Build Operate Transfer Procurement System Construction Essay

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Build Operate Transfer Procurement System Construction Essay

Recently more and more governments in the Southeast Asian countries have been started to allow private participation in some major public investments particularly for infrastructure projects A procurement system called buildoperatetransfer BOT has been operated by the private sector in many large infrastructure projects such as highway power plant tunnel and so on A BuildOperateTransfer BOT project is started with a contractual agreement between a public agency government and a private sector entity Through this agreement the expertise and assets of private sector are used to produce service or facility for the use of the general public Besides the risks and rewards potential in the delivery of the service andor facility will transfer to the private sector The BuildOperateTransfer BOT approach gives an opportunity to the private sector to design finance extend and build a new facility under a longterm concession contract and operates the facility for a defined period of time This method transfers the governments obligation in providing goods and services that are traditionally within governments domain to the private company In the end of the concession contract the private sector entity has to hand over the ownership of the facility to the public sector government


There are several main parties involved in the BOT project In general the government public sector will grant a concession to a project company The project company is responsible in searching the suitable developers contractors investors operators suppliers and lenders Under this system the concessionaire project company is responsible for financing construction and operating the facility The project company gets their funds from the lenders who normally provide the major amount of funds which needed in the project Finally the contractor starts constructing the facility which is managed by the operator afterwards The various parties which involved in the project are clearly determined in the figure 1 below

Figure 1 Parties involved in the BOT project

Contractual Relationship


Government may prepare lists of infrastructure investments based on the economic and development plans of the country To avoid and reduce huge borrowing which needed for the project and at the same time promoting foreign investments in the infrastructure project of the government the government public sector may then request for proposals from the private companies to carry out these plans The government may have a bidding process for the private companies which are interested to respond and finally come up with a scheme which they believe that the government will adopt

Concessionaire private company

Once the private sector entity gets the approval of the government it means that the concession is granted to them and that may last for ten to fifty years or more depending on the nature of the project During the concession period the concessionaire private company has a significant role in financing constructing maintaining and operating the facility and in return the concessionaire has the right to generate revenue for a specified period of time After the concession period the facility will be transferred at no cost to the public sector who usually is the government


Usually for largescale infrastructure project merely involvement of the contractor is not sufficient The contractor may need help from the subcontractors suppliers and consultants

Investors Shareholders and lenders

Generally shareholder provides a limited part of the financing for the BOT project whereas the lender constitutes the major amount of finance needed in BOT project The presence of reliable and competent investors to provide funds needed form an integral part to implement the BOT project In BOT system lenders are normally referred to banks insurance companies and so on


The operator will operate and do maintenance job during the concession p

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