Essay on The Concept Behind A Boot Scheme

919 Words Jun 11th, 2016 4 Pages
The concept behind a BOOT scheme is that the partner from the private sector designs and builds the specified structure at their own expense. The structure is then owned and operated by this partner for a contracted number of years, charging for the services provided by the structure. The income gained from the use of the structure covers the cost of the construction of the structure. At the end of the contract period the structure in question is then transferred to the public partner, either at no or a previously agreed upon price (Chu, 1999).
BOOT schemes are an attractive option for public partners such as the KDC who possess limited funding options; as the end result, ideally, is an item of infrastructure where the services provided are paid for by the private partner; rather than the full cost for the build being taken on by the KDC in this case. Unfortunately, BOOT schemes are known to accrue additional costs to pay a profit to the private partner. In addition to, the occurrence of tie-in effects, where the public partner has committed to work with the private partner and cannot alter the arrangement in lieu of low switching costs, until the private partner has recouped its expenditure for the project (Chu, 1999). BOOT schemes can also be somewhat inflexible, as the public partner’s commitment to acquire the structure, however the agreement is stated, could tie-up the capital and credit of the public partner (Jefferies, Gameson, & Rowlinson, 2002). As the KDC at the…

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