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PPP Models

There can be various PPP modalities for infrastructure projects. The major transaction modalities are given below but a particular PPP transaction can also be a hybrid model.

Build-and-Transfer (BT): A contractual arrangement whereby the Private Party undertakes the financing and construction of an infrastructure project and after its completion hands it over to the Government Agency. The Government Agency will reimburse the total project investment, on the basis of an agreed schedule. This arrangement may be employed in the construction of any infrastructure project, including critical facilities, which for security or strategic reasons must be operated directly by the Government Agency.

Build-Lease-and-Transfer (BLT): A contractual arrangement whereby the Private Party undertakes the financing and construction of an infrastructure project and upon its completion hands it over to the Government Agency on a lease arrangement for a fixed period, after the expiry of which ownership of the project is automatically transferred to the Government Agency.

Build-Operate-and-Transfer (BOT): A contractual arrangement whereby the Private Party undertakes the financing and construction of an infrastructure project, and the operation and maintenance thereof. The Private Party operates the facility over a fixed term during which it is allowed to collect from project users appropriate tariffs, tolls, fees, rentals, or charges not exceeding those proposed in the bid or negotiated and incorporated in the PPP agreement, to enable the Private Party to recover its investment and operating and maintenance expenses for the project. The Private Party transfers the facility to the Government Agency at the end of the fixed term that shall be specified in the PPP agreement. This shall include a supply-and-operate situation, which is a contractual arrangement whereby the supplier of equipment and machinery for an infrastructure project operates it, providing in the process technology transfer and training of the nominated individuals of the Government Agency.

Build-Own-and-Operate (BOO): A contractual arrangement whereby the Private Party is authorized to finance, construct, own, operate and maintain an infrastructure project, from which the Private Party is allowed to recover its investment and operating and maintenance expenses by collecting user levies from project users. The Private Party owns the project and may choose to assign its operation and maintenance to a project operator. The transfer of the project to the Government Agency is not envisaged in this arrangement. However, the Government Agency may terminate its obligations after the specified time period.

Build-Own-Operate-Transfer (BOOT): A contractual arrangement similar to the BOT agreement, except that the Private Party owns the infrastructure project during the fixed term before its transfer to the Government Agency.

Build-Transfer-and-Operate (BTO): A contractual arrangement whereby the Government Agency contracts out an infrastructure project to the Private Party to construct it on a turn-key basis, assuming cost overruns, delays and specified performance risks. Once the project is commissioned, the Private Party is given the right to operate the facility and collect user levies under the PPP agreement. The title of the project always vests in the Government Agency in this arrangement.

Contract-Add-and-Operate (CAO): A contractual arrangement whereby the Private Party expands an existing infrastructure facility, which it leases from the Government Agency. The Private Party operates the expanded project and collects user levies, to recover the investment over an agreed period. There may or may not be a transfer arrangement with regard to the added facility provided by the Private Party.

Develop-Operate-and-Transfer (DOT): A contractual arrangement whereby favorable conditions external to an infrastructure project, which is to be built by the Private Party, are integrated into the PPP agreement by giving it the right to develop adjoining property and thus enjoy some of the benefits the investment creates such as higher property or rent values.

Rehabilitate-Operate-and-Transfer (ROT): A contractual arrangement whereby an existing infrastructure facility is handed over to the Private Party to refurbish, operate and maintain it for a specified period, during which the Private Party collects user levies to  recover its investment and operation and maintenance expenses. At the expiry of this period, the facility is returned to the Government Agency. The term is also used to describe the purchase of an existing facility from abroad, importing, refurbishing, erecting and operating it.

Rehabilitate-Own-and-Operate (ROO): A contractual arrangement whereby an existing infrastructure facility is handed over to the Private Party to refurbish, operate and maintain with no time limitation imposed on ownership. The Private Party is allowed to collect user levies to  recover its investment and operation and maintenance expenses in perpetuity.

Concession Agreement: A contractual arrangement whereby the Government Agency entrusts the operation and management of an infrastructure project to the Private Party for an agreed period on payment of specified consideration. The Government Agency may charge the user levies and collect the same either itself or entrust the collection for consideration to any person who shall pay the same to the Government Agency.

Management Contract (MC): A contractual arrangement whereby the Government Agency entrusts the operation and management of an infrastructure project to the Private Party for an agreed period on payment of specified consideration. The Government Agency may charge the user levies and collect the same either itself or entrust the collection for consideration to any person who shall pay the same to the Government Agency.

Service Contract (SC): A contractual arrangement whereby the Private Party undertakes to provide services to the Government Agency for a specified period with respect to an infrastructure facility. The Government Agency will pay the Private Party an amount according to the agreed schedule.

Discussion

6 thoughts on “PPP Models

  1. What is the difference between Management contract and Concession Agreement as it seems to have same difination…
    What does it mean when you say “on payment of specified consideration” ???

    Can you please make it easier for me to understand……

    Posted by Sana | August 12, 2010, 9:53 am
  2. Dear Sana: Thanks a for pointing out. I’ll make the definitions more clear. In general, in management contracts, only the management aspect is handed over to the private partner, whereas in concessions, the private party assumes a greater role. Management contracts are typically used for managing government entities, such as utility companies, whereas concessions are used in mining, etc. ‘Specified consideration’ in simpler terms would mean the concession fee or the money paid by the private partner in lieu of the contract.

    Posted by hasaankhawar | August 18, 2010, 4:16 pm
  3. Can someone help me with a BOT/ROT model agreement contract? I am supporting the Government of Southern Sudan in developing a PPP contract of this nature, but given that Southern sudan is in a trasitional period after a long civil war, it is difficult finding any prece3dent here. I will appreciate your support
    Philip

    Posted by Philip Mutai | December 3, 2010, 3:34 pm
  4. just wanted to increase my understanding a bit here. Does PPP only link to infrastructure development by the private sector for the public sector? or are there other models which the government can be supported? i would really appreciate it if i could be guided to relevant publications

    Posted by Jawad | July 6, 2011, 11:10 am
  5. Can any body tell me that is there any developed framework for execution of Infrastructure projects on Public Private Partnership basis which reflects role and responsibility of each stackholders during each phase of infrastructure project.

    Posted by Muhammad Sajid Khattak | January 16, 2012, 9:55 pm
  6. Can any body tell me that is there any developed/defined framework in Pakistan for execution of Infrastructure projects on Public Private Partnership basis which reflects role and responsibility of each stackholders during each phase of infrastructure project???????

    Posted by Muhammad Sajid Khattak | January 16, 2012, 9:56 pm

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