Build-operate-transfer Scheme Research Articles

Determining Optimal Capital Structure and Concession Period Length in BOT Scheme Using Trilateral Bargaining Game Model

AbstractEquity:debt ratio and concession period length are the most important financial variables to consider when analyzing a build-operate-transfer (BOT) agreement. Because the involved parties h...

Vulnerabilities of BOT Scheme and Ways to Overcome Them Under PPP: Cross-Country Comparison of PPP Systems Among Selected Countries

Many developing countries have resorted to BOT (build–operate–transfer) scheme for infrastructure development. Although BOT scheme would bring significant benefits to developing countries, it conce...

A tri-level optimization model for a private road competition problem with traffic equilibrium constraints

The Build–Operate–Transfer (BOT) scheme is widely applied in many cities, wherein firms compete to invest in road building and aim to maximize their profits by collecting tolls from users traveling on the roads under their control. Previous research analyzing the private road competition problem assumed that all the new roads would be constructed and operated by private firms under the BOT scheme. The present study recommends a more proactive participation from the government in the new road construction and operation so as to ensure the fulfillment of social welfare. We characterize this problem into a tri-level optimization model. In such a multi-competition game, strategic interaction and market equilibrium must be taken into consideration to determine their investment (road capacity) and price (toll level). Game-theoretic approaches are applied when the toll road network is controlled by more than one private company. Then, we propose a heuristic approach to solve the model and its validity is justified by a simple network numerical example.

A stochastic concession model for infrastructure projects under build-operate-transfer schemes

Concession period is a key factor in the arrangement of a build-operate-transfer (BOT) contract. This paper proposes a stochastic concession period model for infrastructure projects under a BOT scheme, which takes into account the impact of risks and the risk attitudes of the private investor and the government. A hypothetical case is simulated by using the Monte Carlo simulation method to illustrate the proposed model. The results indicate that even for a project with the same estimations, the concession interval can be different and depends a lot on the risk attitudes of the private investor and the government. The proposed model provides a more reasonable concession interval based on which a specific concession period can be obtained through negotiation between the two parties.

Risk Analysis of BOT Scheme on Post-construction Toll Road

Construction of the first toll road in Indonesia, namely Jagorawi connecting Jakarta and Bogor, started in 1973 and operated in 1978. In further developments, since 1987, the government provides an opportunity for the private companies to manage toll-road through a public private partnership (PPP) with Build Operate Transfer (BOT) scheme. Using this scheme, the private sectors build, operate at their own expense and after the period of the concession, they should hand it back to the government. In the construction phase, all the risks that must be handled by the private sectors (either in the form of financial or technical one) generally have be planned and managed, but not the ones occurred during post-construction (operational) phase, where a lot of them are often unexpected or unpredictable. The purpose of this study was to analyze how the post-construction risk management applied to the toll road with Build Operate Transfer (BOT) scheme from the operator's point of view. In this study, the risk of post-construction of toll roads were mapped and evaluated. For this purpose, risk identification, risk levels and strategies in response to the risks that occur in the post-construction were performed. Two relatively new toll roads opened to the public, i.e. Semarang -Solo toll road section 1 and 2; and Kanci – Pejagan toll road, were selected as case studies. The process of data collection was done by means of questionnaires and interviews to the parties concerned. The method used for the analysis of risk management was Risk Breakdown Structure (RBS). Data were analyzed by ranking the risks and risk responses, and then the proposed risk management strategies were selected. The results of this study indicated that the highest risk that may occur in Semarang - Solo toll road section 1 was associated with less effective maintenance of damaged surface of the road so that it contributed on the increase of the overhead cost. On the other hand, the highest risk for Kanci – Pejagan toll road was the unexpected projected revenue in the business plan.

BOT for Green Buildings: A Decision-Making Model for Government

The proportion of energy consumption in construction industry is considerable and therefore more and more attention has to be paid to the development of green buildings. Green buildings have significant environmental and social benefits but the incremental cost becomes one of the major obstacles that hinder their development. Based on the externality theory and Coase Theorem, this paper establishes a utility function of three participants (consumers, enterprises and governments) in green buildings, and derives a decision-making model for government. The model could explain the influence mechanism about how the incremental cost restricts the development of green buildings with full market regulation. Decision-making process of green buildings is also proposed, which indicates that related policies, such as government subsidies, tax exemptions, carbon emissions trading in some developed countries, could regulate the market and achieve more efficient allocation of external benefits of green buildings. Finally this paper, taking into account the fact that the development of green buildings in developing countries like China is in its infancy, proposes a BOT (Build-Operate-Transfer) scheme for green buildings, which could internalize the external benefits by utilizing enterprises professional services and high efficiency. It is hoped that the conclusions would be useful for the development and promotion of green buildings.

Analysis of regulation and policy of private toll roads in a build-operate-transfer scheme under demand uncertainty

The build-operate-transfer (BOT) approach is one of the privatization mechanisms for promoting transportation infrastructure developments by using private funds to construct new infrastructure facilities. In a BOT scheme, it often involves three parties: the government, whose objective is to maximize the benefit defined in terms of social welfare added to the society; the private investors, whose objective is to maximize the profit generated from the investment; and the road users, whose objective is to minimize the inequality of benefit distribution among the road users traveling from different origin–destination pairs. Each of these parties has different objectives that often conflict with each other. In this paper, we develop various optimal road pricing models under demand uncertainty for analyzing the tradeoffs among the three objectives. In addition, a project evaluation framework is developed for assessing the effects of government policy and regulation on the BOT project. Seven cases of the BOT road pricing problem are analyzed: (1) BOT without regulation, (2) BOT with price control regulation, (3) BOT with equity regulation, (4) BOT with construction cost subsidy, (5) BOT with concession period extension, (6) BOT with construction cost subsidy and concession period extension, and (7) BOT with multiple objectives. Numerical results using a real case study of the Ban Pong–Kanchananburi Motorway (BMK) in Thailand are provided to examine the above seven cases.

Effects of Regulation on Highway Pricing and Capacity Choice of a Build-Operate-Transfer Scheme

The build-operate-transfer (BOT) scheme is being used increasingly by governments in their drive to privatize major public transportation projects. In a BOT scheme, the main objective for the private investors in determining the viability of a BOT project is profit, whereas the main objective for the government is whether the construction of the BOT project will give a positive social welfare to the society. These two objectives are often seen to conflict with each other. In this paper, modeling and analysis of highway pricing and capacity choice of a BOT scheme are provided to illustrate the tradeoff between the two objectives. Regulation is normally imposed by the government to ensure that the BOT project satisfies certain requirements. Five cases of the BOT network design problem are analyzed: (1) BOT without regulation; (2) BOT with positive performance measures; (3) BOT with a maximum toll charge level; (4) BOT with a minimum roadway capacity; and (5) BOT with a maximum toll charge and a minimum roadway capacity. Numerical results using a case study of the intercity expressway in the Pearl River Delta Region in China are provided to examine the various effects of regulation on a BOT project.

Are the nonprofit organizations suitable to engage in BOT or BLT scheme? A feasible analysis for the relationship of private and nonprofit sectors

There has been a recent increase in both developing and developed countries in an effort to meet the economic growth through build–operate–transfer (BOT) concessions. However, BOT-type schemes are not only suitable between public sector and private sector, but they can be applied to the third sector, nonprofit organizations (NPOs) as well. The major purpose of this paper is to propose a new feasible mode for build–lease–transfer (BLT) by analyzing the partnership among the constructors, the banks and the NPOs. The “triple win” solution for the main participants can be achieved by means of the successful BLT-based development.

Selection and application of risk management tools and techniques for build‐operate‐transfer projects

Construction projects are risky. However, the characteristics of the risk highly depend on the type of procurement being adopted for managing the project. A build‐operate‐transfer (BOT) project is recognized as one of the most risky project schemes. There are instances of project failure where a BOT scheme was employed. Ineffective rts are increasingly being managed using various risk management tools and techniques. However, application of those tools depends on the nature of the project, organization's policy, project management strategy, risk attitude of the project team members, and availability of the resources. Understanding of the contents and contexts of BOT projects, together with a thorough understanding of risk management tools and techniques, helps select processes of risk management for effective project implementation in a BOT scheme. This paper studies application of risk management tools and techniques in BOT projects through reviews of relevant literatures and develops a model for selecting risk management process for BOT projects. The application to BOT projects is considered from the viewpoints of the major project participants. Discussion is also made with regard to political risks. This study would contribute to the establishment of a framework for systematic risk management in BOT projects.

The analysis of regulation on private highway investment under a build-operate-transfer scheme

The build-operate-transfer (BOT) approach has become an attractive instrument for public facility provision, especially for a project that faces difficulty with public finance. This study analyzes the regulation alternatives on private highway investment under a BOT scheme and their impacts on traffic flows, travel costs, toll, capacity, and social welfare (total user-benefit in the traffic system including congestion). For comparison, five cases are analyzed: (1) No BOT with maximizing welfare, (2) No BOT with breaking even on finance, (3) BOT without regulation, (4) BOT with a minimum flow constraint (the total users will not be less than those in Case 1), and (5) BOT with a maximum travel cost constraint (the travel cost for users on a non-tolled road will not exceed the maximum tolerance). After each case is modeled and simulated on some functional forms, we find that the case of BOT with regulations performs between the cases of maximizing welfare and that of maximizing profit. From the perspective of the government, regulation has less power in a project with low elastic demand. Furthermore, even when the regulation is strict, a high cost-efficient firm with BOT could result in a higher level of social welfare than that without a BOT scheme.

Highway pricing and capacity choice in a road network under a build–operate–transfer scheme

It is often argued lately that the private sector should be allowed to build and operate roads in a transportation network at its own expense, in return it should receive the revenue from road toll charge within some years, and then these roads will be transferred to the government. This type of build–operate–transfer (B–O–T) projects is currently fashionable worldwide, especially for developing countries short of funds for road construction. One of the important issues concerning a highway B–O–T project is the selection of the capacity and toll charge of the new road and the evaluation of the relevant benefits to the private investor, the road users and the whole society under various market conditions. This paper deals with the selection and evaluation of a highway project under such a B–O–T scheme. For a given road network with elastic demand, mathematical models are proposed to investigate the feasibility of a candidate project and ascertain the optimal capacity and level of toll charge of the new highway. The response of road users to the new B–O–T project is explicitly considered. The characteristic of the problem is illustrated graphically with a numerical example.

Build Operate Transfer Municipal Bridge Projects in India

The build operate transfer scheme can be advantageously adopted by municipal administrations in India for implementing transport infrastructure projects, such as the construction of bridges, without undue strain on their declining budgetary resources. The simulation model developed by the writer permits the examination of the financial viability of any proposed build operate transfer transport infrastructure project, as affected by various options relating to the toll structure, toll revision schedule, extent of the municipal grant, and duration of the concession period. A realistic case study of a municipal bridge project illustrates the application of the simulation model.