A Comparison between different Public Private Partnership (PPP) models has been discussed.

1. BITS Pilani, Pilani Campus
Analytical Comparison between (BOT)
(BOOT) and other PPP Projects
Presented By: Presented To:
Bhavin Sharma Dr. Vishakha V Sakhare
2015H130059P (Assistant Professor)

2. BITS Pilani, Pilani Campus
Content
1. Why PPP??
2. Definition of PPPs in India
3. Objectives of a PPP?
4. Advantages of PPP
5. When should PPP be used?
6. Risk Involved
7. PPP Types
1. BOT
2. BOOT
3. FP
8. Analytical Comparison & Conclusion
9. References
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3. BITS Pilani, Pilani Campus
Why PPP in infrastructure?
• Physical infrastructure
– roads
– transportation systems
– water and sanitation networks
• They involve large investments that can put a strain on the public purse. This strain
is especially great for countries, such as India, whose economies are undergoing
rapid development and urbanisation and have a great need for expanded
infrastructure.
• Public-private partnerships (PPPs) are increasingly being used by governments and
public sector authorities throughout the world as a way of increasing access to
infrastructure services for their citizenry and economies at a reduced cost.
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4. BITS Pilani, Pilani Campus
Definition of PPPs in India
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5. BITS Pilani, Pilani Campus
According to “The Department of Economic
Affairs (DEA), Ministry of Finance (GOI)
An arrangement between a government or statutory entity or government
owned entity on one side and a private sector entity on the other, for the
provision of public assets and/ or related services for public benefit, through
investments being made by and/or management undertaken by the private
sector entity for a specified time period, where there is a substantial risk
sharing with the private sector and the private sector receives performance
linked payments that conform (or are benchmarked) to specified, pre-
determined and measurable performance standards.
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6. BITS Pilani, Pilani Campus
Objectives of a PPP in infrastructure
Increase the availability of infrastructure services
To do so with greater efficiency (lower cost for the level of
services provided) than could be achieved using the traditional
public sector approach
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7. BITS Pilani, Pilani Campus
Advantages of PPP
• Access to private sector finance
• Efficiency advantages from using private sector skills and from transferring risk to
the private sector
• Potentially increased transparency
• Enlargement of focus from only creating an asset to delivery of a service, including
maintenance of the infrastructure asset during its operating lifetime
• This broadened focus creates incentives to reduce the full life-cycle costs (i.e.,
construction costs and operating costs)
All of these provide strong reasons in favour of using PPPs in India
and elsewhere.
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8. BITS Pilani, Pilani Campus
Investments through PPP Models
The following chart shows the increasing trend of investments in infrastructure through PPPs,
during the period 1990 to 2008. 8

9. BITS Pilani, Pilani Campus
When should PPP be used?
• The public sector environment is suited to supporting PPPs
• The project is suitable to being carried out as a PPP
• The potential barriers to successful project implementation have
been identified and can be overcome
• Given that these conditions are satisfied, the project must be
commercially viable for the private sector and offer value for
money (VFM) for the public sector
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10. BITS Pilani, Pilani Campus
Risk - a critical focus of PPP design
• "Risk is the chance of an event occurring which would cause actual
project circumstances to differ from those assumed when forecasting
project benefits and costs”
(Risk Management & Contractual Issues, Partnerships Victoria)
• The parties involved in a project can affect the amount of risk by:
– The level of influence they have over events
– The level of information they have about the present and the future
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11. BITS Pilani, Pilani Campus
For e.g. (influence they have over events)
• The Public Sector
It has certain powers and advantages in the process of land acquisition that
mean it is sometimes better suited to this task and taking the associated risks.
• By Private Sector
The private sector is exposed to competitive pressures that force it to
establish improved management practices. It is also often the technology
leader. This means it may be better suited to managing the design and
construction risks.
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12. BITS Pilani, Pilani Campus
PPP Options/ Types
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Full privatization, the private sector assumes
ownership of the infrastructure (design, build,
operation and maintenance and finance)

13. BITS Pilani, Pilani Campus
Responsibility of Sectors
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14. BITS Pilani, Pilani Campus
Build Operate Transfer (BOT)
• In this approach a private party or concessionaire retains a concession for a
fixed period from a public party, called principal (client), for the
development and operation of a public facility
• The development consists of the financing, design and construction of the
facility, managing and maintaining the facility adequately, and making it
sufficiently profitable
• The concessionaire secures return of investment by operating the facility
and, during the concession period, the concessionaire acts as owner. At the
end of the concession period, the concessionaire transfers the ownership of
the facility to the principal at no cost
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The most common examples are roads, bridges, water and sewer systems,
airports, ports and public buildings

15. BITS Pilani, Pilani Campus
Stages of BOT Project
Construction
(Built) [B]
Operation
[O]
Transfer
[T]
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Preliminary
Study
Selection
Process
Project
Implementation

16. BITS Pilani, Pilani Campus
Advantages and Disadvantages
Advantages Dis-advantages
Utilization of private sector's
investment instead of public sector's
Very complicated from the viewpoint of
technical and financial issues and need
high level experts and consultants
Transferring all the risk to private
sector
Increasing expenditures of users in
operation time
Transferring technical knowledge is
one of the most important benefits
of this method for developing
countries
Contrast between benefits of private
sector with public sector
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17. BITS Pilani, Pilani Campus
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.
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18. BITS Pilani, Pilani Campus
Advantages and Disadvantages
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Advantages Dis-advantages
Strong financial incentives for the
BOOT operator
Higher cost for the end user due to the BOOT
provider accountability of 100 percent
financing and on-going maintenance
Risk mitigation through the
involvement of multiple participants
Time consuming and resource hungry
management and monitoring of the
operating contract with the BOOT operators
Increase the project certainty and
early interest recovering through
involving a BOOT operator
Requirement of a rigorous selection process
in selecting a BOOT partner
Efficient designs, High accountability

19. BITS Pilani, Pilani Campus
Full Privatization
• It is a service contract between a public authority and a private sector
concessionaire, where the public authority pays the concessionaire to deliver
infrastructure and related services
• Typically, the concessionaire, who builds the infrastructure asset, is financially
responsible for its condition and performance throughout the asset lifetime,
or the duration of the agreement
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Full privatization, the private sector assumes ownership
of the infrastructure (design, build, operation and
maintenance and finance)

20. BITS Pilani, Pilani Campus
Advantages and Disadvantages
Advantages Dis-advantages
Engages in a competitive process to
achieve the best project for the best
cost
Government risk
Establishes performance standards and
payment mechanisms
Non-complete contracts and
uncertainty over a long horizon are
other FP challenges
Faster procurement
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21. BITS Pilani, Pilani Campus
Analytical Comparison
• BOOT versus BOT
– The definition of BOOT and BOT is very close together and the only
difference is the ownership of facilities in BOOT and because of this, quality
of the work is vital to private
– BOOT is more efficient
– The BOOT contracts have the tendency to work well when the purpose of
the project is to offer a service, but if the aim is to improve a service or
make more efficient a system, this modality is not recommended. These
methodologies increment the complexity of the financial study
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22. BITS Pilani, Pilani Campus
• FP versus BOT & BOOT
⁻ In FP, private sector has a role as engineer or constructor, Ownership, operation
and financing
⁻ On the other hand a pure private is responsible for all matter.
⁻ In BOOT final owner is public, but concession for a long period of time (25-30
year) is regarded to private
⁻ The ownership shifts from public to private as we move from FP to BOOT
⁻ Also private sector accepts more risk and preparing capital investment in
BOOT/BOT
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23. BITS Pilani, Pilani Campus
• Clear law and regulation and Stable political and economical environment is an
important factor that effect BOOT/BOT project more than FP
• The degree of involvement in BOOT/BOT is restricted
• Advantage of this, is releasing from project jobs
• Disadvantage is low control of government on project
• Britain vs. turkey is a good example
– Crises in political relation of two countries caused the
– British party leave project dam building in turkey because Turkish government was not
involved with project document, they were unable to continue the project
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24. BITS Pilani, Pilani Campus
Conclusions
Comparison Aspect
Method Risk Public
support
Duration
period
Involvement Investment Cost for
end user
Efficiency
BOT 90% by
private
sector
Vital Long term
(20-30)
Less public 70-100%
by private
sector
Higher Medium-
high
BOOT 90% by
private
sector
Vital Long term
(30+)
Less public 70-100%
by private
sector
Higher High
FP 90% by
public
sector
Not
important
Short term Nil Lower by
public
sector
Lower -
Higher
High- Low
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25. BITS Pilani, Pilani Campus
References
• World Bank Group[US] https://ppiaf.org/
• http://finmin.nic.in/the_ministry/dept_eco_affairs/dea.asp
• Thomas, S. M, measuring the impacts of delivery system on project performance, Construction
Industry Institute, 2003
• Prof. Drs. Ir. Sebastiaan C.M. Menheere, P. S, Case Studies On Build Operate Transfer. Delft, The
Netherlands, Delft University of Technology, 1996
• Verhoeven, L., BOT in Netherlands, university of technology, Delft, Netherlands, 1997
• Menheere, C. P., Case studies on Build, Operation, and Transfer, 1996
• Canada, P. (2010, may-June). P3 Canada Fund. Retrieved May 30, 2010, from public-private
partnerships Canada:
http://www.p3canada.ca/_files/file/P3C_Project_Submission_Guide_Round_Two_EN.pdf
• http://toolkit.pppinindia.com/highways/sitemap-gts%20.php?links=intro1
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26. BITS Pilani, Pilani Campus