Build-Operate-Transfer Contract


DEFINITION of 'Build-Operate-Transfer Contract'

A type of arrangement in which the private sector builds an infrastructure project, operates it and eventually transfers ownership of the project to the government. In many instances, the government becomes the firm's only customer and promises to purchase at least a predetermined amount of the project's output. This ensures that the firm recoups its initial investment in a reasonable time span.

BREAKING DOWN 'Build-Operate-Transfer Contract'

This type of arrangement is used typically in complicated long-term projects as seen in power plants and water treatment facilities. In some arrangements, the government does not assume ownership of the project. In those cases, the company continues running the facility and the government acts as both the consumer and regulator.

  1. Capital Expenditure (CAPEX)

    Capital expenditure, or CapEx, are funds used by a company to ...
  2. Infrastructure

    The basic physical systems of a business or nation. Transportation, ...
  3. Capital Budgeting

    The process in which a business determines whether projects such ...
  4. Investment

    An asset or item that is purchased with the hope that it will ...
  5. Project Finance

    Defined by the International Project Finance Association (IPFA) ...
  6. Total Cost Of Ownership - TCO

    The purchase price of an asset plus the costs of operation. When ...
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