When no operating contract binds the public and private partners, the project becomes more of a standard commercial venture, which is relatively rare in the U.S. In these cases, the developer is much more like an owner, and so the option would be called BOOT rather than BOT. The eventual no-cost transfer of the facility to the public sector would most likely be well after the economic life of the facility has expired, or at least not until the financing has been repaid.
The Build-Own-Operate (BOO) method involves the greatest degree of private sector participation in development of a new facility. Under this model the sponsoring consortium finances the project and operates the facilities as owner; it is not required to transfer the facilities back to the host government. These types of facilities are sometimes called "merchant" facilities because the owner's risks are about the same as if it built and operated any other type of business, like a hotel. This type of arrangement works well when it can be anticipated that a strong and ongoing market will always exist for the service. In the U.S. this option has worked well with solid waste disposal facilities where the owner has several customers available even if the initial one - the public utility - discontinues using them.
The private sector often conceptually prefers the absence of a transfer component so it can maximize its return on investment. Thus, in a BOO the contractor is more committed to the investment than it would be with a transfer, particularly in cases when transfer occurs relatively quickly. For instance, it is likely to operate and maintain the facility most effectively. In essence, the facility is run like a pure commercial venture.
Partnerships in Existing Projects/Facilities. Public-private partnerships are also available for the operation, redevelopment and financing of existing services and systems as well as new ones. In the case of existing systems, the question of asset transfer and ownership becomes a significant variable in determining the appropriate partnership structure, as well as the responsibility for system financial performance.
Service Contract The public sector retains the greatest degree of control over its services and facilities when the private sector participates through a service contract. In service contracting, or "contracting out," the govevrnment contracts with private entities to supply functional responsibilities that the governmental previously performed, such as garbage pick up, billing and collection, janitorial services, etc. By allowing the private sector to compete for service contracts, the government introduces competition into a previously monopoly-driven area. The public can benefit from competition in reduced service delivery costs, improved service quality, and improved morale of public employees and managers.
In the U.S. existing government employees are often permitted to compete along with private firms for the right to a service contract in a method called "managed competition." The existing employees submit a proposal the same as the private providers, and they are evaluated on the same basis. This method is fraught with difficulties and is often challenged by the private sector as inherently unfair, but it can be quite effective at achieving employee participation in the overall process.