Posted by: tollinfo | March 5, 2007

Kapsch-Brisa – a case of winning by elimination

The Czech electronic truck tolling tender has concluded in the elimination of all bidders for ‘formal reasons’, except the Kapsch-Brisa consortium, which was then announced as winner.

Excluded bidders have filed complaints with the European Union. The EU has referred decision in these complaints back to Czech national court. Czech national courts have rejected the appeals on all levels, and the contract has been subsequently signed by transport minister Milan Simonovsky. In the ensuing political controversy over this procurement process, Milan Simonovsky has been forced to resign soon thereafter. The following summary of this electronic toll system procurement process has been published in Transparency International – Czech Republic’s report on major PPP projects in 2006:

“The legislative process was adjusted to meet the needs of the contract. Such was the situation in case of the Czech Republic: if the electronic toll collection mechanism was not launched in  a timely fashion, the government would lose part of the revenue as the highway vignettes for trucks over 12 tons were abolished at a certain date. 

By its nature, electronic toll falls in the category of measurable monopoly services. Therefore, the contract should strive to minimize risks associated with the danger of abuse of monopoly position. This has not been sufficiently taken into account as the present problems prove. Unfortunately, information about the contract for electronic toll is not publicly available. However, because of the persistent problems in connection with its implementation and operation, the quality of the contract is undoubtedly dubious. It is quite apparent that the contracting authority failed to eliminate the risk of abuse of the monopoly position on the part of the contractor. Further,  it is quite likely that there is not a sufficient terminating provision in the contract for the contracting authority to apply and that there is no obligation imposed on the contractor to transfer the technology upon another provider. That all increases the transaction costs in the event the contracting authority wishes to transfer to another provider. These circumstances along with a strict deadline for  a launch of the system (due to a follow-up legislation to be adopted) caused an uneven negotiating position between the two parties which in turn resulted in the signing of Annex One to the contract which clearly disadvantages the government and which is against the law according to the Award of the Anti-Monopoly Office. In addition to the possible abuse of the monopoly position, the contracting authority did not probably do a very good job in defining the output indicators. An independent auditor should have been selected to monitor the collection of the electronic toll, however, the tender to select such an auditor was cancelled due to terms which proved to be technically impossible to meet (the terms required that the quality of collection is measured with 0.1% accuracy). The fact that the tender was cancelled has been challenged by several bidders and currently (March 2007) the Anti-Monopoly Office is looking into it. Consequently, no independent measurement was carried out during January 2007. Since February 2007 the collection has been monitored by an independent auditor who, however, received a contract without a tender, supposedly an interim solution. The problems linked to the monitoring of the collection quality necessitate additional negotiations between the contracting authority and the contractor since the indicator determines the remuneration and/or sanctions. 

The electronic toll project has been marked with dubious and unclear selection of the contractor when all bidders but one were disqualified for formal insufficiencies. At present, when decisions are being made about phase II of the project (for roads of first-class), it becomes once again apparent that the contracting authority has not been clear from the onset about the overall concept of the project. Possible change in technology, which is being contemplated, will result in complete redrafting of the invitation to tender (as well as the price of the contract) which is in violation of the Public Procurement Act, and a corresponding response from the Anti-Monopoly Office can be expected. 

The electronic toll project is an example of incredibly badly prepared and implemented contract showing a lack of professionalism and competency in the public sector to implement extensive and costly projects in cooperation with the private sector.”

The report further notes that Transparency International – Czech Republic asked the Ministry of Transportation in February 2007 for information from the electronic toll contracts about indicators to measure the quality of the service and about threshold figures to determine due delivery or failure to perform under the contract. The information was not provided by the Ministry with reference to business secret. Such reference makes little sense as the indicators themselves are not a know-how of the contractor and are defined for the most part within the invitation to tender documentation.

The system has costed 780 Million Euros for the Czech Republic, and was promised to give return on investment by 2010. However according to calculations of the opposition party, transportation statistics only project an income of 530 Million Euros by that date. This has prompted the set-up of a 10 member parliamentary investigative committee, looking into the cost-efficiency of this contract. Mr Simonovsky dismisses these calculations as ‘not serious’.

How the quality of electronic toll system in Czech turns out will be possible to assess in the coming few months.

Source: Transparency International


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