During its 20 years in business, Deware Construction Company has always developed its contracts under a fixed-fee or cost-plus arrangement. Now it has been offered an opportunity to participate in a project to provide cross-country highway transportation in an international setting, specifically, a country in Africa. If accepted, Deware will work as subcontractor to a larger European corporation, and the BOT form of contracting will be used with the African country government.
Describe for the president of Deware at least four of the significant differences that may be expected when the BOT format is utilized in Iieu of its more traditional forms of contract maki ng.
1. If a corporation accepts the BOT form of contracting, (a) identify two risks taken by a corporation and (b) state how these risks can be reduced by the government partner.
2. The estimated annual cash flows for a proposed city government project are costs of $450,000 per year, benefits of $600,000 per year, and disbenefits of $100,000 per year. Determine the (a) B/C ratio and (b) value of B – C.
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