144
M. Almuhisen et al.
The Build Operate Transfer (BOT) approach was initially utilized In Turkey in
an official private facility establishment in the year 1984by the Prime Minister Ozal.
The establishment was initially a part of a vast denationalization program aimed
at exploiting new infrastructure (Argyris and Kagiannas 2003). Nevertheless, this
methodology was previously utilized in 1834 during the construction of the Suez
Canal, whereby the canal was financed by European investment through Egyptian
financial funding. Hence, the Egyptian ruler, Pasha Muhammad Ali, was appointed a
franchise to design, construct, and operate the revenue producing waterway (Argyris
and Kagiannas 2003).
One can define the Build Operate Transfer (BOT) as a methodology in which the
private sector maintains a franchise from a public party, also known as the client,
for a scheduled period of time in order to establish and operate a public facility.
This establishment entails the funding, modelling and construction of the facility as
well as administering and sustaining the facility sufficiently, including rendering it
appropriately beneficial. The private sector procures profit return through managing
the facility and during this time, the private sector portrays the owner. Once the
concession period is completed, the private sector reassigns the proprietorship of the
facility to the client exempt of liens and free of charge (Verhoeven 1997).
It has been found that in bidding circumstances, BOT projects are very beneficial.
Moreover, such approaches, when executed, allow the company or the government to
jointly share the project risks (Valencia 1997). Usually, BOT is utilized to establish
a distinct resource instead of a whole system, which is usually modern or naturally undeveloped, in which renovation may be encompassed. Normally, the project
company, which is manipulated by BOT, or the proprietor acquires its profits by
charging the government with the payment’s rather than charging the consumers
with duties. In certain common law countries, various developments are known as
concessions, such as highway toll developments, which are contemporary and are
similar to BOTs.
In each BOT development, there are five main participants: the principal, the
concessionaire, the investors, the contractor and the operator. Generally, the principal
is the public sector, a government agency (local or federal) that comprehends the
necessity for a public accommodation; however, they are incapable of monetarily
funding the development. Throughout the concession period, the concessionaire is the
owner of the development, and through utilization of the accommodation, apprehends
the revenues on the initial investment. The investors include both stockholders and
financiers, who offer financial assistance for the project. The construction of the
project, including employing subcontractors, suppliers and consultants, is dependent
upon the contractors. The operator is employed by the concessionaire and administers
the operative phase of the accommodation (Menheere 1996).
The BOT has several advantages and disadvantages. Some of the most important advantages include the exploitation of the private sector assets rather than the
public sectors, shifting technical expertise which is beneficial for developing regions,
the placement of all risks onto the private sector, and finally, political resistance
is minimized when utilizing private sectors due to the fact that at the end of the
concession agreement, the project will be retransferred to government ownership
(Kumaraswamy 2001). On the other hand, some of the disadvantages include that
M. Almuhisen et al.
The Build Operate Transfer (BOT) approach was initially utilized In Turkey in
an official private facility establishment in the year 1984by the Prime Minister Ozal.
The establishment was initially a part of a vast denationalization program aimed
at exploiting new infrastructure (Argyris and Kagiannas 2003). Nevertheless, this
methodology was previously utilized in 1834 during the construction of the Suez
Canal, whereby the canal was financed by European investment through Egyptian
financial funding. Hence, the Egyptian ruler, Pasha Muhammad Ali, was appointed a
franchise to design, construct, and operate the revenue producing waterway (Argyris
and Kagiannas 2003).
One can define the Build Operate Transfer (BOT) as a methodology in which the
private sector maintains a franchise from a public party, also known as the client,
for a scheduled period of time in order to establish and operate a public facility.
This establishment entails the funding, modelling and construction of the facility as
well as administering and sustaining the facility sufficiently, including rendering it
appropriately beneficial. The private sector procures profit return through managing
the facility and during this time, the private sector portrays the owner. Once the
concession period is completed, the private sector reassigns the proprietorship of the
facility to the client exempt of liens and free of charge (Verhoeven 1997).
It has been found that in bidding circumstances, BOT projects are very beneficial.
Moreover, such approaches, when executed, allow the company or the government to
jointly share the project risks (Valencia 1997). Usually, BOT is utilized to establish
a distinct resource instead of a whole system, which is usually modern or naturally undeveloped, in which renovation may be encompassed. Normally, the project
company, which is manipulated by BOT, or the proprietor acquires its profits by
charging the government with the payment’s rather than charging the consumers
with duties. In certain common law countries, various developments are known as
concessions, such as highway toll developments, which are contemporary and are
similar to BOTs.
In each BOT development, there are five main participants: the principal, the
concessionaire, the investors, the contractor and the operator. Generally, the principal
is the public sector, a government agency (local or federal) that comprehends the
necessity for a public accommodation; however, they are incapable of monetarily
funding the development. Throughout the concession period, the concessionaire is the
owner of the development, and through utilization of the accommodation, apprehends
the revenues on the initial investment. The investors include both stockholders and
financiers, who offer financial assistance for the project. The construction of the
project, including employing subcontractors, suppliers and consultants, is dependent
upon the contractors. The operator is employed by the concessionaire and administers
the operative phase of the accommodation (Menheere 1996).
The BOT has several advantages and disadvantages. Some of the most important advantages include the exploitation of the private sector assets rather than the
public sectors, shifting technical expertise which is beneficial for developing regions,
the placement of all risks onto the private sector, and finally, political resistance
is minimized when utilizing private sectors due to the fact that at the end of the
concession agreement, the project will be retransferred to government ownership
(Kumaraswamy 2001). On the other hand, some of the disadvantages include that