Pros And Cons Of Long-Term Franchise

Pros And Cons Of Long-Term Franchise

Long–Term Franchise (BOT or LDO)



Around the world, long–term franchises for infrastructure facilities are usually referred to as BOT projects, because under this type of contractual agreement the private sector builds, operates, and eventually transfers to government the facility in question. When a lease of the underlying land is involved, this type of arrangement is sometimes called Lease–Develop–Operate (LDO); in this case the "transfer" back to government is implicit approach is widely used for several reasons. First, it taps into a different pool of capital than is normally available for public infrastructure projects, thereby expanding the range of potential funding sources. Second, private consortia are often able to design and build large facilities in significantly less time than is possible via traditional government procurement methods. Third, both the up–front cost and the operating costs may be ... Show more content on Helpwriting.net ...Fourth, BOT is a way of shifting many of the risks of project development from the public sector to the private sector. For these reasons, airport BOT projects have proliferated in recent years. As of early 1994, there were 15 airport BOT terminal or runway projects under way worldwide, and another five projects to develop entire new airports. In addition, another 18 such projects were under study. No outright airport BOT project has yet occurred in the United States, but Transport Canada used this process to develop the successful international terminal (Terminal 3) at Toronto (as will be discussed in the next section). Many U.S. airports have used something resembling an LDO process to develop new terminals sponsored by either one or a group of airlines, which gain exclusive control of the gates in that terminal. But this type of project raises important competition and access issues that do not arise when the developer/operator is an independent third party which relates to all airlines equally as users (as is the case

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