GOVERNMENT POLYTECHNIC, KARAD

GOVERNMENT POLYTECHNIC KARAD

Third Year Civil Engineering
( I Scheme )

COURSE:-Contracts And Accounts(22601)

A Micro Project On
“Report on Build Operate Transfer .”

Submitted By

Mr. H ri s hi k e s h Si dra m B h a d a r g e . [2834]

Mr. Omkar Dattatray Khandagle. [2835]

Mr. Aryan Dattatray Jadhav. [2836]

Guide By
[Link]
 Part A- Proposal
Title Of Micro-project-

“Report on Build Operate Transfer”

01. Aim/Benefits of micro project-

Build–operate–transfer (BOT) or build–own–operate–transfer (BOOT)

is a form of project financing, wherein a private entity receives a
concession from the private or public sector to finance, design,
construct, and operate a facility stated in the concession contract. BOT
finds extensive application in infrastructure projects and in public–
private partnership.

02. Intended Course Outcome-

 Scaling up teams.

 Transparent communication.

 Reducing risks and cost control

 Gain nearshore development operations in an agree timeframe.

 Tapping into new talent pools.

03. Literature Review-

1. We have used some websites for gathering the information about our
Micro-Project.

2. We have also used books such as Contracts and Accounts(22601).

3. We have taken some guidelines of our teachers.

04. Proposed Methodology-

1. Discussion about given topic.

2. Selection of group leader and distribution of responsibilities.

3. Collection of information using different resources.

4. Analysis of information as per formats given.

5. Representation of information in required formats.

6. Preparation of project report.

7. Completion of assigned task.

GOVERNMENT POLYTECHNIC, KARAD

05. Resources Required-

Name Of
[Link]. Resources/Materials Specifications Quantity Remark

1. Laptop Intel CORE 13 1

_
2. Internet

06. Action Plan

[Link] Details Of Planned Planned Name Of
. Activity Start Date Finish Date Team
Members

1. Group All Members

formation
2. Micro project All Members
Topic
3. Divide subtopics All Members

4. Create a All Members

proposal
5. Report All Members
preparation

pg. 4
GOVERNMENT POLYTECHNIC, KARAD

ACKNOWLEDGEMENT
We take it is an opportunity to thanks all those who
have directly and indirectly inspired , directed and assisted us towards
successful completion this project report.
We express our sincere thanks to the Principle/IC DR. K.
M. BAGWAN & the Head of Department Miss J. S. Patil for having us
allowed to submit this report as part of our academics learning .
We express our sincere thanks to [Link] Lecturer in Govt.
Polytechnic Karad subject is Contracts and Accounts (22601) , for
encouragement throughout the project report and guideline in Report
wrinting out this project.

Place: Govt. Polytechnic, Karad

Date:

Yours Sincerely,

Mr. H r i s h i k e s h S i d r am B h a d a r g e . [2834]

Mr. Omkar Dattatray Khandagle. [2835]

Mr. Aryan Dattatray Jadhav .[2836]

GOVERNMENT POLYTECHNIC, KARAD

Certificate
This is to certify that, as a part of Sixth Semester academic
co-curricular activity for the year 2023-2024, and as given by MSBTE
,Mumbai the following third year Diploma Engineering student of Civil
Engineering programme. Mr. Hrishikesh Sidram Bhadarge. (Roll no.
2834), Mr. Omkar Dattatray Khandagle (Roll No.2835), Mr. Aryan
Dattatray Jadhav (Roll No. 2836). Belonged to Government
Polytechnic, Karad. Have successfully completed there Contracts and

Accounts (22601) Microproject title as “Report on Build Operate

Transfer.” and submitted to Civil Department of Government
Polytechnic, Karad.

Teacher & Guide Principle/IC Head of Department

Shri [Link] Dr. [Link] Smt. [Link]

Date-
Place:- Govternment Polytechnic ,Karad
 INDEX
Sr no CONTENT
1 Introduction
2 Type of Infrastructure Project
3 Financing of Infrastructure Project
 GOVERNMENT POLYTECHNIC, KARAD

[Link]
• Build–operate–transfer (BOT) or build–own–operate–transfer(BOOT)is a
form of project financing, wherein a private entity receives a concession from
the private or public sector to finance, design, construct, and operate a facility
stated in the concession contract. This enables the project proponent to
recover its investment, operating and maintenance expenses in the project.

• BOT finds extensive application in infrastructure projects and in public–

private partnership. In the BOT framework a third party, for example the
public administration, delegates to a private sector entity to design and build
infrastructure and to operate and maintain these facilities for a certain period.
During this period the private party has the responsibility to raise the finance
for the project and is entitled to retain all revenues generated by the project
and is the owner of the regarded facility. The facility will be then transferred
to the public administration at the end of the concession agreement, without
any remuneration of the private entity involved. Some or even all of the
following different parties could be in
involved in any BOT project:
➢ The host government: Normally, the government is the initiator of the
infrastructure project and decides if the BOT model is appropriate to meet its
needs. In addition, the political and economic circumstances are main factors
for this decision. The government provides normally support for the project in
some form. (provision of the land/ changed laws) The concessionaire:
➢ The project sponsors who act as concessionaire create a special purpose
entity which is capitalized through their financial contributions. Lending
banks: Most BOT project is funded to a big extent by commercial debt. The
bank will be expected to finance the project on “non-recourse” basis meaning
that it has recourse to the special purpose entity and all its assets for the
repayment of the debt.
➢ Other lenders he special purpose entity might have other lenders such as
national regional development banks Parties to the project contracts: Because
the special purpose entity has only limited workforce, it will subcontract a
third party to perform its obligations under the concession agreement.
➢ Additionally, it has to assure that it has adequate supply contracts in place
for the supply of raw materials and other resources necessary for the project

• A BOT Project (build operate transfer project) is typically used to develop

discrete asset rather than a whole network and is generally entirely new or
Greenfield in nature (although refurbishment may be involved). In a BOT
Project the project company or operator generally obtains its revenues through
a fee charged to the utility/ government rather than tariffs charged to
consumers. A number of projects are called concessions, such as toll road
projects, which are new build and have a number of similarities to BOTs.

• In general, a project is financially viable for the private entity if the revenues
generated by the project cover its cost and provide sufficient return on
investment. On the other hand, the viability of the project for the host
government depends on its efficiency in comparison with the economics of
financing the project with public funds. Even if the host government could
borrow money on better conditions than a private company could, other
factors could offset this particular advantage. For example, the expertise and
efficiency that the private entity is expected to bring as well as the risk
transfer. Therefore the private entity bears a substantial part of the risk. These
are some types of the most common risks involved:
➢ Political risk: especially in the developing countries because of the
possibility of dramatic overnight political change.
➢ Technical risk: construction difficulties, for example unforeseen soil
conditions, breakdown of equipment Financing risk: foreign exchange rate
risk and interest rate fluctuation, market risk (change in the price of raw
materials), income risk (over-optimistic cash-flow forecasts), cost overrun
risk.
 2. Types of Infrastructure
Project
2.1 BOOT (build–own–operate–transfer):

A BOOT structure differs from BOT in that the private entity owns the works.
During the concession period the private company owns and operates the
facility with the prime goal to recover the costs of investment and
maintenance while trying to achieve higher margin on project. The specific
characteristics of BOOT make it suitable for infrastructure projects like
highways, roads mass transit, railway transport and power generation and as
such they have political importance for the social welfare but are not attractive
for other types of private investments. BOOT & BOT are methods which find
very extensive application in countries which desire ownership transfer and
operations including. Some advantages of BOOT projects are:

➢ Encourage private investment Inject new foreign capital to the country

➢ Transfer of technology and know-how
➢ Completing project within time frame and planned budget
➢ Providing additional financial source for other priority projects
➢ Releasing the burden on public budget for infrastructure development.

2.2 BOO (build–own–operate):

In a BOO project ownership of the project remains usually with the project
company for example a mobile phone network. Therefore the private
company gets the benefits any residual value of the project. This framework is
used when the physical life of the project coincides with the concession
period. A BOO scheme involves large amounts of finance and long payback
period .Some examples of BOO projects come from the water treatment
plants. This facilities run by private companies process raw water, provided
by the public sector entity, into filtered water, which is after returned to the
public sector utility to deliver to the customers.
2.3 BLT (Build-leaser-transfer):
Under BLT a private entity builds a complete project and leases it to the
government. On this way the control over the project is transferred from the
project owner to a lessee. In other words the ownership remains by the
shareholders but operation purposes are leased. After the expiry of the leasing
the ownership of the asset and the operational responsibility are transferred to
the government at a previously agreed price. For foreign investors taking into
account the country risk BLT provides good conditions because the project
company maintains the property rights while avoiding operational risk

2.4 DBFO (design–build–finance–operate):

Design–build–finance–operate is a project delivery method very similar
to BOOT except that there is no actual ownership transfer. Moreover, the
contractor assumes the risk of financing till the end of the contract period. The
owner then assumes the responsibility for maintenance and operation. Some
disadvantages of DBFO are the difficulty with long term relationships and the
threat of possible future political changes which may not agree with prior
commitments
This model is extensively used in specific infrastructure projects such
as toll roads. The private construction company is responsible for the design
and construction of a piece of infrastructure for the government, which is the
true owner. Moreover, the private entity has the responsibility to raise finance
during the construction and the exploitation period. The cash flows serve to
repay the investment and reward its shareholders. They end up in form of
periodical payment to the government for the use of the infrastructure. The
government has the advantage that it remains the owner of the facility and at
the same time avoids direct payment from the users. Additionally, the
government succeeds to avoid getting into debt and to spread out the cost
for the road over the years of exploitation
 2.5 DCMF (design–construct–manage–finance):
Some examples for the DCMF model are the prisons or the public
hospitals. A private entity is built to design, construct, manage, and finance a
facility, based on the specifications of the government. Project cash flows
result from the government’s payment for the rent of the facility. In the case
of the hospitals, the government has the ownership over the facility and has
the price and quality control. The same financial model could be applied on
other projects such as prisons. Therefore, this model could be interpreted as a
mean to avoid new indebtedness of public finance.

2.6 PPP CONCEPT:

Infrastructure projects have been traditionally funded with investment from
budgetary resources and funding from bilateral and multilateral organizations. However,
budgetary resources and borrowings have not been sufficient to meet the funding required for
infrastructure creation. In order to fill the infrastructure gap, private capital from private
sector participation has been sought through public private partnership (PPP) route. PPP is
defined as an arrangement between a government/government owned entity on one side
private sector entity for the creation and/or management of infrastructure for provision of
services to public for a specified period of time on commercial terms . In addition, private se
c tor participation is expected to usher efficiency gains arising from innovation, management,
and marketing skills offered by the private sector and greater incentives for the control of
construction, maintenance and operation costs In PPP, public agencies enter into a long term
contractual agreement with the private sector with the aim of sharing the resources and skills
of each stakeholder in order to deliver a service or facility for use by general public. Besides,
sharing the resources and skills each party shares the risks and rewards in the delivery of the
service or the facility:

➢ Public agencies transfer the infrastructure facilities previously controlled by them to the
private sector entity usually for the term of the arrangement. The existing facilities can be
transferred to private sector entity either at no cost or at a nominal fee from the private
sector.
➢ Private sector entity either builds a new facility or extends and renovates the existing
facility. Public agencies specify the operating features of the facility.

➢ Private sector is obligated to provide the services using the facility for a defined period
of time (usually within the specifications on operations and pricing).
➢ Private sector entity either agrees to transfer the facility to the public sector (with or
without payment) at the end of the contractual period or owns and operates the
infrastructure facility in perpetuity.
2.6.1 BENEFITS OF PPP:

Governments have adopted the innovative public private partnership route for
development of infrastructure projects mainly to get additional private capital to
overcome the budgetary constraints faced by them in building the infrastructure. In
addition to the availability of private capital, private sector participation brings in the
following benefits to the government.

1. PPPs allow for allocation of risks to the party best able to manage them. Public sector
can pass on those risks which can be effectively managed by the private sector and retain
those risks which they are in a better position to manage them or their consequences.
Much of the risks associated with the design and construction of infrastructure projects,
which were traditionally borne by public sector, are transferred to private sector and this
in turn insulates the governments from such risks. The effect of the optimal risk
allocation is that the project will achieve better value for money and benefit from the
efficiency gains than they otherwise would if retained wholly under
government control.

2. PPPs enable faster delivery of projects. The pace at which the projects are launched
can be accelerated as the projects are freed from the constraints of public sector spending.
In addition, private sector has the incentive to expedite the project delivery in order to
avoid inflationary cost increases, keep the project cost low, and bring forward the
revenue stream. Contractual conditions such as early completion bonus payments and
inclusion of construction period within concession period further provide the incentive
for private sector to expedite the project delivery.

3. PPPs encourage innovation and efficiency. The combination of public and private
sectors unique motivations and skills; and the competitive process for contract award
provide high potential for innovative approaches to public infrastructure delivery with
PPPs. PPPs facilitate greater flexibility to private sector to maximize the use of new and
innovative approaches to financing, development, construction, operation and
maintenance. Involvement of leading technical and financial experts assists in rigorous
assessment of project feasibility; close examination of project costs and risks; and
imaginative approaches to provide solutions to apparently difficult problems.
Moreover, adoption of flexible and innovative approaches will encourage high standards
of performance and efficiency. In case of certain arrangements of PPPs which integrate
project development and delivery, private sector has the incentive to optimize
expenditure and maximize innovation to achieve greatest level of cost efficiency over the
life cycle of the project through a life cycle approach.
4. PPP projects can be completed more reliably on time and within budget. Private sector
is strongly motivated to complete the project as early as possible to control its costs so
that the payment stream can commence. The private sector is under the pressure to
complete the project within budget as the project cost is fixed before construction
commences. There is more certainty project outcomes as the project sector will
effectively manage the risks of cost and time overruns which have been allocated to
them through contractual arrangements.

[Link] can facilitate transfer of technology and training. PPPs can attract experts and
organizations with international standing and experience which can be a catalyst for
technology transfer and exchange. In addition to technology transfer, the local staff can be
trained and the operational methods and techniques of local firms can be enhanced on
account of exposure to international management techniques and state-of-the-art
technology.

5. PPPs can provide access to international finance and foster the local capital markets.
PPPs provide a medium for investments from abroad. This will help them access the
global bank and capital markets and develop domestic investment environment.

2.7 Type of PPP Models:

The term PPPs is used to refer to wide range of collaboration between public and private
sector to deliver an infrastructure project. The range of collaboration could vary from the
simple arrangement such as supply and management contract wherein public agency
assume most of the responsibilities at one end of the spectrum to divestiture or full
privatization on the other end of the spectrum, where private sector assume a greater
responsibilities for the provision of infrastructure services. Turnkey, Leases, and
Concessions are the other PPP models between the two extremes. These PPP models
differ from one another with respect to the following aspects:
➢ The Supply and Management contracts are contractual arrangement wherein the private
sector is given the responsibilities for management of a part or whole of an infrastructure
project. The public sector retains the ownership of the project facilities. The private
sector is paid a performance-based fee for managing the infrastructure project. The
duration of the contract is usually short, typically three to five years. However, in case of
large projects with complex facilities such as ports and airports the duration could be
longer.
➢ In Turnkey model, the private sector designs and builds the infrastructure projects to
meet the performance specifications laid down by the government agencies for a fixed
price. The private sector assumes the risks involved in the design and construction
phases. The ownership of the project facilities remains with the public sector. Examples
of turnkey model could be seen in India in the form of road projects such as national
highways development being undertaken through EPC contract.
➢ In lease, the private sector is responsible for operating and maintaining the
infrastructure facility and services. The public sector undertakes the responsibility for
investment. The private sector collects the revenue from users of the facility and either
shares it with the public sector or makes a specified lease fee payment to the contracting
public authority. Lease of fixed facilities are for longer period, typically 15 to 20 years.
In some cases, the
ownership of the assets may be transferred to private sector for a period which extends the
economic life of the assets. This model is normally used for brown field infrastructure
projects (i.e. existing infrastructure projects).

➢ The various types of PPP models such as Build-Operate-Transfer and its variants such
as Build-Transfer-Operate, Build-Rehabilitate-Operate-Transfer, and Build-Lease-
Transfer type of arrangements are collectively known as concessions. In concessions,
government defines and grants the private sector to build and operate a facility for a fixed
tenure. The private sector provides the funding for building the facility. The investment
made by the private sector is recouped in the form of revenue collection from users of the
facility. The Selection of the private sector entity is either based on the fees the private
sector will charge from the users or the concession period (i.e. number of years the
private sector entity will operate the project). Typical concession period could vary from
10 to 50 years. In this model, governments also make payments to private sector to
projects to make it financially viable. On the other hand, the private sector could also
shares the revenue with the governments in case of projects with sound project
economics due to strong demand for the infrastructure services. In such cases, the
selection of bidders could be on the amount of grants quoted by the private sector or the
amount of revenues the private sector is willing to share with the government. In India,
BOT and its variants are the most commonly PPP model. For example, projects which
are undertaken through PPP route in National Highways Development Programmed
(NHDP) Phase I comprising of Golden Quadrilateral linking the four metropolitan cities
were developed through BOT route.
➢ In divestiture, the governments transferred all or substantially all their interests to the
private sector. The governments do not have any form of control or mechanism for
regulation over the privatized infrastructure projects.
➢ The comparison of the various PPP models in terms of how owns the asset, how will
provide the operation and maintenance facility during the contract tenure, who will made
the capital investment required for creation of the project facilities, who will bear the
commercial risk associated with the project, the degree of risks being transferred to the
private sector and the duration of the contract is provided below:
PPPModel Asset O&M Capital Commercial Level of risk Durati
ownership reasonability Investmen Risk transferred on
t to private
Sector
Service Public Public Public Public low 1-3
Contracts Years

Manageme public Private Public Public Low 2-5

nt Contract Years
Lease Public Private Public Shared Moderate 10-15
Contract Years
BOT Public/ Private Public Private High 15-30
Private Years
Divestiture Private Private Public Private High Infinit
e
 Chapter No.3
3. Financing of Infrastructure Project
Development of proper infrastructure is vital for economic growth of any
country. Investors will like to put the capital only in those countries where there is
developed infrastructure. Infrastructure consists of many things such as Road, Railway,
Port and harbor, airport, electricity, telecommunication, water supply etc., Development
of infrastructure is capital intensive and gestation period is high. At the same time return
on capital in case of infrastructure projects is small as well as slow. Hence, investors are
shy in investing capital in infrastructure projects unless some special incentives and
privileges are provided.

3.1 Special Feature of Infrastructure Project

(i) Large Capital requirement

(ii) High sunk cost. A large proportion of the cost has to be irrevocably committed upfront
before the project becomes operative
(iii) Long gestation periods
(iv) Returns are slow to pass in
(v) Availability of foreign funds is poor
(vi) Sector is sensitive to political environment and policy changes
(vii) The services produced are non tradable. The excess services generated cannot be
stored or exported and deficiency in service cannot be met with by imports except for
certain exceptions
No single solution applies to different projects as characteristics are different from sector
to sector. What applies to road sector does not apply to railways and what applies to
railways can not apply to telecommunications sector as the capital requirements are
different and so is the method of revenue collection.
 3.2 Type of Privatization

Sr. Name Description

No
1 Build operate Concession is given to private party to finance, build,
transfer (BOT) operate and maintain the facility. Investors collect the
user fee during the concession to recover the cost of
construction, debt servicing and operation cost. At the
end of the concession, the facility reverts back to
Govt. who has given the concession.
2 Build own operate Similar to the BOT but without the transfer of
(BOO) ownership
3. Build own operate Same as BOT but the project is transferred to the
transfer (BOOT) Govt. after a negotiated period
4 Build transfer Govt. provides the right of way on which the highway
lease operate is built. Private party has to pay a nominal rent of
(BTLO) payment for the use of the land
5 Develop build This is a new concept. Initially the company does not
operate (DBO) assume commercial risk but is financially accountable
for building and operating the system as per
specification. Later on the company assumes
commercial risk as per the appropriate regulations laid
by Govt

 Reference
1. [Link]

2. Nirali Publication Contracts And Account Textbook

GOVERNMENT POLYTECHNIC, KARAD

Part B Report

Title Of Micro-Project -
“Report on Build Operate Transfer.”
01. Rational-

Build–operate–transfer (BOT) or build–own–operate–transfer (BOOT) is a

form of project financing, wherein a private entity receives a concession
from the private or public sector to finance, design, construct, and
operate a facility stated in the concession contract. BOT finds extensive
application in infrastructure projects and in public–private partnership.

02. Intended Course Outcome-

 Scaling up teams.

 Transparent communication.

 Reducing risks and cost control

 Gain nearshore development operations in an agree timeframe.

 Tapping into new talent pools.

03. Literature Review-

1. We have used some websites for gathering the information about our
Micro-Project.
2. We have also used books such as “Contracts and Accounts (22601)”.

3. We have taken some guidelines of our teachers.

04. Proposed Methodology-

1. Discussion about given topic.

2. Each of group leader and distribution of responsibilities.
3. Collection of information using different resources.
4. Analysis of information as per formats given.
5. Representation of information in required formats.
6. Preparation of project report.
7. Completion of assigned task.

[Link] used
Name Of
[Link]. Resources/Materials Specifications Quantity Remark

1. Laptop Intel CORE 13 1

_
2. Internet