Build–operate–transfer

Countries where BOT is prevalent include Thailand, Turkey, Taiwan, Bahrain, Pakistan, Saudi Arabia,[1] Israel, India, Iran, Croatia, Japan, China, Vietnam, Malaysia, Philippines, Egypt, Myanmar and a few US states (California, Florida, Indiana, Texas, and Virginia).

The first BOT was for the China Hotel, built in 1979 by the Hong Kong listed conglomerate Hopewell Holdings Ltd (controlled by Sir Gordon Wu).

In the BOT framework a third party, for example the public administration, delegates to a private sector entity to design and build infrastructure and to operate and maintain these facilities for a certain period.

Modified versions of the "turnkey" procurement and BOT "build-operate-transfer" models exist for different types of public-private partnership (PPP) projects, in which the main contractor is appointed to design and construct the works.

This contrasts with the traditional procurement route (the build-design model), where the client first appoints consultants to design the development and then a contractor to construct the work.

The private contractor designs and builds a facility for a fixed fee, rate, or total cost, which is one of the key criteria in selecting the winning bid.

Turnkey procurement under a design-build contract means that the design-build team would serve as the owner’s representative to determine the specific needs of the user groups; meet with the vendors to select the best options and pricing; advise the owner on the most logical options; plan and build the spaces to accommodate the function of the project; coordinate purchases and timelines; install the infrastructure; facilitate training of staff to use the equipment; and outline care and maintenance.

In particular, Oliver Hart (2003) has used the incomplete contracting approach in order to investigate whether incentives to make non-contractible investments are smaller or larger when the different stages of the project are combined under one private contractor.

However, sometimes the incentives to make cost-reducing investments may be excessive because they lead to overly large reductions of quality, so it depends on the details of the project whether bundling or unbundling is optimal.