Transport Policy xxx (xxxx) xxx–xxx

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Transport Policy
journal homepage: www.elsevier.com/locate/tranpol

The effect of critical success factors on project success in Public-Private

Partnership projects: A case study of highway projects in Iran
Ali Akbari Ahmadabadi, Gholamreza Heravi∗
School of Civil Engineering, College of Engineering, University of Tehran, 16 Azar Ave., P.O. Box: 11155-4563, Tehran, Iran

A R T I C LE I N FO A B S T R A C T

Keywords: Public-Private Partnership (PPP) has been promoted as an alternative procurement method to provide public
Public-private partnership (PPP) services. In recent years, several studies have been carried out in order to identify and assess the critical success
Success criteria factors (CSFs) of PPP projects. However, the interrelation between success criteria (SC) and CSFs in PPP projects
Critical success factors has not received attention from researchers. To fill this gap, this paper intended to evaluate the effects of CSFs on
Partial least square (PLS)
the success of PPP projects using PLS-SEM. To this end, SC were monitored throughout construction, operation,
Highways projects
Developing countries
and final transfer stages, whereas CSFs were taken into account during the procurement stage of the PPP project.
Then, based on an opinion survey in Iran, the effects of CSFs on the success of PPP projects were evaluated based
on the developed PLS-SEM model. Moreover, in order to validate the proposed model, two national highway
projects in Iran were studied in detail. The results confirmed the effect of CSF on project success and showed that
private sector capability has a direct effect on project success during the construction period and government
capability is very effective during the project operation stage. In addition, investigating the case studies with
respect to the introduced model indicated that a transparent bidding process, risk allocation, and good part-
nering are among the CSFs in PPP projects in developing countries.

1. Introduction
Public Private Partnership (PPP) has been promoted as an alter-
native procurement method to provide public services in many coun-
tries over the past few decades (Abdel Aziz, 2007; Liu et al., 2014). PPP
schemes generally refer to the relationship formed between the public
and private sectors, with different levels of responsibilities, to deliver
public services (PPIAF, 2014; Chan et al., 2010; Yun et al., 2015).
Different types of PPPs are practiced increasingly in developing coun-
tries for infrastructure development (Ng et al., 2012; Takim et al.,
2009). Over the past 25 years, more than 6000 PPP projects have
reached financial closure in developing countries. Transfer projects are
the most common type of PPP (Guasch et al., 2014).
Despite the many benefits of PPP, these projects have been asso-
ciated with numerous problems and many of them failed or required
renegotiation (Guasch et al., 2014; Bitran and Villena, 2012). Nu-
merous studies have been carried out to investigate the reasons for the
failure of such projects. In these studies, reasons such as insufficient
primary studies (Meunier and Quinet, 2010), inaccurate prediction of
project-investment performance (Jeerangsuwan et al., 2013), changes
in regulations (Fayard et al., 2005), regulatory shortcomings
(Willoughby, 2013; Galilea and Medda, 2010), and an inappropriate
and complex financing structure (Heravi and Hajihosseini, 2012) have
been enumerated. Several research and case studies, also have been
conducted to investigate the factors contributing to the success of PPP
projects as well as the stakeholders' objectives, among them are Ng
et al. (2012); Zhang (2005); Qiao et al. (2001); Jefferies et al. (2002);
Yuan et al. (2013). A large number of such studies categorized and
assessed critical success factors (CSFs) in different countries, such as UK
(Li et al., 2005), China (Chan et al., 2010; Tang et al., 2014), Hong Kong
(Ng et al., 2012), and Lithuania (Gudienė et al., 2014). Considering the
uniqueness of PPP projects, it is likely that their success criteria (SC)
will differ from those of traditionally procured projects (Skietrys et al.,
2008; Osei-Kyei et al., 2017). Several studies have employed structural
equation modelling (SEM) to examine project success. For instance, Ng
et al. (2010) used a SEM model to study the effect of feasibility study on
the success of PPP projects. Tabish and Jha (2012) studied the influence
of human and managerial factors on the success of PPP projects. Most of
the SEM models developed in the aforementioned studies had some
issues with validity as the result of sample size. In this study second
generation of SEM model is developed to tackle this issue. Moreover,
Osei-Kyei et al. (2017) expressed that investigating the relationship
between CSF and SC has not been considered enough yet and can sig-
nificantly help enrich the literature on this subject matter.

∗
Corresponding author.
E-mail addresses: ali.akbari@ut.ac.ir (A.A. Ahmadabadi), heravi@ut.ac.ir (G. Heravi).

https://doi.org/10.1016/j.tranpol.2018.07.004

0967-070X/ © 2018 Elsevier Ltd. All rights reserved.

Received 9 July 2017; Received in revised form 12 July 2018; Accepted 13 July 2018

Please cite this article as: Ahmadabadi, A.A., Transport Policy (2018), https://doi.org/10.1016/j.tranpol.2018.07.004
A.A. Ahmadabadi, G. Heravi
By identifying and providing the factors affecting success, govern-
ments in developing countries attempt to increase the probability of
success in these projects, hoping to popularize PPP in their countries.
But, most PPP studies are related to developed countries or countries
with a broad background and experience such as China, India, and Latin
America. For example, more than 70 papers on PPP have been pub-
lished in China in the past 10 years (Zhang et al., 2016). Although
studies in developed country have contributed to the progress of lit-
erature in recent decades, researchers have emphasized that developing
country should considered individually because of unstable economic
conditions and immature PPP markets (Ameyaw and Chan, 2016).
Performing PPP case studies in fast growing economic regions with
little PPP experience can provide valuable implications for future de-
velopment of PPP projects.
There are several studies in Middle East focusing on PPP success and
CSFs. The findings indicate that there is a difference in significance
between some CSFs and similar projects carried out in developed
countries. For instance, Almarri and Boussabaine (2017) investigated
the influence of PPP's CSFs on value for money viability analysis. They
claimed that government guarantees, macroeconomic conditions,
shared authority between the public and private sectors, social support,
and transparent procurement process contributed positively to value for
money viability analysis. Almarri (2017) conducted a separate research
to investigate the attractive factors for adopting public–private part-
nerships. They compared their findings in the UAE with UK and found
several divergences in results. For instance, technology transfer and
capacity building are evaluated as being more important in UAE com-
pared to UK. Jamali (2004) studied PPP in Lebanon and claimed that
successful PPP projects should begin with comprehensive feasibility
study and economic evaluation especially in developing countries.
Heravi and Hajihosseini (2012)claimed that appropriate risk allocation
and financing structure are critical for success of PPP projects in de-
veloping countries. Ghorbani et al. (2014) assessed risks in PPP projects
in Iran and claimed that assigning inadequate capital to projects causes
difficulties and risks inherent in the construction phase.
With a focus on the experiences of Iran, the present research has
attempted to propose a model to help advancing such projects in other
developing countries in Asia, Africa, and Middle East. In this regard, the
purpose of this research is to evaluate the effects of CSFs on PPP project
success based on literature review, factor analysis (FA) and partial least
squares (PLS) (PLS-SEM), as second SEM generation. This compound
structure comprised of CSFs, monitored during the procurement stage,
and SC, studied throughout the construction, operation, and final
transfer stages of PPP projects. The results of this research refer to CSFs'
effects on the success of PPP highway projects. Finally, through ex-
amining two case studies of PPP highway projects (Tehran-Chalus and
Khoramabad-Pol-e Zal Highways), using the proposed model, the ex-
periences of Iran in PPP implementation in the highway sector will be
reviewed.
2. Literature review
Aksorn and Hadikusumo (2008) have noted that categorizing CSFs
is essential because CSFs can reveal a wide variety of issues. Li et al.
(2005) claimed that if we study CSFs in the procurement stage, we can
improve the success chance of PPP projects. In recent years, several
studies have been carried out in order to identify and evaluate CSFs in
PPP projects; e.g., Hardcastle et al. (2005); Liu et al. (2014); Yang et al.
(2009); Chan et al. (2010). To determine the success of PPP projects, SC
for PPP projects act as dependent variables, whereas the CSFs for PPP
projects become independent variables. The review of literature shows
that studies related to the purpose of this research can be classified into
the following categories:
• Identification, classification and evaluation of the Success
Factors: Qiao et al. (2001) identified success factors (SFs) for BOT
2
Transport Policy xxx (xxxx) xxx–xxx
projects in China. They identified eight CSFs including appropriate
project identification; stable political and economic situation; at-
tractive financial package; acceptable toll/tariff levels; reasonable
risk allocation; selection of suitable subcontractors; management
control; and technology transfer. Li et al. (2005) showed that the
CSFs during the project procurement stage are very important in the
overall success of PPP projects. They studied the CSFs of PPP pro-
jects in Britain and added commitment/responsibility of public/
private sectors, favorable legal framework, sound economic policy,
and well-organized public agency to identify CSFs by Qiao et al.
(2001). Chan et al. (2010) adapted Li et al. (2005) questionnaire to
carry out a similar study in Hong Kong and China and compared the
results with Li et al. (2005). They identified eighteen CSFs and
classified them into five groups: stable macroeconomic environ-
ment, share responsibility between public and private sector,
transparent and efficient procurement process, stable political and
social environment, and judicious government control. Tabish and
Jha (2012) studied the influence of human and managerial factors
on the success of PPP projects and showed that these factors play an
important role in the PPP projects success. Ng et al. (2012) extracted
the CSFs influencing the success of PPP at feasibility stage. Their
study was carried out through investigating perspectives of public
sector, private sector and users. In other study, they examined the
effects of CSF in the feasibility study stage on stakeholder satisfac-
tion using covariance-based (CB) (CB-SEM) and confirmed their
assumptions (Ng et al., 2010). Tang et al. (2014) identified 15 CSFs
and assessed them using FA and sample visualization method. They
claim that clarity and understanding of CSFs have significant effect
on the success of PPP projects.
• Identification, classification and evaluation of the Success
Criteria: Formerly, project success had been measured in terms of
total time, cost, and quality, referred to as the “triangle iron”
(Atkinson, 1999). In recent years, researchers added criteria such as
stakeholder satisfaction, environment impact, efficient use of re-
sources, and many others to the three main criteria based on their
research domain (Ahadzie et al., 2008; Ogunlana, 2010; Osei-Kyei
et al., 2017). The SC in PPPs is different from that in traditional
contracts due to the long-term nature of these projects, the im-
portance of the operation stage, and the presence of a private sector
in infrastructure projects. Even though several studies have been
conducted on PPP success, for instance Akintoye et al. (2003); Yuan
et al (2009); Chan et al. (2002) and Cheng et al., 2013). The iden-
tification and assessment of the SC has received little attention
(Osei-Kyei et al., 2017). Yuan et al. (2009) identified fifteen dif-
ferent performance objectives based on different participants' per-
spectives and investigated the importance of their opinions. Yuan
et al. (2011) categorized the identified SC in five general groups:
physical characteristics of the project, financial and marketing, in-
novation and learning, stakeholders, and process. Ng et al. (2010)
studied the SC of PPP projects and found a connection between six
out of thirteen identified criteria regarding stakeholders' satisfac-
tion. Yuan et al. (2009) suggested a complete model for performance
management in PPP projects. Liyanage and Villalba-Romero (2015)
identified 11 key performance indicators of PPP highway projects.
They evaluated the criteria from the perspective of stakeholders,
contract management, and project management. Osei-Kyei et al.
(2017) evaluated SC in PPP projects. They showed that effective risk
management, meeting output specifications, reliable and quality
service operations, adherence to time, satisfying the need for public
facility/service, profitability, and long-term relationship and part-
nership are the main SC in PPP. They claimed that the investigation
of the relationship between CSF and SC had not been conducted yet
and can greatly help enrich the literature on this field.
A.A. Ahmadabadi, G. Heravi Transport Policy xxx (xxxx) xxx–xxx

3. Research method
Javed (2013)
Lam and

To identify success factors and evaluate their importance, opinion

surveys and statistical methods are the most common methodologies (Li

*
et al., 2005; Tang et al., 2014; Yun et al., 2015). Gorsuch (1990) pro-
et al. (2017)

posed Confirmatory factor analysis (CFA) as a powerful tool for explicit

Osei-Kyei

hypothesis testing of factor analytic problems. It consists of observed

variables and latent constructs and has the capability to determine how
*

*
*

*
*

*
the observed variables measure the latent constructs and model the
relations among them. Molenaar et al. (2000) claimed that SEM/CFA,
as a statistical method, can properly show the relationship between
Villalba-Romero
Liyanage and

research variables. There are two generations of SEM: CB-SEM and PLS-
SEM (Liu et al., 2016, 2017; Hair et al., 2011). Many studies on con-
(2015)

struction management have used CB-SEM; e.g., Liu et al. (2016, 2017),
Tabish and Jha (2012), Ozorhon, et al. (2007; 2008; 2010), Ng et al.
*

(2010), Molwus et al. (2017) and Eybpoosh et al. (2011). In this study,
Yuan et al.

in order to examine the effect of success in different stages on each

(2011)

other and the effect of CSFs on SC, PLS-SEM and path analysis techni-
ques have been utilized.
*

*
*
*

One of the challenging issues in these studies is collecting enough

Cheng et al.

data to validate the model. One of the serious limitations in the use of
(2013)

CB-SEM is the model's sensitivity to data normality as well as the high

number of input data. The acceptable criterion in CB-SEM is 15 cases
*

per measured variables or 10 cases per parameter, with the minimum

Ozorhon et al.

critical ratio of 5:1 (Hair et al., 2012). In most of the models proposed in
various studies, the number of required data will be 150–200 which
(2010)

cannot be achieved in many cases because of the limitations faced by

the researchers (Liu et al., 2016, 2017). Hair et al. (2012) asserted that
*

*
*

PLS-SEM models have reduced the effect of data non-normality and

Molenaar (1996)

considerably decreased the number of data required for model valida-

tion with respect to the dimensions of the proposed model. Field (2009)
Songer and

believes that the more the variables in the CFA model, the more the
inputs needed to validate those models. In order to increase validity, the
*

present study has limited the number of variables in the structure

through negotiating with a panel of specialists.
Chan et al.

The importance of a factor may be conceived as the combination of

(2002)

its impact and its certainty with the latter more relevant to the condi-
*

tions (or the environment) of the country. If all respondents are situated
within similar environmental conditions the impact of the country
The success criteria and their classification with regard to project stages from literature.
Li et al.

conditions on their evaluation is mostly removed through utilizing

(2005)

variance analysis. In this way the results of the analysis could be useful
*

for other countries, especially developing ones.

Yuan et al.

The method of this research is comprised of the following five

(2009)

stages:
*

*
*
*

• Identification of SC and CSFs by literature review and interviews

Private-Public

Public-Private

Public-Private
Public-Private

with experts' opinion survey;

Public-User

• Collection of data that demonstrate the relative importance of SC

Interested

Private

Private
Parties

and CSFs, by conducting opinion survey;

Public

Public

Public

Public

• Development of the PLS-SEM model for CSFs-SC relationships;

• Evaluation of the application and validation of the model by ex-
SC6- Operation cost optimization

SC8- Achieve anticipated private

SC3- Reducing construction cost

SC11- Final project quality after

SC4- On-time or earlier project

amining two case of PPP highway projects in Iran; and some re-
public sector budget restraint

increasing future cooperation

SC2- Stakeholder satisfaction
SC9- Gaining experience and

SC10- Improving technology

SC1- Solving the problem of

level or gaining technology

while achieving acceptable

commendation for practice are provided

SC7- Better service quality
SC5- Reaching qualitative

3.1. Identification of the SC

transfer to public
Success Criteria

In modern project management, project success refers to “success-

completion

standards

fully achieved goals related to cost, time, quality and other criteria”
transfer
quality

chance
profit

(Heravi and Ilbeigi, 2012; Yuan et al., 2011). Therefore goals must first
be documented for PPP projects. In this regard, success of a PPP project
Construction stage

is defined as reaching the predetermined objectives set by project sta-

Operation stage

keholders. Regarding the life cycle of a PPP project, the SC may be

Transfer stage
Project Stages

defined and classified throughout the stages of construction, operation,

and final transfer. Although most of the risks are transferred to the
Table 1

private sector in the construction stage, lots of public sector's objectives

such as private sector participation in project finance, reduction in

3
A.A. Ahmadabadi, G. Heravi Transport Policy xxx (xxxx) xxx–xxx

construction time and cost are pursued at this stage, too. In the op-
eration stage, users seek better service quality and therefore, public
sector pays a lot of attention to the operation quality. The most im-
portant objective of private sector is to make profit, which is pursued by
reducing operation costs and guaranteeing anticipated income through
operation of facility. In the transfer stage, most of the objectives are
pursued by the government. Among these objectives are acceptable
quality level of facility and proper technology transfer.
Table 1 depicts the identified SC, their classification with regard to
the project stages, their interested parties, and their references.
3.2. Identification of the CSFs
Zhang (2005) defined CSFs as a series of factors that “combine to
determine the success or failure of an infrastructure project in terms of
its objectives.” In this regard, the CSFs are considered during the pro-
curement stage of the PPP project life cycle. While implementing the
SEM-PLS using a wide range of variables will result in a poor model fit.
Therefore, to reach an acceptable model fit, the number of variables
should be kept limited (Tabish and Jha, 2012). On the basis of a
comprehensive literature review, ten CSFs which are related to the
procurement stage of PPP projects are identified (Table 2). Moreover, In
order to provide experts with a better and deeper understanding of CSFs
in the opinion survey, the success factors associated with each CSF are
introduced in Table 2.
4. Development of the PLS-SEM model for CSFs-SC relationships
4.1. Collection of data
To validate the identified SC and CSFs, the initial version of the
questionnaire was modified and finalized by a panel of experts in-
cluding the following: (1) The CEO of Saveh-Hamadan project company
with 33 years of work experience; (2) A board member of Ahwaz-
Bandar Imam highway project company with 30 years of work ex-
perience; (3) A client's representative with 20 years of work experience;
and (4) The assistant director of construction and development of
highways who has acted as the representative of government in several
projects with 35 years of work experience.
Two parts of the questionnaire dealt with the SC and the CSFs of
PPP projects. In order to identify the relative significance of SC and
CSFs, the five-point Likert scale (from 1, representing a very low level of
importance, to 5, representing a very high level of importance) was
adopted. Statistical population included all the highway PPP projects in

Table 2
The critical success factors and their subordinate success factors from literature.
*Sources have not necessarily used completely similar phrases to the mentioned phrases in the Table.
Critical Success Factor Success Factor References*

CSF1- Favorable legal and political support 1; 3;4; 6;8; 10; 12; 13; 15; 17
∙ There is political support for the PPP projects
∙ Project is not politically sensitive
∙ Predictable and reasonable legal framework
∙ Stable political system
CSF2- Stable macro-economic 1; 3;6; 8;10; 12; 13; 18
∙ Abilities to deal with fluctuations in interest/exchange rates
∙ Predictable currency exchange risk
∙ Favorable economic system
CSF3- Available finance market 3; 4;7; 8;9; 10; 12; 15
∙ Available Long-term debt financing which minimizes refinancing risk
∙ Adequate local financial market
CSF4- Favorable social support 1; 5;6; 8;10; 11; 13; 16; 18
∙ Project is environmentally sustainable (low environmental impact)
∙ The community is understanding and supportive(the project is in public interest)
CSF5- Economic viability 1; 2;3; 4;5; 6;7; 8;9; 10; 12; 13
∙ Appropriate toll/tariff levels and suitable adjustment formula
∙ Long-term cash flow that is attractive to lender
∙ Sufficient profitability of the project to attract investors
∙ Limited competition from other projects
CSF6- Reliable contractual arrangement 1; 2;3; 5;6; 7;8; 10; 12; 13; 14; 15
∙ Appropriate risk allocation
∙ Flexibility of contract
∙ Concession\ loan agreement
∙ Competitive bidding process
CSF7- Equipment/labor procurement 1; 3;4; 5;6; 8;12; 13
∙ Ability of expert labor procurement for private sector
∙ Ability of equipment procurement in site
CSF8- Government guarantee and experience 3; 4;7; 10; 13; 15
∙ Availability of Government experience in packaging similar PPP projects
∙ Matching government's strategic and long-term objectives
∙ Guarantees/support/comfort letters and Support from the government
CSF9- Strong and good partnering 7; 8;9; 10; 11; 12; 15
∙ Authority can be shared between the public and private sectors
∙ Good relationship with host government authorities
∙ Effective public organization structure
CSF10- Reliable private consortium 8; 10; 13
∙ Supportiveness and commitment of staff to the project
∙ Adapting appropriate risk management framework
∙ Ability to apply risk management properly
∙ Leading role by a key enterprise

1: Ashley et al. (1998); 2: FIDIC (2001); 3: Qiao et al. (2001); 4: Jefferies et al. (2002); 5: HM Treasury (2004); 6: Hardcastle et al. (2005); 7: Zhang (2005); 8: Li et al.
(2005); 9: Corbett and Smith (2006); 10: Heravi and Alkass (2008); 11: Yang et al. (2009); 12: Chan et al. (2010); 13: Ng et al. (2012); 14: Gordon et al. (2013); 15:
Yun et al. (2015); 16: Dowling and Kent (2015); 17: Carpintero and Siemiatycki (2016); 18: Chen et. al (2017).

4
A.A. Ahmadabadi, G. Heravi
Iran.
In order to have a representative sample, a list of on-going and
completed projects under the supervision of Department of Building
and Developing Highways (DBDH) was prepared and all the public and
private sectors that had participated in at least one PPP/BOT highway
project and have more than 7 years of work experience consider as a
frame sample.
In this research convenience and snowball sampling as a non-
probability sampling method is used. In this technique, instead of
random sample selection, respondents who are willing to participate in
the study are selected (Liu et al., 2016, 2017; Patton, 2001). Snowball
sampling is preferred when it is difficult to get response from sample
elements selected at random (Sekaran and Bougie, 2016). Sambasivan
and Soon (2007) used snowball sampling to study cause and effect of
construction industry in Malaysia. Müller and Turner (2007) used si-
milar sampling method to study influence of project managers on
project success. Liu et al. (2016, 2017) used this sampling method to
study risk paths in construction projects.
An interview was conducted for every questionnaire. The researcher
discussed the project objectives clearly during the interview and an-
swered any questions concerning the questionnaire. Heravi and Jafari
(2014) claimed that using structured interview can improve reliability.
One of the challenging issues in these studies is collecting enough
data to validate the model. One of the serious limitations in the use of
CB-SEM is the model's sensitivity to data normality as well as the high
number of input data. Hair et al. (2011) asserted that PLS-SEM models
have reduced the effect of data non-normality and considerably de-
creased the number of data required for model validation with respect
to the dimensions of the proposed model. By a “rule of thumb”, the
required number of samples is estimated 10 times the maximum value
of the following two criteria (Hair et al., 2011; Liu et al., 2016, 2017):
• Maximum number of relationships between a latent construct and
the observant variable, and
• Maximum number of relationships between a latent construct and
other latent constructs.
Based on the presented assumptions including the relationship be-
tween the observant variable and the latent construct, the proposed
model for the effect of CSFs on PPP project success requires a sample
size of 50. Although “10times” rule is the most common method to
calculating minimum sample size (Kock and Hadaya, 2018), Goodhue
et al. (2012) claimed this rule is an inaccurate method. Moreover, Kock
and Hadaya (2018) studied PLS-SEM minimum sample size and con-
firmed Goodhue et al. (2012) results.
Fifty one interview was conducted in this manner. During 51 in-
terviews, 3 respondents changed their mind and didn't complete their
questionnaires which made response rate 94%. 48 complete ques-
tionnaires had been used to develop PLS-SEM model. Ozorhon stated
that taking into account the complexities of CSF model and the quali-
tative nature of the models effect of limited input data in model result is
negligible (Ozorhon et al., 2010). Several studies have adopted SEM
method with a smaller than required sample size in order to validate
their own structures, among them are Ozorhon et al. (2007, 2008;
2010); Yuan et al. (2011).
Table 3 shows a brief summary of respondents' work experiences.
4.2. Model validation
On the basis of CFA, to confirm the validity and reliability of the
proposed model, factor loading values should be higher than 0.4
(Matsunaga, 2015; Hulland, 1999), composite reliability (CR) values
should be higher than 0.7, Cronbach's alpha acceptable threshold is 0.7
(Nunally, 1978) and average variance extracted (AVE) values should be
greater than 0.5 (Hair et al., 2011; Liu et al., 2016, 2017). The square
root of the AVE of each latent construct should exceed the correlation of
5
Transport Policy xxx (xxxx) xxx–xxx
Table 3
The brief summary of respondents' work experiences.
Field of Experience Work Experience Frequency %
Construction Industry 7–10 years 17 35
10–15 years 11 23
Over than 15 years 20 42
PPP project Less than3 years 16 33
3–5 years 7 15
5–10 years 14 29
Over than 10 years 11 23
Profession sector public 25 52
private 23 48
the inter construct, and a measurement items' loading on its respective
grouping should exceed the cross loading (Fornell and Larcker 1981;
Hair et al., 2011; Liu et al., 2016, 2017). As shown in Tables 4 and 5, all
requirements of the validity and reliability of the proposed model are
satisfied.
In the last step of model development, path coefficient values were
calculated using the bootstrapping method to verify the assumptions of
the effects of the CSFs on project success. Similar to the suggestion by
Hair et al. (2011), in this research, 5000 bootstrap samples were taken
into account, and the number of samples was considered 48, equal to
the number of responses. In order to confirm the assumptions, as hy-
pothesis paths in the model, t-values of the paths were calculated. Si-
milar to Liu et al. (2016, 2017), the acceptable t-values for p < 0.01,
0.05, and 0.10 were considered to be 2.58, 1.96, and 1.65, respectively.
Finally, seven hypothesis paths were confirmed (Fig. 1).
In order to evaluate structural model validation, coefficients of de-
termination (R2) and effect size (f2) values are calculated. R2 measures
the relationship between an explained variance and its total variance.
This coefficient is a measure of the predictive accuracy of the model and
is calculated as the squared correlation between the actual and the
predicted values of a specific construct (Hair et al., 2016). Acceptable
R2 values depend on the model complexity and the research discipline.
The values should be sufficiently high for the model to have a minimum
level of explanatory power. Chin (1998) claimed that values of ap-
proximately 0.670, 0.333 and 0.190 are considered substantial, mod-
erate and weak respectively. High R2 values also indicate that the va-
lues of the construct can be well predicted via the PLS path model (Hair
et al., 2016).
In addition to evaluating the R2 values of all endogenous constructs,
f2 measures the change in the R2 value when a specified exogenous
construct is omitted from the model (Hair et al., 2016). Values of 0.020,
0.150 and 0.350 indicate the predictor variable's low, medium, or large
effect in the structural model, respectively (Cohen, 1988).
In general R2 and f2 values confirm structural model validation and
show that these structures can be used as tools to predict the project
success based on CSF conditions. R2 is 0.55 for the transfer stage. This
means that three structures (construction stage, operation stage and
project resiliency) explain 55% of the variance in the transfer stage. The
f2 value for them confirms their effect on the transfer stage and shows
that operation stage explains a major part of the transfer stage var-
iances. In other words, success during the transfer stage highly depends
on the success during the operation stage which is more effective than
any other CSFs. In practice, project stakeholders should focus more on
the success of the operation stage than on the construction success or
private capability so as to obtain success during the transfer stage. As
shown in Fig. 1, the proposed model leads to the following results:
∙ “Private sector capability” has a great influence on the success of the
construction stage, PC = 0.433. All of the objectives during the
construction stage, particularly “solving the problem of public sector
budget restraint”, are highly influenced by the capability of the
private sector. The great importance of “private sector capability”
A.A. Ahmadabadi, G. Heravi Transport Policy xxx (xxxx) xxx–xxx

Table 4
CSFs-SC relationships Model Evaluation.
Latent construct Observant variable Factor loading AVE CR Cronbach's alpha

Construction stage 0.693 0.871 0.779

SC1- Solving the problem of public sector budget restraint 0.78
SC3- Reducing construction cost while achieving acceptable quality 0.088
SC4- On-time or earlier project completion 0.83
Operation stage 0.741 0.920 0.883
SC5- Reaching qualitative standards 0.891
SC6- Operation cost optimization 0.89
SC7- Better service quality 0.855
SC8- Achieve anticipated private profit 0.806
Transfer stage 0.604 0.859 0.787
SC2- Stakeholder satisfaction 0.754
SC9- Gaining experience and increasing future cooperation chance 0.743
SC10- Improving technology level or gaining technology transfer 0.85
SC11- Final project quality after transfer to public 0.755
Government capability 0.680 0.894 0.842
CSF1- Favorable legal and political support 0.811
CSF4- Favorable social support 0.832
CSF8- Government guarantee and experience 0.791
CSF9- Strong and good partnering 0.862
Private sector capability 0.712 0.881 0.798
CSF7- Equipment/labor procurement 0.897
CSF10- Reliable private consortium 0.824
CSF3- Available finance market 0.807
Project resiliency 0.626 0.833 0.702
CSF2- Stable macro-economic 0.746
CSF5- Economic viability 0.855
CSF6- Reliable contractual arrangement 0.767

Table 5
Correlation matrix and the square root of each latent construct.
Construction stage Government capability Operation stage Private sector capability Project resiliency Transfer stage

a
Construction stage 0.832
Government capability 0.314 0.824a
Operation stage 0.251 0.438 0.861a
Private sector capability 0.581 0.704 0.145 0.844a
Project resiliency 0.579 0.590 0.250 0.785 0.791a
Transfer stage 0.535 0.410 0.552 0.437 0.584 0.777a

a
Square root of AVE for each latent construct.

compared to other factors shows that most of the risks of the con-
struction stage are expected to be transferred to the private sector.
∙ “Project resiliency” has influence on the success of the construction
stage, PC = 0.353. This assumptions indicates the effect of initial
studies and appropriate risk allocation on project success. As ex-
pected, “economic viability” will affect project success. “Project
resiliency” has the greatest influence on the success of the transfer
stage, PC = 0.378. The public sector has to be assured that a com-
plete transfer will take place with respect to contract agreement and
quality requirements. Hence, the public sector experience and con-
tractual arrangements are of particular importance.
∙ “Government capability” has a significant influence on the success
of the operation stage, PC = 0.711. Political and economic changes
play an important role in this stage due to its long duration.
“Favorable legal and political support (CSF1)” and “favorable social
support (CSF4)” are highly sensitive to the country's conditions.
5. Case studies
In Iran, a developing country with a broad geographic area, road
network expansion is very important. Because of the huge amount of
funds needed for expansion, the government attracts private investment
in construction and maintenance of road networks through PPP
agreements (Heravi and Hajihosseini, 2012). Inappropriate legislations
and lack of a transparent framework for contracts were the main ob-
stacles to private sector participation in developing highways in Iran. In
2000, The Ministry of roads and urban development in Iran established
the DBDH to improve the performance of highway projects in con-
struction and operation stages. The DBDH used BOT contract frame-
work to develop highway projects and has completed 10 PPP highway
projects since 2000 and is currently working on 15 PPP highway pro-
jects that will be complete by 2018. Although the DBDH is successful in
using PPP, some difficulties have arisen in fulfilling these contracts,
including non-competitive tenders, unavailable financial markets, and
lack of international financiers. Most of the contracts have been signed
through negotiation processes, and all of the financiers have been local
banks and corporations.
In order to select an appropriate sample from among the highway
projects implemented through PPP in Iran, two national projects are
chosen. The Chalus-Tehran highway is one of the largest PPP projects in
Iran which is at the end of its construction stage. This project faced
many challenges in the construction stage with several renegotiations.
Another selected projects is the Khoramabad-Pol-e Zal project. This
project is one of the most successful PPP projects in Iran which was able
to finish the construction project better than the predictions, but faced
some problems during the operation stage.
The CSFs of the two aforementioned projects are evaluated through
an in-depth review of projects documents and a semi-structured inter-
view with project managers. The CSFs is evaluated using three terms of
improper, fair and proper conditions.

6
A.A. Ahmadabadi, G. Heravi
Fig. 1. Model of CSFs' effects on the success of PPP highway projects.
5.1. Tehran-Chalus highway
The Tehran-Chalus project has a great political and economic im-
pact on the Caspian region due to its strategic location. The existing
route traffic congestion, high accident rate, low transport efficiency,
and fuel saving are among the major reasons for the establishment of a
new route through PPP projects in Iran. This project has a length of
123 km with 97 bridges and 145 tunnels. The ultimate value of this
project will be more than US $ 1 billion.
In 1996, the contract between DBDH and Bonyad Mostaza'fan was
signed for a 22 year concession period, including 7 years of construc-
tion and 15 years of operation. The contract details of this project and
risk allocation are mentioned in Heravi and Hajihosseini (2012). This
project is currently finishing with above 10 years of delay, and some
parts of 2 phases of this project were operated in recent years (this
project is comprised of 4 phases). This project faced numerous claims
and problems and had several renegotiations. From the strategic per-
spective, this project failed in the construction stage.
5.2. Khoramabad-Pol-e Zal highway
The construction of Khoramabad-Pol-e Zal highway had a sig-
nificant impact on the operation of Bandar Imam as the largest Iranian
harbor in the North of Persian Gulf. Khoramabad-Pol-e Zal's existing
two-lane road is about 165 km long. By the construction of a new
highway, the distance between Tehran and Bandar Imam will be re-
duced by 60 km and the travel time will be reduced by about 2.5 h for
light vehicles and 5 h for heavy vehicles. This project includes a total of
14 major bridges and 25 km of tunnels. Project construction began in
January 2006 based on a BOT contract. The contract value was $ 1.5
billion, 50% of which was funded by Shaloode Company as a private
sector consortium. Private investment and its profit will be paid back in
18 years of operation period through toll collection.
The construction of Khoramabad-Pol-e Zal freeway project started
from December 2005, finished in October 2010, and has been in op-
eration since November 2010. The Khoramabad-Pol-e Zal freeway
achieved great success during the construction stage. This highway was
7
Transport Policy xxx (xxxx) xxx–xxx
successfully constructed 2 months ahead of schedule and is a prominent
PPP transportation project for achieving an acceptable quality without
increasing project cost.
After the success in the construction stage, this project has not
reached the predicted income in the operation stage. Due to the high
predicted toll price and reduced governmental subsidies in the energy
and, therefore, the increase in the price of gasoline and reduction of
demands across the country, the highway has not reached the antici-
pated demand. Initial studies anticipated a daily traffic of 11500 ve-
hicles, while in the first year of operation, it was near 7000. Also, the
lack of cooperation of the government in paying promised subsidies
resulted in the private sector's lack of achieving the expected profit. As
a result of a private claim the contract period has recently increased
from 18 to 25 years, so that the private sector can obtain the expected
earnings. In general, the Khoramabad-Pol-e Zal project is a considered
as a successful project during the construction stage, but it was not
successful in the operation stage.
5.3. Recommendations for practice
World Economic Forum and the Boston Consulting Group (2013)
provided a detailed checklist that includes an overview of the critical
success factors that should be in place to make PPPs successful. In
Table 6, the CSFs of Tehran-Chalus and Khoramabad-Pol-e Zal projects
are evaluated based on the aforementioned checklist. Data have been
obtained from the in-depth review of documents and interviews with a
panel of experts including board members and assistant directors of the
construction and development and several key SPV managers of the two
projects.
Based on model interpretations and experiences obtained from the
in-depth review of documents and interviews with PPP contract experts
in Iran, the following suggestions are made for the implementation of
these contracts in other developing countries:
• In the Tehran-Chalus project in Iran, the private sector was the
major contractor, but had limited experience with PPP contracts and
project financing (CSF10 # improper conditions). In 2013, DBHO
A.A. Ahmadabadi, G. Heravi Transport Policy xxx (xxxx) xxx–xxx

Table 6
Evaluation of CSFs in Tehran-Chalus and Khoramabad-Pol-e Zal projects with respect to.
CSF groupa Tehran-Chalus highway Khoramabad-Pol-e Zal highway

Rigorous project CSF9- Strong and good partnering: Most project tasks require the
preparation process approval of the Ministry of Transportation, entailing disadvantages such
as a decrease in private sector accountability.
CSF1- Favorable legal and political support: Considering the political
aspect of connecting the capital to the northern cities in Iran it benefited
from high political support
CSF3- Available finance market: One of the constraints of this project
was project financing
Bankable feasibility study CSF6- Reliable contractual arrangement: The signed contract was not
presented based on accurate demand studies, the predicted financing
was very complicated, and studies on environmental issues were not
sufficient.
CSF5- Economic viability: In this project, studies on economic feasibility
and demand were not carried out properly. Nevertheless, due to the
increased traffic of this route, the demand will not be lower than the
predictions.
Balanced risk allocation Financing structure has not been defined clearly in the contract. Also,
and regulation risk allocations for land acquisition have remained unclear in the
contract.
Conductive enabling CSF8- Government guarantee and experience: Due to the limited
environment government experiences with these projects and inappropriate
government structure for cooperation with the private sector, the
performance was not appropriate in providing guarantees and
experiences.
CSF10- Reliable private consortium: Bonyad Mostaza'fan won the
contract without biddings. Despite the company's activities in various
infrastructure projects, it was inexperienced in PPP contracts.
CSF7- Equipment/labor procurement: Bonyad Mostaza'fan is one of the
largest contractors in Iran with extensive access to facilities and
equipment.
CSF4- Favorable social support: Due to the high accident rate in the
present routes, the construction of this highway has received public
support.
CSF2- Stable macro-economic: In the study period of this project, Iran's
economic situation was very stable and none of the macro-economic
risks happened.
CSF9- Strong and good partnering: Due to the government's preference
for not paying fuel subsidies in the operation period, the relationship
between the government and the operator has faced a lot of challenges
CSF1- Favorable legal and political support: Despite its great effect on
economic development, this project was insufficiently supported in
most cases due to political disagreements in determining the accurate
route.
CSF3- Available finance market: In most cases, this project was funded
through bank loans as well as state budget without delays.
CSF6- Reliable contractual arrangement: The signed contract was
modified based on government experiences with similar projects and
uncertainties were mostly resolved.
CSF5- Economic viability: High demands were predicted for this
contract due to travel time reduction and economic growth. Studies on
demand and manufacturing costs were accurately carried out because of
the capability of the contractor
The public sector allocated pricing regime risk improperly in a way that
doesn't give the concessionaire an incentive to operate efficiently and
invest adequately.
No clause was included in the contract regarding the compensation for
loss or damage to the private sector due to fluctuations in the fuel price.
CSF8- Government guarantee and experience: Due to the limited
government experience with these projects and inappropriate
government structure for cooperation with the private sector, the
performance was not appropriate in providing guarantees and
experiences.
CSF10- Reliable private consortium: The contractor's experience in the
construction of infrastructure projects as well as cooperation in PPP
projects at the international level show its capability.
CSF7- Equipment/labor procurement: Shaloode Company, the
contractor of the project, is among the largest contractors in the country
CSF4- Favorable social support: Due to local residents' disagreements as
well as serious environmental damages, it did not receive public support
CSF2- Stable macro-economic: In the procurement stage of this project,
Iran's economic situation was very stable and none of the macro-
economic risks happened

a
World Economic Forum and the Boston Consulting Group (2013).

announced new rules for evaluating the capability of the private
sector. These rules greatly emphasized the private sector's invest-
ment potential in infrastructure projects. Designing a transparent
bidding process and selecting a capable private sector highly affect
the success of PPP contracts.
• In the Tehran-Chalus project, because of political issues, the public
sector rushed to sign a contract with a complex financing structure
and improper risk allocation (CSF6 # improper conditions). After
several failures, DBHO adopted a bidding process and improved the
PPP performance in Iran. Shaloode won the Khoramabad-Pol-e Zal
contract through competitive bidding. This project was very suc-
cessful during the construction stage. Selecting an appropriate pro-
ject with economic feasibility, designing a proper financing struc-
ture, and allocating risks based on capabilities of sectors have a
great impact on the success of the project, especially in the con-
struction stage.
• In the Khoramabad-Pol-e Zal project, limited government experi-
ence and inappropriate government structure caused several chal-
lenges which badly affected public and private partnering (CSF8 and
CSF9 # improper conditions). Based on the developed model, the
government guarantee and experience, as well as good partnership
are regarded as the major factors in achieving success in the op-
eration stage. The guarantees/support/comfort letters provided by
the government are highly effective in attracting investors and the
success of the project, especially in developing countries, due to
their unstable environmental conditions.
6. Discussion
“Private sector capability” has a great influence on the success of the
construction stage. “Available finance market (CSF3)” has been eval-
uated as a highly important CSF in previous studies, among which are Li
et al. (2005) in UK and Chan et al. (2010) in China and Hong Kong.
Model analysis showed that success in the construction period is af-
fected by “private sector capability” and “project resiliency”, which
were quite proper in the Khoramabad-Pol-e Zal project. As a result, the
model predicted success in the construction stage. Ghorbani et al.
(2014) assessed risks in PPP projects in Iran and claimed that assigning
inadequate capital to projects causes difficulties and risks inherent in
the construction phase.
“Project resiliency” has influence on the success of the construction
stage. Marques and Berg (2010) emphasized that risk allocation, re-
negotiation process, and access to market are the main PPP contract
issues. “Appropriate risk allocation” has been evaluated as a highly
important CSF. In Tehran-Chalus project due to the political sig-
nificance of this contract, the government did not spend sufficient time
for initial studies, an appropriate model contract, or a transparent as-
signment process. Lack of studies on demand, lack of consideration for
environmental issues, and the strong urge of the government for
transferring the financing to the private sector led to a non-transparent
and complex contract structure. Heravi and Hajihosseini (2012) studied
risk allocation in this project in detail and claimed that revising the
financing structure and risk allocation can improve project performance
during the construction stage which has a good correlation with results

8
A.A. Ahmadabadi, G. Heravi
of the model. Also, Almarri and Boussabaine (2017) confirmed the in-
fluence of project resiliency on the construction stage. They studied PPP
projects in Dubai and claimed that proper risk sharing can improve
VFM through reducing construction time and cost.
“Government capability” has a significant influence on the success
of the operation stage. Li et al. (2005) evaluated these factors as low-
importance, but they asserted that their results are affected by the
country's conditions and might differ from the results of other studies,
such as Chan et al. (2010) that evaluated these factors as high-im-
portance factors. Liu et al. (2014) claimed that macroeconomic en-
vironments are dynamic; thus, governments should consider such en-
vironments during selection of proper procurement methods. The
influence of “government capability” is far greater in developing
countries, due to the lack of experience in the public sector and the
incompatibility of public and private long-term objectives.
Success during the “transfer stage” depends highly on success
during the operation stages and the technology transfer. Almarri (2017)
investigated attractive factors for adopting public–private partnerships
in UAE and compared them with UK projects. Technology transfer was
ranked fifth in the UAE and the last in the UK for the attractive factors
leading to the implementation of PPPs. These results show that in de-
veloping countries, one of the priorities of the government is to obtain
new technology from private sectors during operation stages.
7. Conclusions
In this paper, the relationship between CSFs and their impact on the
success of PPP projects success were accurately examined. Due to the
wide range of success factors, they were categorized. Moreover, to
determine the SC, they were divided into three stages of construction,
operation, and transfer. The purpose of this paper was to study the
relationship between CSFs and success in PPP contracts. To this end, a
model was proposed for PPP highway projects in Iran. Then, by in-
vestigating the results of two highway projects in Iran, the validity and
application of the model were evaluated. The results of case studies
indicate that this model can properly show the terms of a project and
predict the effect of CSFs on stakeholder's objectives.
On the basis of the developed model, “adapting an appropriate risk
management framework” as a component of “reliable private con-
sortium” and “appropriate risk allocation” as a component of “reliable
contractual arrangement” have major effects on the success of PPP
projects during the construction stage. Moreover, the model demon-
strated the importance of “government guarantee and experience” and
“favorable legal and political support” as the components of “govern-
ment capability” for the success of PPP highway projects in the op-
eration stage. The model confirmed that Success during the transfer
stage highly depends on the success during the operation stage.
Findings of this research can be used in the strategic planning for
highway development, especially in developing countries.
Despite the applications stated for this model and the results ob-
tained from the case studies, this research had some constraints. All the
data were taken from the public and private sectors active on highway
projects. Extending sample frame to other type of PPP projects can
improve validity of research model. Examining the similar model for
other projects as well as other countries and their comparison can have
practical results.
Additionally, instead of using probability sampling, snowball sam-
pling methods were used. Although snowball sampling are common
approach in construction research, using probability sampling can im-
prove model validity. Moreover, in this study a few more input was
required to satisfy “rule of thumb” sample size. Although limited
sample size can effect model validity, Ozorhon et al. (2010) claimed
that this effects are negligible in qualitative model.
This model is used in PPP highway project in Iran, and can be also
applied in the PPP project of other countries. Further, results of this
study properly reflected the conditions of PPP contracts in developing
9
Transport Policy xxx (xxxx) xxx–xxx
countries and can assist in their successful implementation. In the
present paper, the effect of CSFs on SC in highway contracts was in-
vestigated.
Appendix A. Supplementary data
Supplementary data related to this article can be found at https://
doi.org/10.1016/j.tranpol.2018.07.004.
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