The strengths of BOTs include their ability to bring private money into the construction of new facilities or the substantial renovation of existing ones. BOT agreements also tend to reduce market and credit risks for the private investors because the government is the only customer, reducing the risks associated with insufficient demand and ability to pay. Private investors will avoid BOT arrangements where the government is unwilling to provide adequate assurances that the private sector investment will be paid back. As the BOT model has been used to build new power plants in many developing countries, potential financial partners and operators have less of a learning curve in structuring such transactions in the water and waste sectors.
Among the weaknesses of a typical BOT is the fact that it generally involves just one facility or a number of facilities, and thus restricts the partnership's ability to help optimise system-wide resources or efficiencies (notwithstanding the variations described above). BOTs can, however, provide a platform for increasing local capacity to operate infrastructure facilities by exposing local employees to international practices. BOTs provide some competitive incentives for efficiency, since private companies must compete on technical and financial terms to win the contracts. However, the duration and complexity of BOT arrangements make these contracts difficult to design, a fact that may eventually undermine the positive effects of the initial competition. For example, many BOTs have to be renegotiated to reflect changed circumstances once they are under way. These negotiations are then essentially conducted in the absence of competition.