The operator of the country’s largest railway project will receive a uniform rate based on performance and may be granted a concession lasting up to 22.5 years, according to the Department of Transportation.
The DOTr has designated availability payments as the bid parameter for the P229-billion contract to manage the North-South Commuter Railway (NSCR), the country’s largest infrastructure investment to date.
Acting Transportation Secretary Giovanni Lopez said the concessionaire may get up to 22.5 years of tenure, including partial operations, in running the NSCR.
‘The approved contract period is for the pre-operations, partial operations, (plus) 15 years of full operations, for a maximum 22.5 years. Extension was not part of the approved parameters, terms and conditions for the project,’ Lopez told The STAR.
In using availability payments as the bid parameter, the DOTr will be assessing what investments bidders can commit based on predetermined fees.
This means the concessionaire will get paid regularly not from fares collected from passengers, but from budget allocated to the DOTr.
Bangkok-based consultancy Mahanakorn Partners Group said public-private partnerships (PPPs) with availability payments compel concessionaires to perform better to receive compensation.
Since PPPs are long-term, Mahanakorn said availability payments also provide the government with a predictable schedule for its budgetary obligations.
This is different from the PPP model for the Light Rail Transit Line 1 (LRT-1), the concession of which was awarded to the Light Rail Manila Corp.
LRMC recovers its investment capital for the operations and maintenance of the LRT-1 through passenger fares, which are scheduled to increase every two years.
However, this has caused legal troubles for the government, as it denied fare hikes filed by LRMC multiple times.
Prior to the recent fare adjustment in April, LRMC had piled up a deficit of P2.17 billion dating back to its first petition in 2016. Despite this, the operator has delivered on its commitments, including the ongoing extension works for the LRT-1.
China Bank Capital Corp. managing director Juan Paolo Colet expects foreign multinationals to vie for the operations and maintenance of the NSCR after the DOTr conducted roadshows in Singapore, Paris, Manila and Tokyo.
However, Colet warned that some investors may be discouraged to bid for a project as big as the NSCR in light of corruption scandals hounding public works, particularly flood control.
In August, President Marcos exposed that 15 contractors have bagged almost 20 percent, or P100 billion, of the P545 billion worth of flood control projects since 2022.
‘The long-term nature of this project means potential concessionaires would have to take a long view of our country, including our economic prospects and political dynamics. Hopefully, by the time the government launches its bidding, there would have been a clear resolution to the current corruption scandals,’ Colet told The STAR.
Rizal Commercial Banking Corp. chief economist Michael Ricafort underscored the importance of fair play in the concession. Given the length of the deal, bidders would prefer that rules are all set in stone and mechanisms are in place for dispute settlement.
‘It is important to not have changing rules in the middle of the game in view of the six-year term of presidents and their administrations,’ Ricafort told The STAR.
The NSCR, costing P873.6 billion and co-funded by Japan, will run for 147 kilometers across 35 stations in three regions, and it is expected to ferry 800,000 passengers daily once completed.
The future concessionaire of the NSCR will be tasked to operate and maintain its trains, stations and depot, including its interoperations with the Metro Manila Subway Project.