Build operate and transfer (BOT) or build own operate and transfer (BOOT) is a type of arrangement in which the private sector builds an infrastructure project, operates it and eventually transfers ownership of the project to the government. These project components are procured from the private sector in a single contract with financing secured by the public sector. During the period, the private sector has the responsibility to raise the finance for the project and is entitled to retain all revenues generated by the project and is the owner of the regarded facility. The end of concession agreement the private sector will transferred the facility to the public administration.
Advantages and disadvantages of build operate and transfer
Advantages
• BOT projects offer the possibility of realizing a project that would otherwise not be built.
• The willingness of equity investors and lenders to accept the risk indicates that the project is commercially viable.
• A boot project will help in a government's policy of infrastructure privatization.
• The efficiency of the promoter and its economic interest in the design, construction and operation of the project will produce significant cost efficiencies to the principal when the concession period ends.
Disadvantage
• Different objectives between the constructors and operators which may have an influence in several issues, including the quality of the civil work.
• Duplication of functions and resources in some cases in the consortium and in the subcontracting companies.
• Difficulties of relations between the different parties. Particularly the assignment of responsibilities is a major issue.
Real case study
Example
Case Study 2: The Kuala Lumpur-Kuala Selangor Hig...
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...n be seen as a developing technique for infrastructure projects by using private initiative and funding. Such infrastructure projects include a wide array of public facilities with the primary function to serve public needs, to provide social services and promote economic activity in the private sector. With turnkey contracts, the owner buys a package of site, design and finished building, while the developer secures financing, manages the project flow and coordinates the architect and the contractor. BOT is closer to total product delivery where in addition to financing and development, the supplier is also responsible for the operation of the facility.
References
1. http://www.llmnet.gov.my/serverpages/common/about_us.aspx
2. http://faculty.ksu.edu.sa/algahtani/GE%204021/GE402-Topic_10-contracts.pdf
3. http://www.tayebfc.com/documents/PRIVATIZATION.doc
The initiation phase of a project is not complete without a clearly defined goal and realistic, measurable objectives that describe the business benefits which are expected to be delivered upon completion of a project (Laureate Educatio...
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HILLIARD, J. And O’SULLIVAN, J. (2012) The Law of Contract [Online] 5th Ed. Oxford: Oxford University Press. Available from - http://books.google.co.uk/ [Accessed: 2nd January 2014]
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First, traditional path is the tender documents have been prepared and then invite the tender and the employer appoints the contractor to construct the project.
...infrastructure, they also couldn’t accept to allocate the required efforts, cost, time and sometimes the required skilled employees to the reengineering project which limit the success of the project.