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Bidding process delays: understand the obstacles to the transport concession agreements

By Luize Sampaio


In January this year, the state government transferred approximately 22 million reais in single ticket subsidies to public transport modes, which is an amount that before the pandemic corresponded to a normal monthly average. However, since March, with the beginning of social isolation, this amount has been decreasing significantly and, in April, the transfer was around 2 million reais. This difference of almost 20 million is due to the reduction in the number of passengers. The financial data, which is part of a survey conducted by Casa Fluminense, shows that the new scenario has affected the accounts of companies. They have now appealed to the state in the search of a way out of this crisis.


The first attempt by Governor Wilson Witzel was to propose Bill (PL) no 2501/2020 in early May. This had as an objective the creation of emergency financial support for transport companies in Rio de Janeiro to keep going during the pandemic. However, on the day of the vote at Alerj, the government backtracked and said that it would reformulate the text of the bill to clarify that the support money would not come from the pocket of the executive branch. Since then, no other proposal has been made and the governor has been concentrating his actions on trying to remain in office. According to an analyst from the Urban Mobility Program at the Brazilian Institute for Consumer Protection (Idec), Kelly Fernandes, the current crisis in the public transport system is significantly connected to an earlier circumstance, the formulation of the concession agreements.


“Brazilian cities do not have agreements that are prepared to deal with possible crises. Idec analyzed, in partnership with ITDP (Institute for Transport and Development Policies) and IEMA (Institute of Energy and the Environment), invitations to bid at the 12 most populous capitals of the country, including Rio de Janeiro. None of the agreements had clauses that would allow the government to renegotiate the terms when faced with crisis scenarios,” affirmed the analyst.

The researcher also points out that if public resources are not allocated to the financing of the system it is the users who will have to pay the bill for the crisis triggered by Covid-19. The Map of Inequality showed that part of the population of the Metropolitan Region of Rio already spends ⅓ of its income on fares. The most affected populations are from Rio de Janeiro, Duque de Caxias and Nova Iguaçu.


[THE WEIGHT OF THE FARE The spending with transport already commits ⅓ of the income of part of the population from the Metropolitan Region of Rio. Total income of a resident from the Metropolitan Region of Rio. Residents from the municipalities of Rio de Janeiro, Duque de Caxias and Nova Iguaçu are among those who spend the most.] Data compiled from the 2020 Map of Inequality.

This survey was performed based on direct contact with each one of the local governments or the responsible departments because this data is not currently available on any state website.


One step back: invitations to bid, bidding processes and agreements. What do these have to do with the pandemic?


Bidding processes are defined in the guidelines of the Federal Senate as a move by the government to procure private companies to offer goods and services to the state. In the transport system, this call is made through invitations to bid in which interested companies compete for the concession of the state and the municipal government to operate one of the modes. The concession process is one of the management alternatives of public transport. The rules and guidelines that the companies need to follow are defined in the invitation to bid. One of the most controversial points in the clauses is the effective time period of these agreements.


The survey conducted by Idec shows that the agreements in the country establish long concession times for the companies. According to the institute, this makes it difficult to make changes in the sector to adapt, for example, to the scenario of a pandemic. Another problem with these long-term agreements is in the issue of competition because the access to the transport market is restricted to the companies that are already in charge.


In the Metropolitan Region of Rio, the bus system models are variable. There are municipalities that operate by concession, but there are also others in which there are no defined rules of permission. Finally, there is the case of Tanguá, which according to the Map of Inequality does not have any municipal bus line. The capital of Rio de Janeiro received its first public bidding process for bus lines in 2010, but the outcome of this process was not positive. The results were: constant obstacles in the time period for the bus companies to modernize their fleets, an investigation into the fraud scheme in the bidding processes and the bus CPI [Comissão Parlamentar de Inquérito [government investigation]] in the Municipal Chamber.


“The issue of the time periods of these documents is an obstacle in the midst of the coronavirus crisis. For example, the bus concession given in the municipality of Rio was for a period of over 20 years, which can also be extended for another 20 years. Now we have a pandemic and very long agreements. How can these documents be re-examined and changes proposed for the future when these time periods have been previously agreed upon?” asked Kelly, an analyst from Idec.


[TIME PERIODS OF THE STATE TRANSPORT MODES MODE, TRAINS, METRO, BOATS COMPANY WITH THE CONCESSION COMPANY RESPONSIBLE Japanese Conglomerate Mitsui CONCESSION TIME PERIOD The system for electronic ticketing, RioCard, has been operating without a bidding process since its creation in 2010 **but made a request in 2015 for an early revocation of the concession. The new bidding process should take place in 2020 or 2021.]

Among the legal alternatives for proposing changes in the concessions of the transport sector are: the creation of amendments in the agreements and decrees at municipal and state levels. The two options are mechanisms used to complement an already implemented legislation. Local governments that want to change some issues in the agreement, excluding changes of the responsible company and the time period of the concession, can use these legal tools in parallel with the current agreement. This panorama was pointed out by the public transport coordinator of ITDP, Beatriz Rodrigues, who reinforced the need for changes and the revision of these agreements.


“New parameters need to be inserted in these concessions that result in more efficient, clean and inclusive systems. The agreements can no longer be an obstacle in this process and they really need to encourage this. In general, the concession agreements do not present many incentives to a system that should be of a higher quality for the user with efficiency, sustainability and resilience. Several aspects need to be reviewed in order to include financial, technical and environmental incentives, which are capable of facilitating and contributing to the improvement of the system,” explained Beatriz.

The evils of privatization

The trend of removing the government as an agent and service provider has been strengthening in the last decades in different sectors, the most recent case being that of Cedae. When the state gives up operating a service that should be generally accessible to the population as a constitutional social right, as is the case with water and transport, it is placing this right within market logic. According to the analyst from Idec, from the time when the government concedes the operation of the system, it is admitting that the public transport service will be a profit generator for someone, namely a third party that does not prioritize passenger satisfaction.


“Companies do everything to have more internal rates of return, the famous IRR, which are determined in the agreements. The profit of the companies is described in this document, the service being profitable is going to make the companies have an interest or not in the operation of the system. It is a culture of privatization and when the government does this it places these services within a logic in which the search is for more profit and not for the quality or accessibility of the service,” explained Kelly.

For the expert, these concession processes have removed the government from the transport system. One of the most serious consequences of this has been regarding access to the cost and revenue data of the operations. These amounts ​​are not currently made public to the population and, in some cases, not even to the government.


“Very often, the executive branch does not really know how much the system costs. There is no control over this amount and moreover why it is the price it is. The government is hostage to the spreadsheet information that the transport companies offer them. If it says that a new tire costs 'X reais' this is what will be used as the figure and that's it,” explained the analyst from Idec.

How to change this scenario?

Changes to these scenarios are only possible if the state begins to perform a more active role in this process. Kelly explained that it is common, when the government authorizes these concessions, to believe that the problems of that service will no longer be the responsibility of the state. In fact, what happens in a concession is that the government takes on another role and it becomes an inspection agent. Among the actions that need to be performed by the state in this situation are:


  1. The creation of operational control centers

These centers will help provide an overview of how many buses are circulating around the city, the occupancy rate of these vehicles, the travel time between destinations and other strategic data both for inspection and for the next bidding processes.

  1. The analysis and inspection of the indices used to modulate the revenue and cost of the operation

The transparency of data on ticketing and fare collection is included in this monitoring. Last year, after pressure from the House and other civil society organizations, Alerj approved the PL [Bill] of the single ticket, which takes the control of the management from Fetranspor and will provide six-monthly data about the operation.

  1. Sustainable goals established in the agreements

Among the main actions are the reduction of the emission of polluting gases and the electrification of the fleets.

  1. Conducting qualitative research

The provision of an open channel with passengers through the creation of a customer service system for the population to make complaints and ask questions.

  1. Adopt procedures to combat gender and race violence

The Map of Inequality provides data that proves the invisibility of these issues. Operational protocols must be constructed to deal with these situations with investment in the training of employees in addition to the production of case records.


Focusing on the monitoring of the quality of the service needs to be one of the priorities, especially now in the midst of a pandemic where questions about the quality of the service have also become a public health issue, such as overcrowding. "We can no longer allow a concentration of up to 6 to 8 passengers per square meter as has been allowed before, in any mode of transport," concluded Kelly.


Another worrying factor in terms of transport quality are the requests for help amid the political and economic crisis in Rio. The mobility analyst believes that bus companies may use the situation to attempt to renegotiate the time limits for improvements in the system. In the long term, this may signify a step backwards in the service. The quality of the service is already affecting passengers because transport has what experts call captive demand. Part of the population, in general the poorest, need this service and have no other alternative for travel except public transport. Therefore, even with a bad service, this group still has to use the system.


In addition, another defect in the bidding process agreements of the Brazilian cities is a concern: the lack of propositional guidelines in relation to gender and race issues. When analyzing the documents from the main Brazilian capitals, the research also indicated that very few had tools to combat violence and harassment, clauses on driver training or policies of affirmative action when hiring employees.


“When an agreement is planned, it is essential that it mainly considers the life of the most vulnerable population in terms of mobility. These are the poor, blacks, women, the elderly and children. This has to be taken into account at all times and throughout the agreement. In addition, it is necessary that more progressive goals for gender and race parity are on the agenda of the composition of the companies,” concluded Beatriz.

This is the second in a series of reports on transport. The next report will be about planning. Enjoy!


Also read: Far beyond the fare, debates on the financing of transport pave the way to guarantee access

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