BOT Agreements

Definition
The build-operate-transfer (BOT) / design-build-operate-maintain (DBOM) model is an integrated partnership that combines the design and construction responsibilities of design-build procurements with operations and maintenance. These integrated PPPs transfer design, construction, and operation of a single facility or group of assets to a private sector partner. This project delivery approach is practiced by several governments around the world and is known by a number of different names, including "turnkey" procurement, BOT, and DBOM.

Responsibilities
A single design-build-operate contract for the entire project with financing secured by the public agency, under which the contractor provides long-term operation and/or maintenance services, with the public sector sponsor retaining the operating revenue risk and any surplus operating revenue.

Advantages
The advantage of the BOT / DBOMapproach is that it combines responsibility for usually disparate functions-design, construction, and maintenance-under a single entity. This allows the private partners to take advantage of a number of efficiencies. The project design can be tailored to the construction equipment and materials that will be used. In addition, the BOT team is also required to establish a long-term maintenance program up front, together with estimates of the associated costs. The team's detailed knowledge of the project design and the materials utilized allows it to develop a tailored maintenance plan that anticipates and addresses needs as they occur, thereby reducing the risk that issues will go unnoticed or unattended and then deteriorate into much more costly problems.

Life Cycle Costing
The benefits of "life cycle costing" are particularly important, as most infrastructure owners spend more money maintaining their systems than on expansion. In addition, the life-cycle approach removes important maintenance issues from the political vagaries affecting many maintenance budgets, with owners often not knowing how much funding will be available to them from year to year. In such cases, they are often forced to spend what money they do have on the most pressing maintenance needs rather than a more rational and cost-effective, preventive approach.

Procurement Process
Owners award BOT / DBOM contracts by competitive bid following a transparent tender process. Proposers respond to the specifications provided in the tender documents and are usually required to provide a single price for the design, construction and maintenance of the facility for whatever period of time is specified. Proposers are also required to submit documentation on their qualifications, thereby allowing owners to compare the costs of the different offers and the ability of the proposers to meet their specified needs.

Standard Specifications
While the potential exists to reap substantial rewards by utilizing the integrated BOT / DBOM approach, owners who are not accustomed to this approach must take great care to specify all standards to which they want their facilities designed, constructed, and maintained. With a BOT / DBOM procurement, owners relinquish much of the control they typically possess with more traditional project delivery. Unless needs are identified up front as overall project specifications, they will not generally be met. This is important, because from design through operation, BOT / DBOM contracts can extend for periods of up to 20 years or more.