BOT Contracts: Definition, How They Work, Types, and More

bot contracts

The model of BOT contracts was introduced a few decades back for building long-term public sector infrastructure projects in developing countries. This model is getting popular in building many types of huge infrastructure projects in many countries.

Due to the attractive features of the BOT model, it is becoming very popular in the private sectors, especially in the field of information technology. Nowadays, build operate transfer contract sample has become a very pivotal model in IT outsourcing with numerous variants of the models such as Build Lease Operate Transfer (BLOT), Design Build Operate (DBO), and others.

Let’s have a deeper perspective on different models of Build Operate Transfer Contract for Software and the main features and sections of a good BOT agreement template.

What Is a Build Operate Transfer Contract (BOT)?

Building a software-based project, operating it for the client, and transferring the project to the owner of the project after a certain short or long period in which the developer of the project will earn the returns on the investment with certain concessions and incentives is known as Build Operate Transfer agreement sample.

According to Forbes information, the concept of BOT 2.0 contracts has become very popular in the field of software development and other fields of information technology. The development of products and services through offshore development centers under the full control of the client is known as the BOT 2.0 contract. This can be signed for the short term as well as for the long term by providing the guaranteed security of the intellectual property, which is the core asset of IT-related businesses.

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What Are Three Major BOT Financing Variants?

Numerous new variants of BOT financing contracts are emerging in the marketplace. Three of those variants have become very popular in the field of information technologies. Let’s define those popular types of BOT agreements.

Build Lease Transfer Agreement (BLT)

The Build Lease Transfer (BLT) is a very popular type of BOT agreement sample. In this kind of public-private partnership (P3) model, a private business entity leases the land from the public sector organization on very concessional prices and builds an IT-based infrastructure and operates the infrastructure to earn the returns on the investment for a certain pre-agreed time and finally transfers the ownership of the entire facility to the public sector organization that offered the leased land.

Build-Own-Operate-Transfer Contract (BOOT)

This is one of the most common types of a BOT contract template for large projects for longer spans of time. In this variant of PPP project, a private firm or consortium of multiple companies and investors invests money for building a large public sector project in IT infrastructure or in any other domain. After completing the project, the private group of investors owns control over the entire facility and operates it for a pre-specified period of time to earn the returns on the investment. After completing the contract period, the entire facility is transferred to the public entity.

Like other public-private partnership projects under the category of Build-Operate-Transfer estimation module, the BOOT contract is also powered by the government incentives, concessions, and legal cover for earning returns on the invested capital for a long-term duration before the facility is handed over to the public organization.  

Design Build Operate Transfer Contract (DBOT)

The DBOT contract is another important type of BOT contract in which the entire process from designing to the operation and finally transferring of the IT-based facility is carried out by the private investor party mostly an outsourcing software company. After designing and building the facility, the operation mode is also covered by the investor company by leasing the company for a certain period of time – normally longer durations. Once the leasing period of operations is over, the facility is transferred to the client – normally the government entities.

What Should Major Sections a BOT Contract Sample Include?

A BOT contract is a comprehensive set of agreements signed with multiple parties that are stakeholders of the projects. The main stakeholders of a public-private partnership (PPP) project include the two core parties i.e., private investing entities and public organizations (client). The main contracts are done between these two parties, but numerous other stakeholders are also involved in the completion, operation, and handing over of the project to the client. The major stakeholders include:

  • Offtake purchasers
  • Input suppliers
  • Construction contractors
  • Lenders/financiers
  • Shareholders
  • Consultants
  • Operators
  • End-users 
  • And others

All of the above-mentioned stakeholders are taken on board in the BOT contract model through different agreements signed between the investor entity and the stakeholders. A comprehensive BOT contact may include the following sections:

build operate transfer agreement sections
  • Concession – This section should be powered by a dedicated contract commonly known as a concession contract. This contract is done with the government and investor organizations. This agreement section should cover all aspects of the concession provided by the government.
  • Guarantee – The guarantee from the government duly validated by the legal authorities should be added to the contract for future security.
  • Commercial agreement – The commercial agreement should be powered by a detailed contract that should include the basic unit price of the service or the overall purchasing contract by the government and end-user of the services through legal authorization.
  • O&M agreement – This section should also be powered by a detailed service level agreement SLAs, responsibility matrix, and others
  • Loan / Funding – This section should fully show the agreement of both parties about the sources of funding and loans taken from approved parties both local and international.
  • Development – This should clearly describe the resources and outsourcing that will be used for the development of the project. It should be properly agreed upon by both parties.
  • Contract period – The clear definition of concession and operation periods should be added to the contract.

Things to Consider for Arranging a Build-Operate-Transfer Contract

A BOT contract is a big contract that is very complex and should be designed carefully to avoid any kinds of confusion and lash-back. The most important things to consider for arranging a build-operate-transfer contract are listed below:

what to keep in mind while arranging bot agreement
  • Terms and conditions – Every point of this section should be monitored properly before signing the contract.
  • Contract duration – The duration and all conditions related to the operational period of the contract should be defined properly and clearly.
  • Prices – The prices for a unit as well as for a bulk purchase should be defined very carefully to avoid any revenue losses.
  • Equipment – The use of the equipment and other resources should be properly agreed with the outcome and cost of the same.
  • Tax and other concessions – A properly documented agreement for concession providing by the government should be there.

How We Are Highly Reliable BOT Investment Model Implementers?

We are one of the most qualified and reliable providers of human resources and infrastructure outsourcing services based in Ukraine. We help you in arranging cutting-edge software platforms, state-of-the-art equipment, and real estate facilities. We offer you:

  • Tech-talent recruiting – We can hire a highly skilled team of developers, designers, engineers, and other human resources from a large pool of skilled, qualified, and experienced pool of professionals.
  • Product building – Our offshore development center can help you build your product or service faster.
  • Managing service – Our professional teams can manage any IT product efficiently from remote captive centers
  • Transfer service – We are fully capable of operating and finally transferring the product, service, or platform under BOT contract to the client
  • Establishing a development center – Our help to establish a state-of-the-art and fully managed offshore development center on your behalf makes your BOT project a big success.

If you are looking for support for diverse BOT models, get in touch with us to explore options for the most suitable types of BOT contracts for your business right now!

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