PUBLIC PRIVATE PARTNERSHIPS AND BUILD, OPERATE AND TRANSFER (BOT ...

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Option Asset Ownership Build Operate Transfer Divestiture Private and public Private or private and public Source: World Bank (1997) Service contract Operations and Maintenance Capital Investment Commercial Risk Private Private Private Duration 20-30 years Private Private Private Indefinite (may be limited by license) 9. Under this option, the private sector performs a specific operational service for a fee, for example meter reading, billing and collection. Management contract 10. In this option, the private sector is paid a fee for operating and maintaining a government-owned business and making management decisions. Lease 11. Under the lease option, the private sector leases facilities and is responsible for operation and maintenance. Concession 12. Under concessions, the private sector finances the project and also has full responsibility for operations and maintenance. The government owns the asset and all full use rights must revert to the government after the specified period of time. Divestiture 13. This option can take two forms – partial or complete divestiture. A complete divestiture, like a concession, gives the private sector full responsibility for operations, maintenance and investment, but unlike a concession, a divestiture transfers ownership of the assets to the private sector. 14. Discussion on the build, operate and transfer (BOT) options is covered more fully in the next section. 4
BOT/ BOOT Schemes 15. The build, operate, transfer (BOT) approach has in recent years played a growing role in the implementation of industrial and infrastructure projects such as toll roads, water supply and treatment facilities in both industrialised and developing countries. They are designed and implemented as Public-Private Partnership (PPP) arrangements. 16. In the FIC region, the need to develop and implement innovative project financing methods such as BOT is more pronounced given the costs of providing infrastructure services are naturally high. Small scale, dispersed populations, remoteness and susceptibility to natural disasters mean that “[Pacific countries] don’t benefit from the economies of scale infrastructure normally offers, services are often more costly to produce and maintain, and it is costly to increase access to rural areas”. 4 What is BOT? 17. BOT is the terminology for a model or structure that uses private investment to undertake the infrastructure development that has historically been undertaken by the public sector. 5 In a BOT project, a private company is given a concession to build and operate a facility that would normally be built and operated by the government. The private company is also responsible for financing and designing the project. At the end of the concession period, the private company returns ownership of the project to the government (although this need not be the case). The concession period is determined primarily by the length of time needed for the facility’s revenue stream to pay off the company’s debt and provide a reasonable rate of return for its effort and risk. Other types of BOT 18. The acronym BOT is often used interchangeably with BOOT or build-ownoperate-transfer. Variants include BOO (build-own-operate without any obligation to transfer); BT (build and transfer); BLT or BRT (build, rent or lease and transfer); BT (build and transfer immediately), BTO (build, transfer and operate) 6 , DBFO (design, build, finance and operate); and DCMF (design, construct, manage and finance); MOT (modernize, own/ operate and transfer); ROO (rehabilitate, own and operate); and ROT (rehabilitate, own and transfer). 19. The table provided below reviews the BOT option and its variants, describes some characteristics of these different procurement arrangements and depicts the relationship between these different procurement methods and the financing of the project. 4 Castalia (2005) 5 UNIDO (1998) 6 Possibly subject to installment payments of the purchase price. 5
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