Growing use of design, build and operate contracts

Design, build and operate (DBO) contracts were increasingly used in the
1980s onwards by government departments in the UK who saw a benefit in
not shouldering all the complications of building and operating a new facility, but in passing this out to the commercial sector. Such contracts have the added advantage that if a contractor has to operate the works he has built for a number of years, he has a financial incentive to use good quality design and materials to minimize his expenditure on operation and maintenance.
There are several variations of DBO contracts. ABOT ‘build, operate, transfer’ contract usually implies the client pays for the works as they are constructed and takes over ownership of them at the end of the operation period. A BOOT ‘build, own, operate and transfer’ contract usually implies the contractor finances construction of the works (or negotiates with some funding agency to provide the funds) and transfers ownership of the project to the client at the end of the operational term of years.
A variety of ways of funding DBO contracts and re-imbursing the contractor are possible. Where a contractor provides all the finance required under a BOOT contract and receives income from the project output, this approach is indistinguishable from ‘Private Finance Initiative’ (PFI) described below – save that, under BOT and BOOT contracts the promoter usually identifies the size and nature of project required, whereas under PFI the contractor may do this.