A presentation on Comparison of boot and bolt modes of Construction

1. COMPARISON OF BOOT
AND BOLT

2. INTRODUCTION
Infrastructure is the word used to collectively refer to the facilities
like roads, railways, bridges, manufacturing plants etc. The
Government envisaged the nation wide infrastructure development
through the participation of the private sector.
The investment required for these projects were huge and the
gestation period of these projects were also quite high. The
Government with a view to encourage the private participation in
these developmental projects offered various business, models like
BOOT, BOLT & BOT.
Under this scheme the private participant will get an 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.

3. BUILD-OWN-OPERATE-TRANSFER
(BOOT)
It is a founding model and a form of concession in which a public
authority makes an agreement with a private company
(concessionaire) to Design Build, Own and Operate a specific piece of
an infrastructure
such as power, transport, water, and telecom industries, within
receiving the right to achieve income from the facility under a period
of time (concession period approximately 15-25 years), and later
transferring it back into public ownership through a single
organization or consortium (BOOT provider)
The earned income can be based on a variety of arrangements,
ranging from a fixed annual fee (flat rate) to the measured quantity
supplied (unit rate) and "Take-or-pay" arrangements are effectively
two part tariffs expressed in a different manner.

4. HISTORY AND DEFINITION
This concept according to according to McDermott (1999) was
established more than a century ago to construct canals and railways,
was sought and encouraged by governments as a means of obtaining
private sector finance for projects, such as infrastructure projects,
which in modern times have been a drain on the finances of the
public sector.
Barnett (1997) provides a comprehensive definition of BOOT as,
‘Government granting to a private sector organization a concession of
franchise to build a specific facility, to own it for a specified period,
to operate it and to take the revenue from it, and ultimately to
transfer it back to the Government’.

5. A TYPICAL STRUCTURE OF A BOOT
PROJECT

6. CONDITIONS FOR SUCCESSFUL
IMPLEMENTATION OF BOOT
PROJECTS
Country
Economic Stability
Stock and Capital Projects
Legislative or Judicial Process
Project
client

7. ADVANTAGES AND DIS-
ADVANTAGES

8. BOLT
BOLT means Build Own Lease &
Transfer.
The Private participant will lease the
facility to the Government and the
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.

9. CONT.
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 , 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.
As a system of project financing this procurement method has a
number of advantages the major one being that the private entity,
contracted by the client, has the responsibility to raise the project
finance during the construction period.
This way the BOLT developer assumes all the risk, the risk of raising
the project financing and the risk during the construction period.
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 developer’s 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

10. CONCEPTUAL FRAME WORK

11. ADVANTAGES AND DIS-
ADVANTAGES
Advantages:
Full authority to government
Public service delivery in an effective way
Dis-advantages:
Limited motivation for the private sector due to the transfer of
ownership

12. COMPARISON BETWEEN VARIOUS
PPP MODELS DURING
CONCESSION PERIOD

13. COMPARISON BETWEEN VARIOUS
PPP MODELS AFTER CONCESSION
PERIOD

14. CONCLUSION:
BOOT models cannot be used efficiently for social infrastructure as
all the commercial risks pertain to private sector.
BOLT is best suitable for such projects as risks are shared by both
the parties (private and public) and also government does not have to
finance the project.
In BOOT operation and maintenance is of private sector whereas in
BOLT it is of government. Hence, for social infrastructure such as
public hospitals, schools, etc.; government is required to operate and
maintain in order to serve the people economically.
BOOT cannot be effectively used as there is no or less revenue
generation, which will not give sufficient rate of return to the private
bodies.
PPP models are generally concentrated in transportation sector but
BOLT excels in both transportation and social infrastructure.

15. Thank you