BOOT Projects model is beneficial for certain projects, there are many risks and problems associated with it and may act as a constraint in the implementation of these projects.
The main problems associated with BOOT projects are as follows:
There may be many reasons for this. One of those reasons may be unavailability of experienced developers. If the developer is not experienced enough, then the project may face many problems in its completion. The other reason may be absence of equity investors. Therefore, a well organized structure is very essential for successful completion of these projects.
Due to the complicated structure of BOOT projects, it becomes difficult to maintain the project until the end. It requires commitment and interest, which may be lost as the project proceeds due to longer concession period. In addition, detailed planning, time and money are required throughout the concession period, to maintain these projects and it may be difficult to invest these in the project.
Many risks are associated with BOOT projects. BOOT projects have elemental and global risks. Elemental risks are associated with elements of the BOOT projects while global risks are not associated with the elements of the project.
In BOOT projects, the global risks are allocated through the concession agreement while elemental risks are allocated through the construction, operation and finance contracts.
BOOT projects are also associated with risks of market price, financing, technology, revenue collection and political issues.
There are some operation and maintenance issues with BOOT projects as well. These operation and maintenance issues are as follows:
- Type of the operation and maintenance contract depending on the suitability of the facility
- Operation and maintenance of the technology during the working life of the facility
- Costs involved with the project and resources required during the operation period
- Requirement of the facility
- Operation and maintenance methods needed by the principal
- Unavailability of operational materials
- Operational risks
- Licenses, authorisations, and permits
- Sudden breakdown of machinery
- High spurt in input cost
Operators are responsible for managing the project assets. These should be operated on the basis of maximizing the profit or minimizing the cost on behalf of the promoter.
For the success of the BOOT projects, it is essential to provide effective service to the client. Operation and maintenance issues should be addressed at the bidding stage of the project and not after the project has been awarded.