roads
1) Don Muang Tollway 357.49 263.99 4.25
2) Second Stage 308.37 249.26 2.57
Expressway
3) SOE 243.54 240.97 2.57

Based on the results shown in Table 5, M9, an asphaltic pavement public tolled road
appeared to have lowest construction and operation and maintenance costs . When choosing
similar type of road (i.e., precast concrete box girder bridge), public tolled road (Burapha Withi
Expressway) cost less for the construction than did the private tolled roads. However, average
annual operation and maintenance cost of public tolled road (Burapha Withi Expressway) is
more than double of Second Stage Expressway and SOE, both operated by the same Project
Company. Therefore, based on our observation from these results, construction cost and
operation and maintenance (O&M) cost tend to show negative correlation.

CONCLUSION
In this paper, we have presented computational model for computing life cycle cost between
public and private projects whose cash costs occurred in different time period so as to compare

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its life cycle cost correctly. Data from two public tolled roads and three PPP tolled roads are
collected and then their LCCs are computed, as described in the previous section. Based on the
results obtained, PPP tolled roads were built with higher construction costs; however, their
operation and maintenance (O&M) costs appeared to much less than the O&M costs of public
tolled road (Burapha Withi Expressway). Interestingly, this may be, to some extent, implied that
higher construction cost could help lower operating cost in the long -run, and the integrated
project delivery (construction and operation by the same entity) may essentially help increase
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cost efficiency measured in terms of life cycle costs. We humbly acknowledge that more data
collection from other transport infrastructure projects is needed to produce more reliable and
conclusive results regarding cost efficiency of PPP arrangements .

ACKNOWLEDGMENTS
This research paper is financially supported by Grants for Development of New Faculty
Staff, Ratchadaphiseksomphot Endowment Fund, Chulalongkorn University.

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