Institutional and regulatory elements

• Metrobús. Performance indicators are reviewed every six months to measure the mileage achieved, the incidence of faults, the incidence of accidents, and the impact of drivers on the provision of the service. • Transantiago. indicators of fulfillment of the offer measure the achievement of frequency levels and customer service as well as the effective availability of transportation for users and transportation capacity (overcrowding in vehicles) according to those planned for each service.

These indicators not only measure the quality of the service but also impose sanctions on operators for noncompliance. The incomes of concessionaires may be discounted by 3–10 percent depending on the level of quality provided. However, it is important that the percentages deducted not to be so high as to consume a substantial part of the operators’ resources. This situation would considerably reduce their capacity to execute the changes necessary to improve the quality of service.

INSTITUTIONAL AND REGULATORY ELEMENTS

Institutional elements

The government should be in charge of systematizing, controlling, planning, programming, guiding, developing, organizing, approving, and, where appropriate, modifying the presentation and operation of the public transportation service as well as granting the corresponding concession and, if necessary, implementing the procedures for its closure. Having regulatory authorities and specialized support allows for legal certainty that there will be proper decision-making and acts of authority because they guarantee that institutions have not only the power to make decisions but also the technical capacity to promote the efficiency and quality of the transportation system. Key agencies responsible for related actions include the following:

• The national government • subnational governments (states or provinces, metropolitan governments, and municipal governments) • Public transportation authorities.

The World Bank’s “institutional labyrinth” (Kumar and agarwal 2013) provides a good framework for understanding institutional settings for urban transportation projects. The following is a summary of its main messages:

• No institutional model fits all situations. The appropriate model depends on the administrative policy of the country and the city. • Urban transportation institutions take time to evolve. The ideal cannot give rise to the moment of creation; patience is needed to align expectations appropriately. • New urban transportation institutions need financial resources and, above all, regulatory authority over the financial resources available to be successful.

This fact, more than any other, provides the institutions with power to achieve their plans and carry out their mandate successfully. • Any new transportation institution will experience setbacks and opposition from existing agencies. The success of a lead institution depends primarily on its ability to implement policies in the public interest, develop technical

capacity and a solid financial base for the performance of its tasks, and garner strong support at the political level. • Institutional change can be catalyzed by external “trigger events,” such as an election, political movement, public protest, or a change in macroeconomic conditions. it is of fundamental importance to involve civil society through a communications program.

Concessionaires’ rights and obligations

The definition of a concessionaire’s rights and obligations must be consistent with the risk-and-function allocation strategy defined in the risk matrix (see the chapters in part ii). The obligations and rights derived from the concession are intended, from the administrative perspective, to guarantee the operation, quality, and efficiency of the transportation service. They must be defined clearly and in a way that is consistent with project objectives. On the one hand, the rights granted by the concession must be related to the concessionaire and to the provision of the transportation service (to obtain remuneration). These rights may include the right to use the infrastructure associated with the service and to formalize contracts to attract additional resources. The concession should define whether rights are specific to the individual entity and nontransferable and if the concessionaire must execute them by itself or with a third party (so long as the concessionaire personally supervises their execution in accordance with the provisions of the concession’s characteristics and specifications). On the other hand, the obligations have to be linked to the provision of the service in compliance with the terms and conditions indicated in the applicable regulations, as well as the technical, operational, material, economic, and financial elements necessary to provide the public service.

Concession terms

The terms of the concession refer to the validity of the rights of use or exploitation that it will grant to its signature. There is no general rule to determine this duration; the administrative authority establishes its terms, based on the conditions and specific characteristics of the public service concession and the useful life of the investment in capital (since the plan must guarantee the recovery of the concessionaire’s investment). a typical operation concession in the transportation sector ranges from 3 to 15 years and rarely exceeds 15 years, depending on various criteria. The terms of the concession vary depending on the characteristics of the fleet and its ownership; the concessionaire’s responsibilities for infrastructure provision; and the technical, legal, financial, investment, or recovery criteria used to set the terms. subject to local laws and regulations, the following criteria, among others, directly affect the terms: (a) type of service; (b) infrastructure required to provide the service; (c) rolling stock (type and characteristics); (d) amount of investment required for operating costs and service of a particular quality; and (e) project structure and obligations of the concessionaire.

The concession may be extended for a period equal to or perhaps less than that originally established, provided that the conditions of the contract have not changed and the concessionaire, for its part, has fully complied with the obligations derived from the concession. specifically, the terms of the concession may be subject to extension under the following assumptions:

• The concessionaire’s compliance with each and every one of the obligations contracted in the concession • sufficient need for or general interest in the continuation of service • The absence of any conflict of personality with the representative of the legal entity or controversy regarding ownership over the concession and its inherent elements.

Termination: Causes and procedures

causes and procedures for termination must be clearly established in the concession (to the extent possible), along with applicable regulations, to ensure legal certainty, transparency, and equality among subjects. For this purpose, there are different ways to terminate the concession, some attributable to the grantor (authority) and others to the concessionaire. common causes of a concession’s termination are as follows:3

• Compliance with terms. Once the terms are complied with, the concession ceases unless it is extended. an extension will depend on the discretion of the PTa. • Lack of object. if the object of the concession is extinguished or exhausted or it is unable to subsist, the concession is considered to be terminated. • Rescission. Recission is the right of any of the parties to rescind the contract without incurring any liability. Rescission occurs when the other party breaches the contract because of default or any other cause beyond the control of the parties. usually, damaging a third party will be a cause for rescission. Other causes include default by the concessionaire or the public party, the public interest, and force majeure, among others. • Revocation. Revocation is a unilateral act of the authority. it can be a sanction that cancels the rights of the concessionaire. it can also be part of a unilateral termination that would generate rights to the concessionaire. • Expiration. The authority can trigger termination when the concessionaire fails to comply with the starting date for provision of service, suspends the service for reasons attributable to the concessionaire for a period longer than a maximum stipulated time, or does not grant the guarantees in the manner and at the times established. • Nullity. absolute nullity occurs when the contract does not comply with the law. Relative nullity occurs when the contract’s formalization lacks one or more essential elements: consent, object, or cause (which correspond to causes for voiding the contract). This will cause termination de facto but not de jure, as the null contract was never effective. • Lack of concessionaire capacity. The authority can trigger termination when the concessionaire does not have the capacity or aptitude to continue providing the public service. This situation includes the bankruptcy, liquidation, or dissolution of the moral person in charge of the concession, such that it cannot continue to provide the service. it also includes changes in the concessionaire that are not compatible with the requirements of the concession.

The process by which the authority may declare termination should be included in the concession contract and the applicable law, in addition to the process by which the concessionaire may request termination. The key elements may include the following:

• Defined notification procedures for both parties, including deadlines to present evidence, pledges, or allegations within their rights