Build-operate-transfer Research Articles

Survey, the necessity of use and risk identification in BOT contracts

By considering that the investment in infrastructure sector which is mostly done by the government has faced with very serious financial and low efficiency problems, the necessity of using the private sector participation in infrastructure projects is felt. Providing the necessary conditions for the private sector participation is the most important point in this regard which leads to investing with more confidence and security for the internal or external private sector. The contract of Build - Operate - Transfer (BOT) is one of the main approaches of private sector participation in infrastructure projects. In order to increase the involvement of the private sector, it is necessary to include the conditions and main factors of success in both investee and investor sides. In this paper, after investigating the structure and the necessity of using this contract, suitable projects were presented for usage and finally, the risk of these types of contracts will be evaluated.

Designing of a Knowledge Base Expert System for Specific Risks Management in BOT Projects

Abstract. Economic growth and development is the most important factor in the development of a country, and infrastructure projects such as water and sewage systems, airports, power plants, etc. are the most important factors for economic growth and development.One of the best methods is the use of BOT (Build Operate Transfer) contracts. Since the BOT projects are usually large, and they took relatively long time, risk management is highly important in these projects. In order to solve such problems that does not have precise algorithms but a complex structure and are based on the knowledge and experience of experts,Expert Systems are the best solution. This paper presents an expert system to manage risks in these types of projects; that can act as an expert assistant for project managers. Initial feasibility was conducted in Beckman method, and its knowledge base is designed on the Rule Base and in a way to be developed in the future without any damage in the Inference Engine. The inference engine of the system is a Forward Chaining,and deductive and inductive methods are used for inference. Increased efficiency, saved time and cost, and high availability are the main benefits of the system.

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.

Projectisation of setting up of a dialysis centre at a zonal service hospital

Dialysis is essential for patients suffering from “End Stage Renal Disease (ESRD)” and it is observed from preliminary studies that the prevalence of Chronic Kidney Disease (CKD), the precursor to ESRD is 0.8% in India. The major contributing causes to CKD are diabetes and high blood pressure among many others. These diseases are increasing at an alarming rate across the country 1. With the increasing global trend of chronic non-communicable diseases and India being the world capital for diabetes and possibly hypertension. The cost of supporting the treatment of patients undergoing dialysis and suffering from ESRD is very high in the order of Rs 10,000 to Rs 20,000 per month. Presently dialysis centres only exist at command level hospitals. Considering the anticipated delay in delivering the dialysis service to the patient in the available facility, time and distance; criticality factors involved and the hassles in availing the facility in civil hospitals, there is an inescapable need to establish haemodialysis units in service hospitals at places far away from Command hospitals where the dialysis facility is available at present. With the sparse availability of dialysis facilities for armed forces and their dependents, clientele, it was conceptualized that enhancing the availability of dialysis services at zonal service hospital level shall reduce the patient suffering and produce better health outcomes. This paper brought out the need, feasibility, process, factors involved and outcome of the proposed projectisation of dialysis facility at zonal service hospital. It is found that projectisation of establishing the dialysis setup in Build Own Operate (BOO) model in Public Private Partnership (PPP) mode has potential effectiveness and efficiency for providing comprehensive dialysis services to the dependent clientele at zonal service hospitals.

Multi-Objective Optimization Of Build-Operate-Transfer (BOT) Tender Problem For Private Sector Companies

Bugun dunyada pek cok projede Yap Islet Devret (YID) proje finansman modelinin siklikla kullanildigini gozlemlemekteyiz. YID ihalesini kazanmak isteyen proje sirketinin basarisi icin kilit gorus, YID sozlesmesi geregince iliskide oldugu taraflarin beklentileriyle uyumlu finansal bir paket hazirlamasidir. Proje sirketinin belirleyecegi ozsermaye borc orani, imtiyaz (calisma) suresi ve urun/hizmetlerin birim fiyatlari onemli finansal karar degiskenleridir. Proje sirketinin ihaleyi kazanma potansiyeli ve borc bulma potansiyeli iki farkli ihale hedefidir. Calismanin amaci, bu hedefleri iceren finansal optimizasyon modelini sunmaktir. Cok amacli evrimsel algoritma ile cozumlenen model, pareto cozumler kumesi sunarak, iki celisen amac arasindaki degisimi degerlendirmede karar vericilere yardimci olmaktadir. Modelin uygulamasi icin Turkiye’deki bir havaalani YID projesi verileri kullanilmistir.

An alternative incomplete information bargaining model for identifying the reasonable concession period of a BOT project

Build-Operate-Transfer (BOT) scheme has been widely advocated with increasing demand of public infrastructure in recent years. As a critical component of the BOT contract, identifying concession period has been emphasized by both researchers and practitioners. However, existing studies usually assume the availability of complete information for decision-making, which is unreasonable in real-life projects. Therefore, this study develops a model to identify the reasonable concession period of a BOT project by utilizing incomplete information bargaining analysis. The model provides more guidelines for decision-making under the constraints of incomplete information. A hypothetical case from existing studies is used to demonstrate the procedure of the model. The model provides an alternative tool for the government to design the concession period before BOT tendering, which would reduce relevant negotiations after bidding. Limitations and relevant future studies have also been discussed.

BUILD-OWN-OPERATE-TRANSFER (BOOT) FOR WATER-INFRASTRUCTURE PROJECTS

Restructuring procurement processes is one way to enhance project delivery systems to service the needs of the community while providing value-for-money outcomes. Procurement options, however, require ongoing review of relative effectiveness in delivering (public-sector) infrastructure facilities. Public-private partnership (PPP) procurement adds to a list of schemes that can be utilized to bring infrastructure projects to fruition. The effectiveness of a PPP in comparison with traditional procurement is investigated here by case-study project examination of Western Australia’s first water-infrastructure project to be procured under a PPP scheme, using build-own-operate-transfer (BOOT) progression. Data was generated principally by designing/developing and conducting semi-structured interviews with the key stakeholders involved. The survey results show that the most significant factor in a decision to pursue a BOOT scheme, in comparison with traditional procurement, is the establishment of value-for-money (determined by a public-sector-comparator to provide a benchmark for evaluating private consortia bids). The work conducted here found that while BOOT schemes have extremely high bid costs that restrict tender participation, life-cycle considerations from a single consortium can offer cost advantages (through BOOT) in comparison to traditional procurement. Conversely however, the study found that if the procurement and delivery timeframes are factored in, traditional procurement is deemed more time efficient than PPP/BOOT. Indeed, currently mitigation of risk via bespoke contractual agreements for BOOT is (overly) complex and difficult to administer. Findings go towards part of the (public sector’s) procurement assessment suite of tools for the realization of future infrastructure assets.

Economic Analysis for Establishment of the Intersection in Diwaniyah City Depending on the Parameters of Economic Growth, Traffic and the Level of Service According to the Principle of Build, Operate and Transfer ( B.O.T ) Investment

Economic Analysis for Establishment of the Intersection in Diwaniyah City Depending on the Parameters of Economic Growth, Traffic and the Level of Service According to the Principle of Build, Operate and Transfer ( B.O.T ) Investment

Balancing Public and Private Stakeholder Interests in BOT Concessions: Minimum Revenue Guarantee and Royalty Scheme Applied to a Water Treatment Project in China

AbstractBecause of demand uncertainties, a build-operate-transfer (BOT) project may lead a concessionaire either to realize an excessive profit or suffer a loss. The object of this paper is to establish an adjustment mechanism to automatically balance the risks and rewards between public and private sectors under the fixed preset concession period. Using a revised net present value (NPV) financial evaluation model and the Monte Carlo simulation technique, the authors construct a model that can determine the optimum solution of the minimum revenue guarantee (MRG) level and the collect rate of royalty for BOT projects. The MRG and royalty collection combination (G&R) is shown, via a reduction in the decision variables, to be a more effective scheme than those in previous studies. The results of a sensitivity analysis based on a wastewater treatment BOT project prove that Scheme M of MRG based on 90% volume combined with a 20% royalty rate is the leading option because it guarantees that the concessionaire w...

Managing Refurbishment Projects Through Selection of Procurement System: The Case of Malaysia

The type of procurement method determines how the project would be managed. This is because project uncertainty could be found in the way that projects are awarded and how the construction project is managed into a system of contract. Procurement methods also influenced the time performance of construction projects. Time would be affected by the flow of project that was driven by different type of procurement method. However, it’s still inconclusive to what extent that different types of procurement systems could affect the performance of refurbishment projects. This study conducted to identify types of procurement methods used in Malaysian refurbishment projects and what are the problems and difficulties encountered by contractor using different types of procurement systems. On top of that, the study also would examine relationship between challenges encountered by contractors using different types of procurements towards refurbishment projects performance. Triangulation technique was used in the study. 316 sets of closedended questionnaires were obtained from targeted respondents which included site agents, project engineer, contract administrator, contract manager and project manager who were working in various construction companies. From the questionnaire sent out, 268 questionnaires were found to be useful for data analysis, giving a final response percentage of 24.53%. Semi-structured interview has been carried out with 15 contractors to validate the result. The findings shown that 54.3% of the projects were used traditional procurement systems, 39.9% using design and build, 4.3% using management procurement, 1.1% of the refurbishment project using turnkey system and 0.3% using built-operate-transfer (BOT) system. Refurbishment projects using traditional procurement systems were performing well compared to the others. Besides, out of seven contractor challenges variables (independent) which are cash flow and financial, communication with client and consultants, client decision making, frequent change order by client, insufficient or discrepancies of contract documents, material price escalation and skill, expertise and experience tested were significantly correlated with at least one performance variable (dependent). The findings would be useful for future references, especially to those stakeholders who involved in refurbishment projects in Malaysia. Keywords: Malaysia, Procurement system, Performance, Refurbishment

Karaikal Port Private Limited

Karaikal Port Private Limited (KPPL) was a special purpose vehicle created by MARG Group on February 18, 2006 to develop Karaikal port. According to the concession agreement signed for a period of 30 years, KPPL was given rights to Karaikal port on a Build, Operate and Transfer (BOT) basis. It was to phase the building of the port based on short term, midterm and long term demand. By August 22, 2011, Phase I of construction had been completed, and Phase IIA was nearing completion. Though the project had not faced any major problems in its development, there were issues such as restrictions on the availability of land for any future expansion, limited scope of hinterland businesses, small scale environmental issues and others that needed to be addressed for the future development of the port.

Discussion on Asset-Backed Securitization of PV Power Plants

At present, it universally exists that the financing problem confronts photovoltaic (PV) power plant construction in our country. The PV power plant construction in industry falls into the capital-intensive enterprises with the feature of long-time development, substantial investment needed but relatively fixed income. Thereby, it is greatly appropriate for solar securitization to address the financing needs of the industry with its characteristic and realize diversified financing channels. In this paper, firstly, the feasibility and necessity of ABS financing for PV industry is discussed. Then, we elaborate the current four construction modes of PV power plant, namely, transfer of beneficial interest of power charge, credit increment of financing platform company, BOT (build-operate-transfer), and financing leasing, according to which the financial institution designs the asset-backed securities supported by the beneficial interest of the power plant. Further, we analyze the main problems and challenges of carrying out the ABS business. Countermeasures and suggestion ns are put forward finally.

Alternative Model for Determining the Optimal Concession Period in Managing BOT Transportation Projects

The concession period is one of the most crucial variables influencing the success of a transportation project under the build-operate-transfer (BOT) procurement model. Since BOT transportation projects are characterized by irreversibility and uncertainty, project values tend to be underestimated by ignoring the value of the option to defer in the evaluation process, and thereby a long concession period is required by the concessionaire and a high subsidy is invariably paid by the government concerned when a project is financially nonviable. However, the existing net present value (NPV) method for making a concession period decision cannot properly capture the managerial flexibility value in BOT projects. In addition, the existing Nash bargaining model used in the concession period negotiation process cannot define an optimal concession period but can only narrow the interval of the concession period. This paper presents an alternative method for determining the optimal concession period by considering the investment in BOT-type transportation projects under dynamic uncertainty. In the proposed model, real options theory is used to identify an effective interval of concession period for a BOT transportation project, and Nash negotiation theory is applied to find the optimal value of the concession period. An actual transportation project in China is referred to as demonstrating the effectiveness of the proposed model.

RISK MANAGEMENT FRAMEWORK FOR BUILD, OPERATE AND TRANSFER (BOT) PROJECTS IN KUWAIT

Successful implementation of build-operate-transfer (BOT), infrastructure projects is dependent on a full and thorough analysis of factors that include social, economic and political, amongst others. Alongside the financially focused evaluations, qualitative factors will also have a strong impact on the project and so require specific techniques for the analysis. This paper presents a new evaluation framework, based on the analytical hierarchy process technique, for use in assessing the most common and significant decision factors relating to risks in BOT projects. Consultations with an expert group identified a series of risk decision factors. The results produced twenty-eight critical Risk Factors, which have a particular impact on the risks of BOT projects. The project risk framework was constructed by classifying the factors into five categories. The framework was successfully validated using a BOT project case study. This research seeks to make a valuable contribution to the field by having developed and validated a new risk evaluation framework, focused on BOT projects in Kuwait.

Concession period for PPPs: A win–win model for a fair risk sharing

Public Private Partnership (PPP) is adopted throughout the world for delivering public infrastructure. Despite the worldwide experience has shown that PPP can provide a variety of benefits to the government, to fully gain them several critical aspects related to a PPP project need to be managed, among these the determination of the concession period.This paper provides a methodology to calculate the concession period as the best instant of time that creates a ‘win–win’ solution for both the concessionaire and the government and allows for a fair risk sharing between the two parties. In other words, the concession period is able to satisfy the private and the government by guaranteeing for both parties a minimum profit, and, at the same time, to fairly allocate risks between parties. In order to take into account the uncertainty that affects the PPP projects, the Monte Carlo simulation was used. To demonstrate the applicability of the proposed model, a Build–Operate–Transfer (BOT) port project in Italy has been used as case study.

Directory of Innovative Financing

With other pressing needs and the significant amounts of resources required, the public sector can no longer finance all the work that needs to be done. Instead, governments worldwide have begun undertaking infrastructure projects, large and small, with the participation of private investors under a variety of financing schemes: Build Own Operate (BOO), Build Own Operate Transfer (BOOT), Build Own Transfer (BOT), privatization, concession, and more. The Director of Innovative Financing was an early effort to classify those infrastructure deals that are seen in the markets as innovative and precedent setting. Most of our research has been done in consultation with project sponsors, advisors, and financiers in the private sector.

Pareto-improving toll adjustment for a buildoperate-transfer toll road project with unknown demand

The social welfare gain and investment return are two main concerns of a road investment project, and they are usually key components of a Build-operate-transfer (BOT) contract. Therefore, the Pareto efficient outcomes of the two objectives are attractive for both government and private investor. This paper proposes a ex-post toll adjustment procedure called Paretoimproving trial-and-error procedure (PI-TEP), in order to achieve the Pareto efficient outcomes for a BOT toll road project with pre-determined road capacity and unknown demand function. The PI-TEP is novel and Pareto-improving, since the procedure does not require an analytical demand function and can improve social welfare and revenue simultaneously. Furthermore, the PI-TEP is theoretically proved to be efficient in obtaining the Pareto efficient outcomes. And thus, the procedure is practically useful and valuable for both government and private investor in a BOT toll road project.

Real options methodology in public-private partnership projects valuation

PPP offers numerous benefits to both public and private partners in delivery of infrastructure projects. However this partnership also involves great risks which have to be adequately managed and mitigated. Private partners are especially sensitive to revenue risk, since they are mostly interested in the financial viability of the project. Thus they often expect public partners to provide some kind of risk-sharing mechanism in the form of Minimum Revenue Guarantees or abandonment options. The objective of this paper is to investigate whether the real option of abandoning the project increases its value. Therefore the binominal option pricing model and risk-neutral probability approach have been implemented to price the European and American abandonment options for the Build-Operate-Transfer (BOT) toll road investment. The obtained results suggest that the project value with the American abandonment option is greater than with the European abandonment option, hence implying that American options offer greater flexibility and are more valuable for private partners.

Analysis on Medical Waste Management and Disposal in Kunming City

Medical waste is a special category of waste with potential health and environment risks. Medical waste management and disposal is a difficult problem in the western China because the shortage of financial support. Kunming city was selected to assess the current achievement and experience of medical waste management and disposal. Kunming municipal government solved the problem of medical waste disposal by adopting the model of BOT (Build-Operate-Transfer). The analyzed results showed that there was a good achievement of medical waste disposal in Kunming city that medical waste disposal realized centralized and normalized disposal, and centralized disposal had amounted to one hundred percent in urban area since 2006. Medical waste disposal in Kunming city mainly includes three steps, that is,the sort and collection of respective medical institutions, the centralized collection and transport of Kunming Center for Medical Waste Centralized Disposal (KCMWCD) and incineration . Kunming municipal government approved franchise for Medical waste disposal. The government has strengthened the medical waste disposal by building the effective administrative monitoring system of medical waste, organizing some meetings and visiting the place of medical waste disposal for relevant person and training them, and imposing the medical waste disposal fee on medical institution.

Real-Option Valuation of Build-Operate-Transfer Infrastructure Projects under Performance Bonding

This study assesses the effect of performance bonding on the valuation of a build-operate-transfer (BOT) project by extending the classical Black-Scholes-Merton (BSM) call option model. As common features in BOT contracts, a performance bond is a penalty imposed on concessionaires who exercise contractual rights to terminate participation in a project. In the real-option context, termination rights grant concessionaires the flexibility in managing market uncertainties that can increase the valuation of an infrastructure project, but the penalty impairs this flexibility and reduces valuations. A case study numerically illustrates the BSM model and indicates that performance bonding can destroy the flexibility and project valuations inherent in termination rights even when the penalty is moderate. Balancing performance bonds and termination rights is necessary because both are important in establishing and maintaining long-term contractual relationships in privatized BOT infrastructure projects.