2.1.24 Under the DBFO model, the private sector can own the land and PPP facility thereon that it finances and develops. However, this is not always the norm. There are some DBFO deals where the public agency will own the land and PPP facility thereon once construction is completed. For example, in some UK Roads and Prisons PPP deals, the public sector retains ownership of the land and assets, but the contractor will be responsible for the operations. Public agencies entering into PPP deals have to decide whether Government or the private sector partner should own the facility.
2.1.25 In general, there are two ownership structures for PPP projects:
a) Contractor-Owned, Contractor-Operated (COCO). In COCO, the ownership of the land and facility thereon resides with the private sector for the length of the contract. COCO is particularly suitable for projects where:
i. the facility is not dedicated for Government's use only but can be shared by other users, i.e. there is scope for generating additional revenue flows through providing services to other users;
ii. Government's usage is only for a portion of the asset life. For example, if Government only needs the asset for 5 years out of its economic life of 30 years;
iii. the owner can affect the productivity of the asset through enhancement, maintenance or upgrading during its life, especially when the risk of obsolescence of the asset is high; and
iv. the main "productive" capacity of the asset is through its operations, i.e. the facility plays an integral role in providing the service for the users. For example, COCO is suitable for PPP water treatment plants where the private sector partner has to operate the asset to supply water to the users/Government. This is in contrast with school buildings, where the facility is meant to house the productive activities, i.e. education activities, but is not an integral part of the education services that is delivered.
b) Government-Owned, Contractor-Operated (GOCO). In GOCO, the private sector will finance and develop the facility, but the public agency retains ownership of the land. Upon completion of construction, the ownership of the facility will be held by the public agency since it owns the underlying land. GOCO is suitable for critical and unique facilities that should remain under Government's ownership and control, e.g. national defence infrastructures. The contractor maintains all the properties but the land title to the properties remains with the public agency. However, with GOCO, the public sector has to assure the private provider and its financiers that their investment in the facility will be safeguarded even if they do not hold title to the asset. This includes giving the right to the operator to use the land and operate the asset on the land once it is developed.