A Primer on BOT and BOOT Contracts

Maritime infrastructure developer Harun Halim Rasip leads or participates in various port and terminal construction projects as president director of PT Tanah Laut Tbk, a public company in Indonesia. Involved in Tanah Laut for many years, Harun Halim Rasip assumed his present role in the company in 2007. A graduate of the University of Western Australia who studied accounting, Harun Rasip structures build-operate-transfer (BOT) and build-own-operate-transfer (BOOT) contracts with public entities, including the Malaysian government entities.

BOT and BOOT are common public-private and private-private party agreements recognized within certain areas of the world in which one private entity receives a contractual concession from the public (or other private) organization to finance, develop, and operate a facility or facilities. The two agreements differ in ownership, however.

With BOT contracts, the private-sector enterprise builds the project (often an infrastructure initiative) and operates the completed facility for a pre-determined time before handing over control to the other party. Oftentimes, the public (or other private) agency promises to purchase a pre-determined amount of the project output, thus ensuring that the development firm recoups some or all of its investment.

BOOT contract structures differ in that the private entity maintains ownership of the project during development and may charge tariffs to recoup its investment. When the contract ends, the company hands ownership over to the other party.