Government will outsource projects of railroads

The federal government decided to outsource the production of projects to build new railroads to try to unlock the investment package aimed at the industry, one of the main focuses of President Dilma Rousseff to eliminate bottlenecks in the national logistics. The information was given on this Friday (December 27) by the Chief Minister of the Civil House Gleisi Hoffmann.

According Gleisi, part of the 13 stretches of railroads included in the Logistics Investment Program (PIL), launched in August last year, will have the project done by private companies and not by the government, as previously planned.

“The government have no conditions or structure to it [make several studies and projects at the same time],” the minister said during a breakfast with reporters at the Palácio do Planalto in Brasília.

Gleisi pointed out that, by this measure, it is expected to solve two problems at once: eliminate mistrust of the market and remedy deficiencies identified by the Brazilian Court of Audit (TCU) on the projects done by the government.

On December 16, TCU decided to condition the concession of the first stretch of railroad between Lucas do Rio Verde (state of Mato Grosso) and Campinorte (state of Goiás) to a series of corrections in the project, which practically ended the chances of government to make the first auction in early 2014.

Moreover, the court ruled that, for the next stretches of railroads, the government should present more detailed studies. It is precisely to meet this resolution that part of the projects will have their implementation outsourced.

Balance

“We’re talking to TCU and the market to know what we need of specifications [in the projects] so that the pricing [of works] is considered balanced for both one and the other,” said the minister. She said investors feel that the values of the works set out in the government projects are underestimated, while the court considers them too high.

Gleisi reported that one of the railroad stretches that can have its study outsourced is that one linking Estrela D’Oeste (state of São Paulo) to Dourados (state of Mato Grosso do Sul). And that the hiring of this and other studies will be done via Expression of Interest Proposals (PMI), in which the companies interested present them on their own, with no guarantee that they will be accepted.

According to the minister, the advantage of this contracting model is that the projects are delivered within six months after the manifestation of the government and, thereafter, the notice to bid of the auction may already be published. Thus, the government avoids making a bid only to hire the project, which, Gleisi said, would require twice as much time just for its presentation.

This model has been used, for example, in the auction of the airports of Galeão and Confins, held in November. For the railroads, however, there will be a change: the government will allow companies submitting projects to participate in the auctions – in previous situations, it was forbidden.
Gleisi said the government should express interest in private studies for 3 or 4 railroad stretches already in January. And that she hopes to auction the stretch between Lucas do Rio Verde (state of Mato Grosso) and Campinorte (state of Goiás), with the government’s own project, in March 2014.

10,000 km of railroads

Launched in August last year, the Logistics Investment Program (PIL) provided the investment of $38.34 billion to build 10,000 km of railroads. Over a year later, the government still has not managed to auction any of the stretches of new tracks.

Part of the postponement is because of the delay of the Brazilian Court of Audit (TCU) to examine the government’s proposal, which includes a new concession model for the industry.

Despite impose conditions for the first auction of the railroad, the TCU approved the new model created by the government to the industry. It predicts that the winner of the auction will only build, maintain and operate the lines. The entire capacity of freight transportation for these rails will be purchased by the state-owned company Valec, which will resell it to the carriers interested.

The objective of the model is to ensure free access to the rails, which should lead to competition and price drop in freight transportation in the country – the railroads under concession today operate under monopoly. When buying all the transport capacity, however, Valec assumes the risk of injury if the business demand is less than expected.