High Speed Train could have a consortium of building firms

The five largest construction firms in the country, namely Camargo Corrêa, Odebrecht, Andrade Gutierrez, OAS and Queiroz Galvão, may enter the contest for the right to provide the bullet train that is to connect Campinas and Rio de Janeiro, passing through São Paulo, making one sole consortium. According to a high-profile Government source heard by Valor, the building firms are already sharing detailed studies about the project and are now appraising which foreign company would be the best technological option for participation in the bidding process. The companies have declined to comment on this matter.

One month after the Government officially postponed the bullet train tender for the second time, this move made by the large building firms has caused an upheaval to the plans of the manufacturers of bullet trains. According to this selfsame source, there is now a contest between the manufacturers, seeking to get involved in this group. This is a heavy fight, as many manufacturers are interested in participating in the project only as suppliers of equipment, and not as consortium members. This is the case of such companies as CAF and Talgo, both from Spain, and Bombardier, from Canada.

This concentration of building firms may reduce the number of competing parties in this auction process, even though the Government is not particularly concerned with getting a large number of candidates.  In the tussle for the behemoths of concrete, according to this source, the Korean consortium – with the technology of Hyundai Rotem – has shown a greater financial advantage, offering a more competitive price. Its main rivals, however –French company Alstom and the Japanese Shinkansen – have systems which are more mature from the technological standpoint.

The concerns expressed by these manufacturers are fully justified. If this group of large construction firms does indeed get consolidated and then signs a partnership agreement with one of the suppliers, this means that there shall only be one course of action still open: that of seeking smaller building firms, or withdrawing from the project.

One institution that has already realized this is the São Paulo State Association of Businesspeople for Public Works (Associação Paulista de Empresários de Obras Públicas – Apeop). The Association has studied the project in depth and has managed to get 19 companies of the segment to take part in the auction. The institution’s challenge now is that of convincing a manufacturer of high-speed trains to be part of the group as an investor. We have spoken to several manufacturers of such trains, but unfortunately their posture is that of only supplying equipment. Frankly, if our consortium does not have a manufacturer as a partner, the whole project becomes unfeasible, says the President of the Apeop, Luciano Amadio.

Two months away from the delivery of the commercial proposals, the building companies have pressed the Government to give way in a few more points of the Invitation to Bid. One of the main requests is that of the reduction of taxes on importation of equipment, but according to the National Land Transport Agency (Agência Nacional de Transportes Terrestres – ANTT), nothing else can be forsaken in terms of federal taxes. Everything that could be cut has already been shorn off, and all that remains now is State Taxes such as Value Added Tax (Imposto Sobre Circulação de Mercadorias e Serviços – ICMS), said the General Director of the ANTT, Bernardo Figueiredo.

Out of the requests made so far by the companies, the Government has agreed to give way in one of them, according to Mr Figueiredo. According to the current tender process, it is the Government that chooses to whom they shall be assigning the technological knowledge as absorbed with the development. The manufacturers, however, complain saying that they could have their technologies passed on to a major competitor. We shall change this rule for the tender process. The choice of which company shall receive the transfer of technology shall be the result of a consensus between the Government and the manufacturer, in the words of the General Technology Director of the ANTT.

The Government shall also allow the companies to change the route as proposed in the Tender Documents, provided the conditions of access to the stations are maintained, and also is the speed of 350 kilometers per hour. First postponed last November and again this April, the bidding process for the bullet train to connect Campinas, São Paulo and Rio de Janeiro has now been scheduled for 11 July, which shall be the date for receiving proposals. The envelopes shall be opened on 29 July.