BOO - BOT characteristics is “sole source award” i.e. selecting and negotiating
with one prospective sponsor instead of soliciting competition through bids.
18.5 The Advantages of a BOT Offering
The advantages mentioned below are those that should, in principle, be available.
But, as always, practice may differ a lot from theory.
18.5.1 To the Host Government
BOT allows a government to obtain a much-needed infrastructure project at little or
no cost to taxpayers.
The government will incur little or no risk as there are generally sufficient bonds
in place and sufficient letters of credit in hand to insure completion of the project in
the event that the sponsors default prior to project completion.
Because the private sector can usually move the preconstruction activities along
more rapidly than government agencies, the project will probably progress from
concept to construction faster.
Since the construction activities will be those of a private-sector operation rather
than a public-sector one, the construction cycle will be more rapid.
The sponsors must operate and maintain the facility for periods of time generally
exceeding 20 years, so the chances are good that initial quality will be high.
18.5.2 To the Citizens of the Host Country
General taxes will not have to be increased, nor will revenue bonds have to be issued
to pay for the project.
When projects receive income from tolls, only the users of the BOT facilities will
be required to pay for them. Citizens can elect to use alternate routes if toll rates are
not reasonable, which exerts pressure on the consortium to keep toll rates as low as
possible.
18.5.3 To the BOT Consortium
The construction and engineering firms and equipment manufacturers have created
their own market for their services and products and anticipate making a profit. Some
or all of the consortium’s members may receive profits from the operation of the
18.5 The Advantages of a BOT Offering
507
with one prospective sponsor instead of soliciting competition through bids.
18.5 The Advantages of a BOT Offering
The advantages mentioned below are those that should, in principle, be available.
But, as always, practice may differ a lot from theory.
18.5.1 To the Host Government
BOT allows a government to obtain a much-needed infrastructure project at little or
no cost to taxpayers.
The government will incur little or no risk as there are generally sufficient bonds
in place and sufficient letters of credit in hand to insure completion of the project in
the event that the sponsors default prior to project completion.
Because the private sector can usually move the preconstruction activities along
more rapidly than government agencies, the project will probably progress from
concept to construction faster.
Since the construction activities will be those of a private-sector operation rather
than a public-sector one, the construction cycle will be more rapid.
The sponsors must operate and maintain the facility for periods of time generally
exceeding 20 years, so the chances are good that initial quality will be high.
18.5.2 To the Citizens of the Host Country
General taxes will not have to be increased, nor will revenue bonds have to be issued
to pay for the project.
When projects receive income from tolls, only the users of the BOT facilities will
be required to pay for them. Citizens can elect to use alternate routes if toll rates are
not reasonable, which exerts pressure on the consortium to keep toll rates as low as
possible.
18.5.3 To the BOT Consortium
The construction and engineering firms and equipment manufacturers have created
their own market for their services and products and anticipate making a profit. Some
or all of the consortium’s members may receive profits from the operation of the
18.5 The Advantages of a BOT Offering
507