- 5 Marks
Question
Public-Private Partnerships (PPP) involve collaboration between government and a private sector company that can be used to finance, build and operate projects. Financing a project (for example, a highway) through PPP can allow a project to be completed sooner or make it a possibility in the first place.
Required:
Given the following types of PPP arrangements, discuss each of them and how they can be suitable for a highway project:
i) Build-Operate-Transfer (BOT)
ii) Design-Build-Finance-Operate (DBFO)
iii) Service Concession
Answer
i) Build-Operate-Transfer (BOT)
In a Build-Operate-Transfer (BOT) arrangement, the private partner is responsible for the design, financing, construction, and operation of the highway for a specified period. During this period, the private partner recoups its investment by charging tolls or other fees to users. After the concession period, the highway is transferred back to the government at no cost.
ii) Design-Build-Finance-Operate (DBFO)
In a Design-Build-Finance-Operate (DBFO) model, the private partner is responsible for designing, constructing, financing, and operating the highway. Unlike BOT, the private partner may also take on some maintenance responsibilities. The government typically makes availability payments or provides shadow tolls rather than charging users directly.
iii) Service Concession
Under a Service Concession, the private partner operates and maintains an existing or newly built highway while the government retains ownership. The private partner collects revenues from users, typically through tolls, and is responsible for ensuring that the highway meets specified service standards.
- Tags: BOT, DBFO, Infrastructure Financing, Public-Private Partnerships, Service Concession
- Level: Level 2
- Topic: Public-Private Partnerships (PPP)
- Series: Nov 2024
- Uploader: Salamat Hamid