Using bargaining-game theory for negotiating concession period for BOT-type contract

This paper extends the build-operate-transfer (BOT) concession model (BOTCcM) to a new method for identifying a concession period by using bargaining-game theory. Concession period is one of the most important decision variables in arranging a BOT-type contract, and there are few methodologies available for helping to determine the value of this variable. The BOTCcM presents an alternative method by which a group of concession period solutions are produced. Nevertheless, a typical weakness in using BOTCcM is that the model cannot recommend a specific time span for concessionary. This paper introduces a new method called BOT bargaining concession model (BOTBaC) to enable the identification of a specific concession period, which takes into account the bargaining behavior of the two parties concerned in engaging a BOT contract, namely, the investor and the government concerned. The application of BOTBaC is demonstrated through using an example case.

Responsiveness to change by standard-form contract drafters: A case study of the FIDIC White Book

Purpose – The purpose of this paper is to focus on the Fédération Internationale des Ingénieurs-Conseils (FIDIC) White Book standard form of building contract. It tracks the changes to this contract over its four editions, and seeks to identify their underlying causes. Design/methodology/approach – The changes made to the White Book are quantified using a specific type of quantitative content analysis. The amended clauses are then examined to understand the nature of the changes made. Findings – The length of the contract increased by 34 per cent between 1990 and 2006. A large proportion of the overall increase can be attributed to the clauses dealing with “conflict of interest/corruption” and “dispute resolution”. In both instances, the FIDIC drafting committees have responded to international developments to discourage corruption, and to encourage the use of alternative dispute resolution. Between 1998 and 2006, the average length of the sentences increased slightly, raising the question of whether long sentences are easily understood by users of contracts. Research limitations/implications – Quantification of text appears to be particularly useful for the analysis of documents which are regularly updated because changes can be clearly identified and the length of sentences can be determined, leading to conclusions about the readability of the text. However, caution is needed because changes of great relevance can be made to contract clauses without actually affecting their length. Practical implications – The paper will be instructive for contract drafters and informative for users of FIDIC's White Book. Originality/value – Quantifying text has been rarely used regarding standard-form contracts in the field of construction.

A trading strategy based on the lead–lag relationship between the spot index and futures contract for the FTSE 100

This paper examines the lead–lag relationship between the FTSE 100 index and index futures price employing a number of time series models. Using 10-min observations from June 1996–1997, it is found that lagged changes in the futures price can help to predict changes in the spot price. The best forecasting model is of the error correction type, allowing for the theoretical difference between spot and futures prices according to the cost of carry relationship. This predictive ability is in turn utilised to derive a trading strategy which is tested under real-world conditions to search for systematic profitable trading opportunities. It is revealed that although the model forecasts produce significantly higher returns than a passive benchmark, the model was unable to outperform the benchmark after allowing for transaction costs.