BOO Contract – What is it, definition and concept | 2022

The BOO contract is a type of agreement by which an investment project can be developed. Under this modality, the contractor builds the work and maintains its property, operating and exploiting it.

That is, the BOO contract is a type of contract by which the contractor retains ownership of the work after completion. Thus, he does not have the obligation to transfer it to the contracting party or client.

The contract name BOO comes from the English words Build, Own, Operatewhich in Spanish means to build, own, operate.

This type of agreement is usually signed within the framework of a public-private association, with the private party being the contractor and the contracting party, the State.

A public-private association is a modality through which public works are developed, but calling on private companies that will contribute their resources, experience, technology, knowledge and equipment. Likewise, the risk is distributed between the private sector and the State.

Through this type of association, large infrastructure works are usually carried out, for example, to provide public services. For these projects, one of the possible contract modalities is the BOO contract, but it is not the only one.

Characteristics of the BOO contract

Among the characteristics of the BOO contract we can highlight:

  • Unlike other modalities, such as the BOT or BOOT contract, the contractor does not transfer ownership of the project to the contractor at any time.
  • The contractor has the right to charge for the use of the developed work.
  • Although the contracting party, the State, does not obtain ownership of the developed work, it can intervene as a regulator. This, for example, by supervising that the rate charged by the contractor to the users is adjusted to the objectives. It may be that the Government seeks that citizens can acquire the service provided at a rate that is accessible. Let us remember that the work developed may be intended to provide a public service.
  • This type of contract can be classified in practice as a privatization.
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Example

An example of a BOO contract could be the following: The Government seeks to promote the construction of a wastewater treatment plant on the outskirts of the capital city. For this, it calls for a public tender and chooses the proposal from the company HU Contratistas.

It is agreed to sign a BOO contract, by which the company develops the work and maintains its property. In this case, the firm does not charge citizens directly, but the State for the services that will be provided in the treatment of water. This, during a period specified in the contract.

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