Impact of Financial Package versus Technical Solution in a BOT Tender

Abstract

The two main components in the tender of a privatized infrastructure project let under the build-operate-transfer (BOT) contractual arrangement are the technical design and the financial package. This paper examines the impact of a financial package when assessed against the technical design during the selection process. It is concluded that the ability to provide an attractive financial package is critical under the conditions when (1) the project is technically certain; (2) the tolls to be charged are of government's main concern; (3) competition is keen; and (4) the project viability and financing are uncertain. However, promoters must not underestimate the importance of an innovative technical solution as it could make an attractive financial package possible. The role of an innovative technical solution was never in question in the cases studied in spite of the great importance attached to the financial package by the governments.