Build-operate-transfer Research Articles

Financial conflict resolution model in BOT contracts using bargaining game theory

Purpose This study aims to determine the optimal value of concession period length in combination with capital structure in build–operate–transfer (BOT) contracts, based on direct negotiation procurement and considering the conflicting financial interests of different parties involved in the project. Design/methodology/approach The financial model of a BOT project is developed considering all the influencing factors. Then, fuzzy set theory is used to take into account the existing risks and uncertainties. Bilateral bargaining game based on alternating-offers protocol is applied between the government and the sponsor to divide project financial benefit considering the lender’s requirements. Finally, concession period and equity level will be determined simultaneously according to the sponsor’s and government’s share of project financial benefit and the lender’s requirements. Findings The proposed model is implemented on a real case study, and a fair and efficient agreement on concession period length and capital structure is achieved between the government and the sponsor considering the lender’s requirements. It is revealed that being the first proposer in the bargaining process will affect the concession period length; however, it will not affect the equity level. Moreover, it is shown that considering income tax as a part of government’s financial benefit increases the length of concession period. Research limitations/implications The presented model concentrates on direct negotiation procurement in BOT projects where the sponsor and government bargain on dividing financial benefits of project. It is assumed that the product/service price is determined before according to market analysis or users’ affordability. All the revenue of project during concession period is assumed to belong to the sponsor. Practical implications The proposed model provides a practical tool to aid BOT participants to reach a fair and efficient agreement on concession period and capital structure. This could prevent failing or prolonging the negotiation and costly renegotiation. Originality/value By investigation of previous studies, it is revealed that none of them can determine the optimal value of concession period length and capital structure simultaneously considering the BOT negotiation process and different financial interests of parties involved in the project. The proposed model presents a new approach to determine the financial variables considering the conflicting interests of involved parties. The other novelty aspects of the presented model are as follows: introducing a new approach for calculating the sponsor and the government’s share of project financial benefit that will affect the determination of the concession period length and considering the effect of existing risks and uncertainties on final agreement between the involved parties using fuzzy set theory.

Examining influenced factors of the preparation phase on total construction time delay of build-operate-transfer transport projects in Vietnam

The involvement of private investors in public works has been widely-known under the scheme of Public-Private Partnerships (PPP) world-wide. Although being started in early years of the twenty-one century, the PPP scheme in Vietnam is still waiting for its booming period due to an incomprehensive regulation system. As of an approval of some important PPP decrees, the period of 2010-2018 is considered as a remarked period for the PPP development in Vietnam, especially in transport sector. Using the neural network approach, this study contributes to the literature by providing an insight of 48 build-operate-transfer (BOT) transport projects completed in the period. Findings of this study are meaningful to the field because they highlight several influenced factors of the project preparation phase those affect total completed construction time of the investigated projects.

Examining influenced factors of the preparation phase on total construction time delay of build-operate-transfer transport projects in Vietnam

The involvement of private investors in public works has been widely-known under the scheme of Public-Private Partnerships (PPP) world-wide. Although being started in early years of the twenty-one century, the PPP scheme in Vietnam is still waiting for its booming period due to an incomprehensive regulation system. As of an approval of some important PPP decrees, the period of 2010-2018 is considered as a remarked period for the PPP development in Vietnam, especially in transport sector. Using the neural network approach, this study contributes to the literature by providing an insight of 48 build-operate-transfer (BOT) transport projects completed in the period. Findings of this study are meaningful to the field because they highlight several influenced factors of the project preparation phase those affect total completed construction time of the investigated projects.

Design of build-operate-transfer contract for integrated rail and property development with uncertainty in future urban population

This paper proposes a novel model of the design of a build-operate-transfer (BOT) contract for integrated rail and property (R + P) development when the size of future urban population is uncertain. A real-option approach is adopted to accurately capture the potential economic value of a BOT investment project under uncertainty and its externality effects on urban spatial structure. The proposed model is formulated as a two-stage problem. The first stage of the model optimizes the concession period and rail line parameters (including rail line length, and number and locations of stations) through a Nash bargaining game between a private investor and the government. The second stage determines the headways and fares during the private operation and after transferring the BOT project to the government. The private investor's objective is to maximize its own net profit received during the concession period, whereas the government aims to maximize social welfare over the whole life-cycle of the project. The proposed model is extended to explore the effects of future population jumps due to non-recurrent random events and station deployments with even and uneven station spacings. The results show that compared with the rail-only scheme, the R + P scheme can lead to a win-win situation for the government and private investor. In the BOT contract design, ignoring the effects of population jumps and using an average (or even) station spacing as an estimate of actual station deployment can cause a large bias of the parameter values designed in the contract and an underestimate of project values in terms of expected net profit and expected social welfare.

Juridical Deed Review Of The Cooperation Agreement To Build Handover (Build Operate And Transfer) Bot Between Government And Private Sector

The purpose of this study was to: 1) To determine and analyze the Agreement in order to handover a build (Build Operate And Transfer) BOT between government with Private Sector. 2) To determine and analyze the Regulation No. 19 of 2016 there are no relevant provisions of the cooperation agreement made in the form of a notarial deed but in implementing cooperation agreements and there are other legal regulations. The data used in this study are primary data, secondary data and data that can support tertiary study, which was then analyzed by descriptive analytical method.Based on the results of data analysis concluded that: 1) Deed in the agreement to transfer (Build Operate And Transfer / BOT) before the formation of Regulation No. 19 of 2016, has complied with the requirements valid agreement of Article 1320 of the Civil Code sehigga positions of the legislation. Notary deed in agreement wake up in order to transfer (Build Operate and Transfer) BOT after the entry into force of Regulation No. 19, 2016 a requirement valid agreement beyond the provisions of the Civil Code, and if it is not done then there will never been considered although qualify valid agreement of Article 1320 of the Civil Code. The legal consequences deed of cancellation of the parties shall make a certificate into a build to transfer (Build Operate Transfer / BOT) lose their authenticity, the cancellation of the agreement unilaterally because defaults are not eligible void Article 1266 of the Civil Code, can be regarded as an act against the law because it is not based on good faith and such cancellation shall be requested to the trial judge.Keywords: Judicial Review; Government Cooperation Agreement; Build Operate and Transfer And Deed.

The Determination of Concession Period for Build-Operate-Transfer Solar Photovoltaic Power Project under Policy Incentives: A Case Study of China

Since the concession period is one of the most crucial variables influencing the success of a photovoltaic (PV) power project under build-operate-transfer (BOT) mode, this paper presents a real option game model—which integrates the real option and cooperative game theory—to determine the optimal concession period of the BOT solar PV power project under policy incentives by considering the value of the option to defer. In the proposed model, an effective interval of concession period for the BOT project was identified by using a real option, and the equilibrium value of the concession period was obtained by applying classical optimization theory. To evaluate our model, we empirically determined the optimal concession period for the BOT solar PV power project in China, and a sensitivity analysis was conducted to demonstrate how relevant influential factors, which are presented in the model, affect the equilibrium value of the concession period and its effective interval. The results indicate that the current investment environment in China could successfully implement the BOT solar PV power project under policy incentives, including initial cost subsidy and the feed-in tariffs mechanism. While the high volatility of electricity demand, investment cost, and land-use rent fee can lead the failure of the BOT solar PV project implementation, promoting the technological development of PV power generation, maintaining the market stability, and increasing the policy incentives can help the BOT power project to be arranged with an optimal concession period. In addition, the feed-in tariffs mechanism is more helpful than the initial cost subsidy for winning the BOT contract.

Innovative operating strategies in build–operate–transfer transport infrastructure in Nigeria

This study investigated drivers and critical success factors (CSFs) of innovations employed in the operating phase of transport infrastructure procured through build–operate–transfer (BOT) in Nigeria. The study was aimed at enhancing infrastructure revenue flow through customer-focused innovations using electronic toll collection and customer relationship management as case studies. The primary driver of innovation was establishment and execution of innovation as an integral component of the business development plan. The most significant CSF was an effective pre-implementation plan. Innovation design and execution requirements were effectively articulated. The study concludes that innovation in BOT projects must be continuous and cover all BOT phases.

Win-win pricing method for BOT projects using a simulation-based evolutionary optimization

Several failures have been reported in maintaining the Build-Operate-Transfer (BOT) projects viability through their life cycle. BOT contracts are one of the popular tools to respond to fund deficiencies in infrastructure projects, thus it is crucial to determine optimum concession terms for them. In previous research, the value of social benefits has mostly been neglected in the decision-making process, which results in unfair distribution of benefits between the government and the concessionaire. Therefore, a pricing framework based on a Simulation Multi-Objective Optimization (SMOO) method is developed in this research which includes the value of social benefits as well as the effects of uncertainties in BOT projects. The application of the model to a real-world project confirms that it presents a win-win solution in which the benefits of the two contracting parties are simultaneously maximized compared to the results obtained by using conventional methods. The results confirm the contribution of this research to reach a consensus on concession price and to keep the project viability as a result of its ability to cope with the high volatilities through simulation techniques. Furthermore, it can help the decision-makers to either seek a balance between both sides’ interests or determine the concession price based on their preferential strategies.

Compound Options in Build–Operate–Transfer Projects with Default Risk for Highways in Taiwan

This study proposes a model for appraising the overall contract price of build–operate–transfer (BOT) projects with default risk in public works construction situations. The contract is assumed to have been terminated during its implementation period; then, this assumption is used to estimate the final simulated default situation and to calculate the BOT option price. Taiwan’s highway expansion project is used for an actual appraisal, analysing the project sensitivity and default price. A numerical solution is obtained using the Monte Carlo simulation method.

Pemenuhan Hak Atas Air Bersih Terhadap Masyarakat Kabupaten Gresik

As an unimportant one that is needed by humans and important for other purposes, the discussion of this thesis related to aid and the use of air is an important problem in life. Water that was once felt abundant and can be used together. More and more populations are increasing. Water needs for the Gresik Regency community in 2018 have only been served by PDAM Giri Tirta in Gresik Regency totaling 11 Districts out of a total of 18 Districts in Gresik Regency. The fulfillment of the right to clean water for the people of Gresik Regency must always be pursued in line with the increase in population and development of industrial areas. However, related to the completion of clean water for the community, the need for investment funds is not small for the construction of SPAM supporting infrastructure. Related to what is stated in article 2 paragraph (1) of the Covenant on Ecosob rights. The policy of fulfilling the right to clean water for the people of Gresik Regency is implemented by increasing production capacity. The need for investment funds that are not small to build SPAM infrastructure and limited government funds has implications for the implementation of Cooperation between the Government and the Private Sector (KPS). carried out by PDAM Giri Tirta of Gresik Regency as the executor of the provision of SPAM with Business Entities using a system of Cooperation to Build, Operate and Transfer (BOT). Regulation of the Minister of Public Works and Public Housing Number 19 / PRT / M / 2016 concerning Provision of Support by Regional Governments in Collaborating in the Implementation of Drinking Water Supply Systems.

Collaborative Agreement between the Regional Government of West Nusa Tenggara and the Private Sector through the Elements in the Build Operate Transfer System

This study aims to examine the arrangement of regional cooperation agreements with third parties through the Build-Up System based on Indonesian laws and regulations, and how the parties regulate the rights and obligations of the parties in the regional cooperation agreement with third parties in West Nusa Tenggara through the Build-Up pattern This research is a normative study so that the approach used is the legislative approach and case approach. The results of the research show that the legal source of cooperation in the management of goods belonging to the region is Law No. 23 of 2014 concerning Regional Government, Government Regulation No. 50 of 2007 concerning Procedures for Implementing Regional Cooperation, Regional Regulation of West Nusa Tenggara Province No. 8 of 2007 concerning Management of Regional Property.

Financing China’s unprecedented infrastructure boom: the evolution of capital structure from 1978 to 2015

ABSTRACTThe authors examine the sources of the funds that have financed China’s infrastructure development since 1978. They define the five periods in which this development has taken place in terms of predominant financing: fiscal funds, build-operate-transfer (BOT), treasury bonds, the land financing, and local bonds. The system is characterized by a heavy reliance on debt financing and one-off revenues. These approaches have raised widespread concerns about fiscal sustainability in China. The authors explain why a shift towards the more conventional approach of fiscal funds is necessary.

Design and construction risks in BOT type mega transportation projects

Purpose In build-operate-transfer (BOT) transportation projects, design and construction phases are critical in terms of their effect on time and cost overruns. The purpose of this paper is to identify the role of risk factors affecting these phases and their significance level for BOT transportation projects. Design/methodology/approach Design and construction risks were determined and then validated by focus group discussions. Afterwards, an illustrated case study was presented to better understand the effects of determined risks in a BOT mega transportation project. As the last step of the study, the fuzzy analytical hierarchy process method was used to prioritize risk factors. Findings The prominent risk factors were found out as occupational accidents, integration between design and construction phases and excessive design variations. Research limitations/implications Different kinds of BOT transportation projects in different countries might be executed very differently considering specific social, political, economic and other factors. However, the results of the study are important in terms of the specific lessons learned from the case study that can be used as a foundation for developing possible risk mitigation measures. Originality/value Though the risk management of BOT projects has been investigated frequently in the literature, there is a knowledge gap in the quantitative evaluation of risk significance specific to design and construction risks. The prioritization of determined risks with an associated case from a mega transportation project will contribute to the BOT project practitioners about possible challenges in design and construction phases in BOT mega transportation projects.

A trading and pricing method of expansion options for BOT freeway projects in China

PurposeThe purpose of this paper is to develop a trading and pricing method of expansion option (EO) model to solve expansion problems of build-operate-transfer (BOT) freeway project.Design/methodology/approachThis paper proposes anex antemechanism through trading the EO to avoid the transaction costs. By editing the paths generated from binomial option pricing model, this paper establishes an American real option binomial lattice model and evaluates the value of EO. Data are collected from Liaoning province in China and the model is practiced in the context of a BOT freeway in Liaoning province.FindingsSupported by empirical evidence, this study finds out that there exists a minimum price at which the government can sell the EO and a maximum price that the private sector is willing to pay. When the minimum price is negative, the government should transfer the EO to the private sector free of charge to avoid the transaction costs. Otherwise, the government should sell the EO at a reasonable price to protect public interests.Practical implicationsThe study can be used for the government to reducing the transaction costs. By using the trading EO model, the government can sell its share of the EO to the private sector to manage its resources efficiently.Originality/valueThis paper builds a trading EO model to solve expansion problems instead of renegotiations. In addition to reducing the transaction costs for the whole society, trading EO can also raise the respective payoffs of both public and private sectors. An EO trading framework and algorithm is further developed. It realized an American option model, making the owner can exercise the option whenever he wants. Thus, the whole model is adapted to best fit BOT highway practice.

Fuzzy Logic Analysis of the Build, Capacity Build and Transfer (B-CB-T) Modality for Urban Water Supply Service Delivery in Ethiopia

Rapid urbanization in Ethiopia is resulting in the need for alternative sustainable service models for urban water supply. Contractual arrangements to improve the functionality of urban water services in Ethiopia have included build, operate and transfer (BOT), design, build and operate (DBO), performance-based contracts (PBC) and utility development. UNICEF undertook a review of these modalities and concluded that a modified version of the BOT modality was required to both incentivize private sector engagement in urban water supply and to enhance public sector utilities. This paper describes the contractual modality developed to achieve this aim, namely an Ethiopian build, capacity build and transfer (B-CB-T) modality. This paper tests the applicability of the B-CB-T model using fuzzy logic statistical analysis and concludes that of the four tested variables (internal accountability, external accountability, operation and maintenance and financial management), the most statistically significant was the clear mandate to address complaints and maintain a positive relationship with the clients (users). This paper concludes that the B-CB-T is an effective contracting modality that should be accompanied by appropriate behavior change and social mobilization outreach to maximize tariff, billing, extension and performance of the infrastructure that is administered within the B-CB-T arrangement.

NEGOTIATING THE SELLING PRICE OF HYDROPOWER ENERGY USING MULTI-AGENT SYSTEMS IN BOT

During the feasibility study of BOT (Build-Operate-Transfer) hydropower investments, the selling price of energy is the most critical parameter that impacts the net present value (NPV) estimated by the investors. Investors usually consider the price of energy guaranteed by the government during their feasibility studies which is the worst case scenario. However, it is apparent that negotiations that take place between investor and broker determine the price of energy which is affected by various sources of uncertainty associated with the energy demand and country conditions. The objective of this study was to make a realistic estimate of the investor’s selling price by modeling the negotiation process between investor and broker using a multi-agent system (MAS). Thus, the factors affecting the negotiation process were identified, a negotiation protocol between the parties was set up, negotiation scenarios were determined, and modelled by using a MAS. The model was tested on a hydropower investment in Turkey and generated more realistic results compared to the current practice. Investors and brokers may benefit from this study because it considers the potential changes in the market as well as the negotiating postures of parties under different scenarios.

Determine the factors that affecting on the applicability of Build Operate Transfer contracts for infrastructure in Iraq

The traditional project delivery systems in Iraq is unsubstantial, due to the delays and poor planning to manage these projects within the required quality and within the allocated budget by the public sector. Build Operate Transfer (BOT) approach, considered an option helps the governments to overcome the above problems. This research aims to determine the factors of applicability of BOT for infrastructure project in Iraq. The research initiates with reviewing the references about BOT and fieldwork process, which includes personal interviews and preparing closed questionnaire forms, the distribution of these forms to the sample members of the research to answer questions, collect these forms, and analyze the results statically. By discussing, the results found that the percentages of the factors affecting the applicability of the BOT are in three weights medium, good and very good. The percentage of medium Weight was about 9% and the good weight was about 19%. The very good weight was 72%. In addition to in this research, indicate the political and security stability among the decision factors as the most important, with 72.64% effect on the BOT applicability.

Hybrid Annuity Projects: - 'Study of HAM in Highway Construction Projects-Owner and Contractor Prospective'

India has embarked on a brisk pace of highway development following the policy change in the mid-1990s that gave a high priority to highway development in India. The National Highway Development Programme (NHDP) was launched in 1997 to develop a large highway network in a relatively short period of time. The Public Private Partnerships (PPP) model was adopted for highway development in India, given the intrinsic advantages associated with it over conventional models. Pursuant to the policy decision, a large number highway development contracts were awarded under the Build, Operate and Transfer (BOT) variant of PPP model and other variants with further development of policy’s Design, Build, Finance, Operate and Transfer (DBFOT) models were awarded and finally now National Highway Authority of India (NHAI) has adopted Hybrid Annuity Model (HAM) for highway development at rapid pace. This paper first discuss the various features of HAM in road sector of India, later it compares the Hybrid Annuity Model (HAM) with the conventional DBFOT model of road development so as to find out the advantages and risk associated with HAM both for client & contractor prospective, which will help the stake holders to analyze the latest trends of HAM projects awarded by NHAI.

Kerja Sama Pemerintah Swasta (KPS) Sebagai Upaya Pengembangan Bandar Udara Radin Inten II Lampung Selatan

Penyediaan infrastruktur sebagai salah satu prioritas pembangunan di Indonesia masih terhalang oleh keterbatasan biaya. Oleh karena itu, pemerintah dapat melibatkan pihak swasta dalam hal penyediaan dana. Keterlibatan pihak lain untuk mencapai tujuan suatu negara dikenal dengan konsep good governance. Salah satu upaya pelibatan pihak lain (swasta) dikenal dengan istilah Kerja sama Pemerintah Swasta (KPS). Pada penelitian ini lokus yang dipilih adalah Bandara Radin Inten II Lampung Selatan. Lokus ini dipilih karena posisi bandara yang strategis dan potensi penumpang yang dimiliki tidak berbanding lurus dengan upaya pembangunan infrastruktur. Tujuan dilaksanakannya penelitian adalah mengetahui urutan prioritas bentuk Kerja sama Pemerintah Swasta (KPS) dalam upaya pengembangan sisi udara Bandara Radin Inten II Lampung Selatan dan faktor yang paling berpengaruh dalam bentuk KPS tersebut. Metode pada penelitian ini adalah studi deskriptif dengan menggunakan teknik analisis data berupa AHP (Analitycal Hierarchy Process). Hasil penelitian menunjukkan bahwa bentuk yang paling menguntungkan untuk pengembangan sisi udara Bandara Radin Inten II Lampung Selatan adalah Built Transfer (BT) dibandingkan Built-Operate-Transfer (BOT) dan Built-Transfer-Operate (BTO). Bentuk Built Transfer (BT) terpilih berdasarkan kriteria ekonomi (sukriteria : modal), kriteria risiko (subkriteria : aturan hukum), dan kriteria pasar (subkriteria : demand). Dari beberapa kriteria yang dipilih, kriteria ekonomi berupa modal merupakan faktor yang paling berpengaruh dalam pemilihan bentuk KPS.

CASE STUDIES OF PRIVATE GOVERNMENT COOPERATION: PROCUREMENT OF LAND DEVELOPMENT PROJECTS TOLL ROAD KRIAN – LEGUNDI – BUNDER – MANYAR

One of the efforts to maintain and enhance the economic growth of a region is supported by the existence of infrastructure development. Infrastructure development in the form of a toll road could increase the potential for the development of the economy of the region through improved the smooth flow of goods and services. Toll road construction project Krian– Legundi – Bunder – Manyar areas is one of national strategic Project (PSN) that are in the shadow of the State Ministry of Public Works and Public Housing (PUPR) with PT. Waskita Bumi Wira as the initiator. The research method used is descriptive qualitative, i.e. by doing observation and interviews with related parties on the project construction of KLBM toll road. The results of this study are: (i) the forms of cooperation carried out in the construction of KLBM toll roads, is Build Operate Transfer (BOT); (ii) the process of acquiring the land in KLBM toll road development projects are the responsibility of PT WBW assisted by PPK Land Procurement and BPN Sidoarjo and Gresik Regency; (iii) Proceedings reversion bailouts land is done through examination by the BPKP and then verified by the LMAN and the value of payments carried out as stated in the agreement.