The financial risks in build‐operate‐transfer projects

TLDR

The build–operate–transfer model enables rapid infrastructure delivery when public funds are scarce, but its complexity and multiple stakeholders create significant risks. The study compiles and classifies a comprehensive list of financial risks to aid practitioners in drafting successful BOT concession agreements. The authors justify and describe each risk, then categorize them by lifecycle stage and source. The resulting framework identifies 27 financial risks that support risk managers in evaluating projects before bidding and during negotiations.

Abstract

The build–operate–transfer (BOT) approach for developing infrastructure projects is a technique that allows fast realization of public works in cases of a shortage of public funds. This process is full of risks, due mainly to the complexity and extend of the disciplines, public agencies and stakeholders involved. The identification, classification and presentation of a comprehensive list of this type of risks will provide BOT project practitioners with a useful tool in the effort of setting up successfully a BOT concession agreement. The approach presented provides a practical insight into 27 financial risks, which are associated with the BOT projects in their lifecycle. This is achieved through proper justification and description of the content of each risk. Furthermore, a categorization of the risks is presented, according to the stage at which they occur and the sources of their origin. The findings of this research would facilitate the risk analysis process that is being conducted by risk managers prior to bidding for a BOT project and during the negotiation period.