Mass Transit System in San Salvador (SITRAMSS)

Post date: Jun 23, 2015 5:26:36 AM

(Final project prepared for WB PPP MOOC)

Introduction

A Public-Private Partnership (PPP) can be defined as public service or private business venture funded and operated through a partnership between government and the private sector. Public transport projects can be good candidates for PPPs. A common trend started in the early 2000s in Latin America was the establishment of Bus Rapid Transit (BRT) projects where governments usually provided the initial infrastructure, while private operators took care of providing the rolling stock, operating transit services and some times maintaining the infrastructure for a determined period of time. The main risk for private investors in this type of arrangement is the estimation of the demand, which can make or break a project.

El Salvador got in fairly late into this type of arrangement. Starting in 2011, the construction of the initial stage of San Salvador's new integrated transit system (SITRAMSS) began. The government announced that it had entered in an arrangement with a group of local bus operators that would be in charge of operating the corridor, while the government received a 50 Million USD loan to build the infrastructure of the first stage, which included a main station and 7 km of dedicated lanes with intermediate stations along the way.

Source: http://www.elsalvador.com/especiales/2013/graficos-sitramss/sit1.gif

Initial Setbacks and corrective measures

Construction suffered some delays and the first large capacity buses finally started operations by the end of 2014. The terms of the arrangement between authorities and operators are still underworks according to this link, but the project garnered a lot of detractors that could have been avoided if key elements of successful PPP arrangements would have been followed, two of those elements are mentioned below:

With regards to transparency: the process used to select the benefitted operators was criticized for apparently favoring operators with affinity to current authorities. A transparent bidding process calling for potential parties interested in the operation would have prevented this situation.

El Salvador has a PPP law to manage these types of arrangements, but it has not been used for the mass transit project, arguing that the project would be treated as the assignment of a common bus line in the country. Considering the investment in infrastructure the authorities are undertaking, and how only a group of private operators will benefit from it, the lack of a clear and transparent bid process seems inadequate.

Moving Forward

The project is still in its early stages as it was mentioned in the introduction, it is a perfect project for a PPP initiative as it was already stated, with the government providing the infrastructure and operators bearing the risk of passenger demand while operating the vehicles and providing the transit service. If done properly however, it is possible that a large captive demand will make the project a no brainer for interested private investors.

Although the first corridor has been assigned without a seemingly clear framework, it is possible to improve the image of the project moving forward by considering the following:

Additional lines need to be assigned in order to create a feeding route network to support corridor operations and to extend the coverage of the service. These routes should be arranged into “packages” based on geographic affinity and should be bid out so that they are assigned to the most suitable operators. An adequate legal framework can be established for this stage that would facilitate this process.

Since there are already private operators running bus services in the area of influence, some sort of priority should be given to current operators in the suggested bidding process. This does not only seem like the fairest way to move forward, but it would also help to deal with natural opposition these operators will present if they see the project as a threat instead of an opportunity.

A transparent process to assign these new routes, publicly available contractual documents that address the main risks and at the same time give some flexibility to address future issues should also be a welcoming step in the right direction in order to improve the chances of success for the project.

A key stakeholder, namely the service users could be involved more directly in the process and may have valuable input in order to guarantee the success of future project stages.

The administrative unit within the government in charge of the project should also be strengthened and solidified so that they are more capable of adequately handling the project during its lifecycle.

Conclusion

There is a lot of room for improvement in the current way the mass transit system project for San Salvador is being managed. A well established PPP arrangement seems ideal for the remaining phases in the project and would represent an improved way to move the project forward, if carried out appropriately.

Contrasting views

How the operators see the project: