An Integrated Stochastic and Game-Theoretic Framework for Optimizing BOT Concession Periods: Empirical Validation on a Highway PPP Project

The Build–Operate–Transfer (BOT) model is one of the most widely used Public–Private Partnership (PPP) methods for financing large-scale infrastructure projects. In this model, the concession period, which is the most critical parameter of the contract between the government and the private-sector investor, is a decision variable that directly affects the interests of both parties and varies depending on many uncertainty factors. The vast majority of models in the existing literature have been tested on hypothetical projects, and it is observed that parameters such as country-specific legal regulations, traffic volume guarantees, and financing conditions affecting discounting over time are not sufficiently incorporated into existing models. This study develops an integrated stochastic financial model, building on the established NPV–Monte Carlo–bargaining framework in the literature, that determines the optimum concession period for highway projects to be tendered via the BOT model in Türkiye. In the proposed model, uncertain parameters (construction cost, inflation, loan interest rate, traffic volume, toll increase rate, operation and maintenance costs) are defined with probability distributions; the Net Present Value (NPV) based financial model is solved via Monte Carlo simulation; and the obtained concession range is narrowed using a Rubinstein-type alternating-offers bargaining-game framework. The model simultaneously integrates parameters that prior studies addressed only in isolation: the equity–debt structure, loan repayment conditions, the government’s traffic volume guarantee, expropriation costs, and legal limits specific to Türkiye. The proposed model was validated by applying it to the Ankara–Niğde Highway Project, which was tendered in 2017. The results indicate that the concession range calculated by the model (11 years, 9 months, 2 days–24 years, 4 months) is consistent with the actual bids in the tender process. Following the application of bargaining-game theory, the range was narrowed to between 13 years, 4 months, and 16 days and 13 years and 5 months; this interval represents the concession range that best balances the profitability of both parties. This study provides a multidimensional evaluation framework for decision-makers by presenting comprehensive profitability analyses under different scenarios (including/excluding guaranteed traffic volumes and the project being fully constructed by the state).