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 …show more content…
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 time was interested in keeping the costs of the project minimal (Auditor-General, 2013), the BOOT scheme entered into was an appealing one. As it appeared to be a means for the structure to be built without the KDC, itself, having to come up with the large construction costs. However, there were no perceivable records that the KDC fully …show more content…
If a life-cycle risk-management approach had been utilised these risks may have been mitigated, by focusing early in the project on optimum risk-ownership allocation, particularly by including a clear knowledge of alternative options; as well as early attention being paid to risk management, prior to the tender process (Zou, Wang, & Fang, 2008). It is within the early stages of the project that finances should be clarified, therefore, any future means of funding can be matched. Thus avoiding some of the other factors highlighted in the Auditor-General’s inquiry, but not focused on in this case study. Given the risk-profile of the funding provided by the Auditor-General (2013), a life-cycle risk-management system would have been appropriate for the KDC’s project. By appropriately identifying value drivers and risks, such as price increases, from the initiation of a project, a member of the project team should have been appointed responsible. This would have provided a system where contractor behaviour could have been held in check as well as assured accountability throughout the project (Beckers et al.,
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 …show more content…
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 time was interested in keeping the costs of the project minimal (Auditor-General, 2013), the BOOT scheme entered into was an appealing one. As it appeared to be a means for the structure to be built without the KDC, itself, having to come up with the large construction costs. However, there were no perceivable records that the KDC fully …show more content…
If a life-cycle risk-management approach had been utilised these risks may have been mitigated, by focusing early in the project on optimum risk-ownership allocation, particularly by including a clear knowledge of alternative options; as well as early attention being paid to risk management, prior to the tender process (Zou, Wang, & Fang, 2008). It is within the early stages of the project that finances should be clarified, therefore, any future means of funding can be matched. Thus avoiding some of the other factors highlighted in the Auditor-General’s inquiry, but not focused on in this case study. Given the risk-profile of the funding provided by the Auditor-General (2013), a life-cycle risk-management system would have been appropriate for the KDC’s project. By appropriately identifying value drivers and risks, such as price increases, from the initiation of a project, a member of the project team should have been appointed responsible. This would have provided a system where contractor behaviour could have been held in check as well as assured accountability throughout the project (Beckers et al.,