Engineering, Technology & Applied Science Research Vol. 7, No.

5, 2017, 2089-2093 2089

Investigating Appropriate Financing Methods in

Collaborative Projects of Water and Wastewater with
AHP Approach

Vandad Vosoughi Heydar Dashti Nasserabadi Abbas Babaei

Department of Civil Engineering Department of Civil Engineering Department of Civil Engineering
Nour Branch, Islamic Azad Chalus Branch, Islamic Azad Nour Branch, Islamic Azad
University, Nour, Iran. University, Chalus, Iran University, Nour, Iran
[email protected] [email protected] [email protected]

Abstract—A mix of public and private funding is employed addition to the sources, the participation takes place in the risk
worldwide to enable the construction of large public projects and sharing and harvesting interests [4].
even, in some cases, the work of public services. In this study, the
selected methods of financing of participatory projects of water
and water wastes were studied and prioritized. Questionnaires
II. METHOD LAYOUT SCHEME
and comments of experts were used along with AHP decision- A research method includes the set of rules, the tools, the
making and Expert Choice software. Different financing methods reliable and systematic ways for achieving solutions [5]. In this
include: BOT and BOO and its types, the publication of bonds, research, suitable financing methods for participatory projects
foreign direct investment, the method of buyback, internal of water and water waste projects are investigated, considering
financing, current financing, development banks, Barter the special characteristics of such projects. For this purpose,
transactions, new tax resources and foreign financing. Results are some criteria for evaluating the types of financing methods is
shown and discussed and a final ranking is provided. introduced and explained. Ten such methods are chosen and
indicators are introduced through a questionnaire handed to
Keywords-financing; public-private partnership contracts;
experts in this area. Results are analyzed using Expert Choice
water and sanitation projects; AHP methods
software.

A. Effective indicators
I. INTRODUCTION
The effective indicators were identified using a set of
With rapid population growth and the increasing need for literature review and case studies.
drinking water and wastewater disposal, in most countries, the
governments are obliged to carry out infrastructure projects. 1) Efectiveness area
Historically, public funds were used for such projects. The effect's value of water and water waste projects on its
However, the past years a mixed (public and private) funding is climate conditions has a direct relationship with the desired
followed in most such cases [1]. The justification for private objectives from the implementation of the plan. Plans for water
participation in the funding is the state’s financial situation, the are designed for a specific region (directly) but the impact
ability to move forward multiple projects and the high expertise weighs in the whole country (indirectly), thus the effectiveness
that private sector is supposed to offer [2]. The original area is both the region and the country [6].
contract is between the public and private parties. The
2) Fairness
participation contract is the risk divider between associated
The fair term reflects the fact that the preparation of
risks with the projects of the parties and is determined by the
required funds to build infrastructure facilities should be
general conditions of the assignment, tariffs, and payments,
divided fairly between the consumers. This means that
regulations and performance standards for the design,
everyone to the extent that benefited from this structure (direct
construction, operation and maintenance of constructions.
and indirect users), must pay its fee [6]. From this perspective,
Public Private Partnership (PPP) is a model in which, the
the method of selling products is considered as the fairest
government-sector in partnership with the private sector,
method. As the payment groups to move away from the circle
attempt to design, implement, manage and support large
of direct consumers, the fairness value is reduced [6].
projects [3]. Public-Private Partnership includes a contract that
takes place between a governmental agency and a private party 3) Effectiveness
in which the parties are involving in using their abilities and During the process of choosing a financing method, the
assets, to provide services and facilities and public use. In impact on the project’s success and the development of the near

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 Engineering, Technology & Applied Science Research Vol. 7, No. 5, 2017, 2089-2093 2090

area is to be considered. However, additional care should be (1) new tax resources, (2) current finance payback method,
provided so that the extra costs are not imposed on the (3) barter transactions, (4) foreign investors, (5) bonds, (6)
consumers [6]. Correlating the level of satisfaction to the price internal financing, (7) buyback methods, (8) BOT, BOO etc,
is a well established method [7]. Whatever the difference (9) development banks, (10) Foreign Direct Investment.
between the cost that satisfies the consumers and the actual
cost, the consumers will most likely try to modify the C. Familiarity with AHP analytical method
conditions to their advantage [8]. In the ideal case that no Analytical Hierarchy Process (AHP) method is a multi-
difference is documented, the value of this index is set to 1. criteria decision-making technique. This method can be rather
4) Financial sustainability useful when faced with few options and decision criteria.
The values of stability and sustainability of used resources Indicators can be quantitative or qualitative. The basis of this
are also to be considered (8). The main focus of the project method is pair comparisons [9].
executive is on the determining the fluctuations in the resources The process of ranking and prioritization of options in AHP
of the selected method. Several factors are involved in causing methods includes the following steps:
these fluctuations and the result of activating these factors is
1) Setting the Hierarchy
imposing additional costs to the project. The most prominent
risks during the financing of a project, can be divided into 5 At this stage, the problem is defined and the purpose of
main groups: political, financial, construction, risks, decision-making is drawn with a hierarchy of factors and
operational and market [8]. elements of the decision. For this purpose, a decision tree is
used [9] (Figure 1).
B. Financing methods
In this study, to evaluate the most appropriate method of
financing, ten methods are considered. These are the following:

Fig. 1. Making hierarchy Determine the most appropriate method of financing

2) Paired comparisons based on a preliminary judging decision that appears in the

At this stage, the experts make comparisons between scales form of pairwise comparison matrix and any error and
and sub-scales of decision making and determine its scores to incompatibility between options and indicators would skew the
each other. final obtained results of calculations [9].
3) Calculation of relative weight D. Questionnaires
The next step in the Analytic Hierarchy Process (AHP) is
the required calculations to determine the priority of any 1) Structure
decision elements by using the information of the matrixes of The questionnaire includes a set of Frequently Asked
paired-calculations. Questions that by utilizing various scales, comment,
perspective, and insight of individuals assesses the respondent.
4) The final weigh of options The measurement scale is a set of principles for assigning the
The final weight of options is obtained from the sum of subjects to the category or assigning the figures to the subjects.
criteria importance in the weight of options (9). The relative scale has been chosen as the used scale in the
questionnaire. Relative scale is the most precise scale for
5) Calculation of data validation (incompatible rates)
measurement. This scale has a value of true zero that is a point
Inconsistency rate (I.R.), is a mechanism by which the
on the scale that shows a complete shortage of the features on
validity of the answers of respondents to the pair wise
measurement. By this scale either the difference between the
comparisons is measured. Almost all the AHP calculations
figures and their relative importance could be compared [10].

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2) Validity
Standard questionnaires were used in this study and after
receiving the comments of the experts in the stage of
validation, the accuracy, clarity, and transparency of made
questions, were revised and the questionnaires were prepared
for distribution.
3) The sample size
In order to obtain the opinions of the experts, 20
questionnaires were distributed between them. Among the
distributed questionnaires, 14 of them were returned. 5
numbers of questionnaires due to defects in completion and Fig. 2. Ranking based on effectiveness
improper method of inserting information were excluded from
the analysis process. Therefore, the analysis was conducted on
the remaining 9 questionnaires.
4) Limitations in information gathering
Data collection from different experts involved in different
projects is bound to face constraints due to confidentiality.
personal involvement is also an issue.
5) Reliability
One of the most well known methods for calculating Fig. 3. Comparison
reliability is using Cronbach's alpha. The method is used for
calculating the internal consistency of measurement tools,
including questionnaires. Cronbach's alpha has been used to
determine the reliability of the questionnaire with emphasis on
internal consistency. Provided that the alpha coefficient is more
than 0.7 the test has acceptable reliability.
6) Analysis of questionnaire data
The AHP method is used for converting the qualitative
comments of experts to quantitative values that can be
calculated and compared. For ranking, all questions were
summarized in the form of four separate matrices, then the Fig. 4. Ranking on fairness
different AHP methods were implemented on the data. The raw
data was analyzed using Expert Choice software.

III. RESULTS
The Expert Choice software results for each of the
comparison criteria and for the questionnaire of AHP
coefficient is shown in Figures 2 to 6 and Tables I to V. As it
can be seen the participatory methods such as BOT, BOO have
the highest value. The mean, variance and standard deviation
(std) of the available data for each indicator are also calculated. Fig. 5. Ranking on financial sustainability
An overall comparison is given in Figure 7.

IV. CONCLUSION
In this study, ten methods of financing for water and water
wastes projects were studied and prioritized. Questionnaires
were used along with AHP decision-making and Expert
Choice software. The final ranking is as follows: (1) BOT,
BOO etc, (2) bonds, (3) Foreign direct investment, (3)
buyback, (4) internal financing, (5) current financing, (6)
developmental banks, (7) Barter transactions, (8) New tax
resources, (10) Financing from foreign finance.

Fig. 6. Percentage of AHP coefficients for each of the financing

methods

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 Engineering, Technology & Applied Science Research Vol. 7, No. 5, 2017, 2089-2093 2092
TABLE I. AHP COEFFICIENTS DERIVED FROM THE ANALYSIS CRITERIA

Number of questionnaire 1 2 3 4 5 6 7 8 9
Effectiveness 0.064 0.073 0.078 0.17 0.056 0.99 0.08 0.187 0.379
Fairness 0.237 0.205 0.205 0.123 0.62 0.537 0.609 0.07 0.508
Sustainability 0.699 0.722 0.722 0.707 0.324 0.364 0.311 0.743 0.113

TABLE II. TOTAL OBTAINED AHP COEFFICIENT FOR EACH FINANCING METHOD

Financing
method

Foreign direct investment

developmental banks

Barter transactions

New tax resourced

Foreign finance
Internal finance

Current finance
BOT ،BOO etc

Financing by

Buyback

Bonds
Number of
questionnaires

1 0.239 0.108 0.102 0.012 0.169 0.03 0.137 0.083 0.068 0.049
2 0.239 0.104 0.103 0.014 0.167 0.033 0.147 0.088 0.068 0.045
3 0.208 0.083 0.112 0.017 0.156 0.046 0.149 0.11 0.06 0.036
4 0.193 0.031 0.125 0.03 0.118 0.094 0.173 0.145 0.068 0.025
5 0.194 0.034 0.122 0.034 0.121 0.094 0.166 0.145 0.071 0.025
6 0.198 0.038 0.109 0.04 0.115 0.09 0.182 0.141 0.066 0.027
7 0.153 0.06 0.138 0.048 0.09 0.115 0.183 0.128 0.062 0.023
8 0.16 0.064 0.144 0.056 0.107 0.124 0.2 0.14 0.072 0.026
9 0.138 0.062 0.139 0.052 0.108 0.12 0.168 0.122 0.077 0.023

Fig. 7. Overall comparison

TABLE III. THE SCORES OF COMPARING INDEXES TABLE IV. COMPARING INDICES

Sustainability Fairness Effects sustainability Fairness Effects

Average score for each Variance 0.052 0.043 0.0096
0.467 0.346 0.132
indicator Standard
23.47 % 20.67 % 9.78 %
Percentage of each indicator 49.4 36.60 14 deviation

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TABLE V. THE VALUES OF MEAN, VARIANCE AND STANDARD DEVIATION FOR FINANCING METHODS

Financing method mean var std (%) Financing method mean var std (%)
BOT, BOO etc 0.17 0.0011 3.38 internal finance 0.10 0.0012 3.4
Bonds 0.13 0.001 3.16 Buyback 0.08 0.0006 2.5
Current finance 0.12 0.001 3.16 Foreign Direct Investment 0.07 0.0014 3.7
Development banks 0.11 0.0009 3.02 Using foreign finance 0.07 0.0003 1.7
New tax resources 0.11 0.00055 2.54 Barter transactions 0.04 0.003 1.7

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