GUJARAT

GUJARAT
TECHNOLOGICAL
TECHNOLOGICAL
UNIVERSITY
UNIVERSITY

SNPIT&RC,
SNPIT&RC,
UMRAKH
UMRAKH

M.E. CONSTRUCTION ENG. &

MANAGEMENT
COMSTRUCTION PROJECT
MANAGEMENT (2711401)

CONCEPTS OF BOT ,BOLT ,BOOT

Guided by:
PREPAID BY:1. PATEL TARUN J.
(140490714006)

Mr. HIREN RATHOD

Assistant Professor
Civil Eng. Department
S.N.P.I.T. & R.C.

CONTENT

BOT: Definition

Participants in BOT Projects

RALATIONSHIP BETWWEN PRICIPAL PARTICIPENTS IN

BOT

Characteristics of BOT Project

The major types of risk in BOT project are

Advantages of BOT Projects

Disadvantages of BOT

Built-Own-Lease-Transfer :-(BOLT)

Conceptual Framework

Policies/Regulatory Framework

BUILT OWN OPERATOR & TRANSFER(BOOT)

STRUCTURE OF BOOT PROJECTS

ADVANTAGES

DISADVANATES

BUILD-OPERATE-TRANSFER (BOT): DEFINITION

BOT:

Build
Set-up the facility and infrastructure, staff the

development centre,

and establish knowledge transfer

Operate
Manage the offshore organization: Program

Management,

Development, QA, maintenance, enhancements, and product support

Transfer
Register a new offshore subsidiary for the customer,
assets and handover operations

transfer

BOT PROJECTS
The term BOT is used mainly in the area of infrastructure projects financed
by the private sector. The economic environment today is suitable enough for
the private sector to invest in infrastructure projects for the following
reasons :

Government policy aiming to increase the private

Modification in legislation and laws that encourage investments.

Decrease

in inflation rates.

Availability of cheap and experienced work force .

sector participation.

BOT HAS MORE THAN ONE DEFINITION. HERE ARE A FEW :

A model that entails a concession company providing the finance, design

construction, operation, and maintenance of a privatized infrastructure project
for a fixed period, at the end of which the project is transferred free to the host
government.

The granting of a concession by the government to a private promoter, known

as the concessionaire, who is responsible for the financing, construction,
operation, and maintenance of a facility over the concession period before
finally transferring the fully operational facility to the government at no cost.

A model or structure that uses private investment to undertake the infrastructure

development that has historically been the preserve of the public sector

PARTICIPANTS IN BOT PROJECTS

The implementation process of a BOT project involves many parties,
including the government, promoter, construction contractor,
operating firms, financiers and other parties. The main
stakeholders

in

BOT

projects

are

Government;

promoter/concessionaire; lenders/financiers and the public. All of

them have particular reasons to be involved in the project.
I.

Public Procurer/Government

II.

Project sponsors/promoters

III.

Lenders / financial Institutions

RALATIONSHIP BETWWEN PRICIPAL PARTICIPENTS IN BOT

CHARACTERISTICS OF BOT PROJECT

BOT projects are financed on a project finance basis with limited recourse .
Typically in limited recourse financing, the lenders provide debt to the concession
company solely based upon expected cash flow/revenue generating capacity of the
project. Financing is provided on the merit of the revenue generating capacity of
the project rather than the assets of the concessionaire company.

A key characteristic of BOT projects is raising of finance entirely by the private

sector without the involvement of government. The private sector is fully
responsible for a design, construction, finance and operation and maintenance.

BOT projects are complex structures comprising multiple interdependent

agreements among the various participants.

BOT projects are typically large-scale infrastructure projects.

Transaction costs
amount on average 5 to 10% of total project cost.

BOT projects are associated with uncertainties and high risk.

BOT projects transfer the risk to the private sector.
BOT formula can be applied to any sector of the economy. But it
has been used
widely

in

power

telecommunications

plant

sector,

transportation

and

BOT BENEFITS

Rapid scaling of operations

Wider service offerings, quickly filling business model gaps

Lower infrastructure set-up costs

Reduced time to operations through utilization of knowledgeable 3rd

party management resources responsible for:

Real Estate

Government rules and regulations

Cultural transition

IT infrastructure procurement

Security

Etc.

THE MAJOR TYPES OF RISK IN BOT PROJECT ARE

Political risk

Currency and foreign exchange risk

Cost overrun risk

Delay risk

Tariff adjustment risk

Market risk

Operation risk

Force manure risk

ADVANTAGES OF BOT PROJECTS

Key advantages of privatization are as follows.

The private firms are more efficient, hence project or service can be
delivered at lower cost
Private firms are more innovative in selection of design and operation
phases of a project or service.

The

private sector invests directly in the development of infrastructure,

thereby reducing public debt, balancing the budget deficit, and reduced role
of public sector.

BOT projects create business opportunities for the local private

sector, create employment avenues as well as attract substantial
foreign direct investment.

BOT projects help in facilitating transfer of technology by

introducing international contracts in the host countries

DISADVANTAGES OF BOT

Transaction costs are high, they amount to 5-10% of total project

cost
Not suitable for smaller projects
The success of BOT project depends upon successful raising of
necessary finance. Various costs such as cost of construction,
equipment, maintenance should be committed during the life of
the project.
BOT projects are successful only when substantial revenues are
generated during the operation phase

BUILT-OWN-LEASE-TRANSFER :-(BOLT)

The private participant will lease the facility to the government and
government will pay the lease charges for a specific period and on the
completion of the lease period the facility is transferred to the
government.

Or

It is a non-traditional procurement method of project financing whereby

a private or public sector client gives a concession to a private entity to
build a facility (and possibly design it as well), own the facility, lease
the facility to the client, then at the end of the lease period transfer the
ownership of the facility to the client.

 The

operational and maintenance responsibility for the facility is the

developers, as the facility is owned by them until the lease period ends.
The

lease period will see the client who in essence becomes the tenant

of the facility, paying the developer a lease (monthly or annually) for

the use of the facility at a predetermined rate for a fixed period of time.

The lease payment becomes the method of repaying the investment,

and ultimately rewarding the developers shareholders.

At

the end of the lease period, ownership of and the responsibility for

the facility are transferred to the client from the developer at a

previously agreed price

CONCEPTUAL FRAMEWORK

POLICIES/REGULATORY FRAMEWORK
Using BOLT model for social infrastructure, following policies must
be followed by both public and private parties.

After the identification of the project, the selection of private party

should be purely based on negotiations rather than contract bidding

The government has to disclose the detail drawing and

specifications of materials to be used. Also the duration of the
completion of project is to be specified in the agreement

The private party should be selected through the negotiations from

the contenders who satisfies the required criteria as well as have
fair experience in such projects.

The contender giving the least estimate should not be preferred always
but the one giving the best quality of work within the stipulated time
should be selected.

During the construction stage, the State Government agency should

monitor the work as per the design drawings and specifications .

In case of delay in the construction work of project within the

stipulated time, the private party may be penalized as per the
concession agreement.

The lease period of the project should start immediately after the
project enters into its operational stage.

The concession period should be between 5-15 years.

The rate of return to the private body should be at least 15-20 percent per annum
according to the type of project

Provision of financial security should be there in the concession agreement in

case of failure of payment of lease amount of government

In any case, including the change of the ruling party there should not be any
alteration in concession agreement and the project cannot be terminated before
the concession period.

In case of natural calamities the duration of the construction stage can be altered.

At the end of concession period the agreement is terminated and final ownership
is transferred to the government

BUILT OWN OPERATOR & TRANSFER(BOOT)

Under this scheme the private participant will get opportunity to

own and operate the facility for some time and during this period
the developer can commercially exploit the facility so developed .
After the specified period the facility would be transferred to the
government.

STRUCTURE OF BOOT PROJECTS

SUPPLIER

LENDERS

SUPPL
Y
CONTRA
CT

LOAN
AGREE
MENT

LOAN
INVESTERS

AGREEME
NT

CONSESSI
ON
AGREEMEN
T

OFFTACK
CONTRA
CT

PROMOTER

OPERAT
ION
CONTRA
CT

CONSTRUCTI
ON

CONTRACT

USER
S

OPERATO
R

CONSTRU
CTOR

THE FOLLOWING ARE SOME OF A REASONS WHY HOST GOVERNMENTS

ADOPT THE BOOT PROJECT PROCUREMENT STRATEGY.

The use of private sector financing provides new sources of capital and reduces
public and direct spending.

The development of project that would otherwise have to wait , and complete
for ,scarce sovereign resource is accelerated.

The use of private sector capital, initiative and know how reduces project
construction costs, shortens schedules and improves operating efficiency.

Project risk and burden that would otherwise have to be borne by the public
sector is allocated to the private sector.

The involvement of private sector and experienced commercial leaders ensures

an in- depth review as an additional sign of project feasibility.

CONDITIONS FOR SUCCESSFUL IMPLIMENTATION OF

BOOT PROJECT
1.

COUNTRY

Economic stability

Project will to carry out the project

Stock and capital markets

Legislative or judicial process

2.

PROJECT

3.

CLIENT

ADVANTAGES

BOOT projects offer the possibility of realizing a project that

would otherwise not be built.

The willingness of equity investors and lenders to accept the risk

indicates that the project is commercially viable.

A BOOT project will help in a governments policy of in fracture

privatization.

The efficiency of the promoter and its economic interest in the

design , construction and operation of the project will produce
significant cost efficiencies to the principal when the concession
period ends.

DISADVANATES

Commercial lenders and export credit guarantee agencies will be

constrained by the same country risks.

There will be no credibility if the government provides too much

support to the promoter.

A BOOT strategy is a highly complicated structure that requires

detailed planning . time and money throughout the concession
period . The promoter must have the commitment and interest to
maintain the project.

Thank you