Build-Own-Operate or Build-Operate-Own?

BOO Contracts and Examination of a Conflict in Related Laws and Regulations

BOO contracts are one of the models of Public–Private Partnerships (PPP), encompassing three concepts: Build, Own, and Operate.

The most important and distinctive stage in this type of contract is the ownership stage, whereby the investor becomes the owner of the project and may exercise all proprietary rights. This ownership is particularly significant for financing purposes, as the investor may pledge the project’s assets to banks as collateral and obtain loans.

Furthermore, ownership of the project by the investor, unlike the BOT model, is not limited to the contract term, and the investor is not obliged to transfer the project back to the government.

A review of Iranian laws and regulations related to this contractual model reveals a contradiction in its sequencing: in some laws it is referred to as Build–Own–Operate, while in others as Build–Operate–Own. Examples are as follows:

Examples of laws and regulations defining BOO contracts as “Build–Operate–Own”:

• Article 34 of the Law on Permanent Provisions of Development Programs of the Country

• Article 48 of the Sixth Five-Year Development Plan Law

• Article 133 of the Fifth Five-Year Development Plan Law

• Article 3 of the Executive By-law of Note 19 of the Single Article of the Budget Law of 2018 (1397)

• Article 1 of the Directive on Determining the Guaranteed Purchase Price of Electricity, subject to Article 48 of the Sixth Five-Year Development Plan Law

• Article 5 of the Procurement By-law of the National Water and Wastewater Engineering Company

Examples of laws and regulations defining BOO contracts as “Build–Own–Operate”:

• Article 1 of the Resolution of the Executive Council for Information Technology regarding the Directive on Non-Governmental Participation in Providing Government Electronic Services of the Islamic Republic of Iran

• Clause 4 of the Amended Resolution of the Economic Council concerning the issuance of a license for guaranteed purchase of electricity produced by Unit International Turkey from a combined-cycle power plant

• The General Conditions, Special Conditions, and Standard Appendices of BOO Contracts (Build, Own, Operate) issued by the Engineering, Research, and Technology Department of the Ministry of Petroleum Although, according to the prevailing opinion and the view of most jurists, the correct definition of BOO contracts is Build–Own–Operate.