A Systematic Approach for the Selection of Contract Strategies for Water Projects

Abstract

This paper describes the use of the ‘Pendulum Obligation Diagram’ (POD) and a set of ‘Assessment Criteria’ (AC) assisting decision-making process in selecting contract strategies for construction, operation and maintenance of new water supply projects in Padang City, Indonesia. The use of POD and AC are useful in comparing the relative merits of alternative contract strategies in the financing and developing of water supply projects. Various options were developed, it was summarized that a full concession contract will best meet most of the project requirements on fresh capital investment and is also attractive to investors as the projected IRR is relatively high (14.27%) and CPBT is relatively short (12.99 years) and a BOT contract strategy could meet partial project requirements with the IRR is 14.42% and CPBT is 10.41 years