Exploring concession contract models for public transport in Brazilian cities

Well-planned and effectively implemented concession contracts are a crucial part of ensuring high quality public transport systems. These regulations are negotiated between the city and private companies that bid for the right to operate transport systems under certain conditions. On August 15, 2014 EMBARQ Brasil and the World Bank organized the “Public Transport Concession Models: Practices and Trends” seminar in São Paulo, Brazil to spread global lessons on concession contracts for transport. The event was supported by the Institute for Applied Economic Research (IPEA), São Paulo Transportation (SPTrans), and São Paulo Municipality. The seminar addressed issues such as measuring transport demand, planning routes, managing costs, and developing more competitive contracts that make bus systems more valuable for users. One of the main points speakers highlighted was the importance of designing public transport systems around users’ needs and expectations. Approximately 130 people attended the event, including authorities, technicians, and representatives of State and Municipal Financial Courts.

A crucial moment for sustainable mobility in Brazilian cities

São Paulo’s Deputy Secretary of Transportation, José Gonçalo Evaldo, opened the meeting alongside Luis Antonio Lindau, Director of EMBARQ Brasil, and Georges Darido, a Senior Transport Specialist at the World Bank. Gonçalo expressed that Brazil is experiencing a decisive moment in urban mobility. "We joined EMBARQ Brasil and the World Bank on the quest for sustainable models for our cities. In São Paulo, and in many other Brazilian cities, the primary public transportation mode is by bus. Concession modeling will be crucial in helping to build our city over the next 15 or 20 years," he declared. “On behalf of the mayor, it is a real honor to be here. The experiences discussed here will certainly help us to accomplish the process of bus service bidding in the city of São Paulo by the end of next year," he said.

Eduardo Leite, Mayor of Pelotas, described that the issue of tendering concession contracts is relevant in cities across Brazil.           "[This] is a very timely event because it allows both the political authorities and technicians to observe how other cities and even other countries are dealing with an issue that affects the entire population," he said. "In Brazil, most cities have not yet launched tenders for public transport. Given their complexity, it is necessary to exchange experiences and identify the main factors in the tender processes.”

Darido and Lindau thanked the participants for their presence and highlighted the importance of partnering to expand the dialogue on urban transport bidding in the country. "It is an honor to be here today and participate at an event presenting the best practices in urban transport concessions to such an illustrious audience", said Darido. Lindau added, "We need to improve the quality of public transport in Brazil and this entails contractual models and infrastructure investments. Today, we have a great opportunity to discuss the best mechanisms to help the sector and increase productivity." 

Director of SPTrans Ciro Biderman, Director of EMBARQ Brasil Antonio Lindau, and World Bank Senior Transport Specialist Georges Darido spread best practices to help ensure that cities across Brazil are leaders in sustainable mobility. Photo by Mariana Gil/EMBARQ Brasil. 

The importance of technology, route design, and public engagement in Brazil’s tender process

Presentations at the workshop showcased experiences in cities across Brazil, Latin America, and other parts of the world that have used concession contracts for public transport service. In 1998, Belo Horizonte became the first city in Brazil to implement bidding contracts. Daniel Marx Couto, Public Transport Director of Belo Horizonte’s Transport and Traffic Agency (BHTRANS), described the city’s experience with contract formulation, which has become much more complex in the new bidding process. This year, Belo Horizonte incorporated 500 new buses with new specifications and improved technology as part of MOVE, the city’s BRT system launched in 2014. Belo Horizonte’s experience helps cities understand the role of new technology in bus systems. For example, using sensors and other tools can help cities map user demand more accurately and frequently. A better understanding of user demand can help cities ensure adequate supply of transport options, instead of letting the supply govern demand. Belo Horizonte also redesigned its fare calculation formula in response to concerns that bus fares would not cover operating costs.

Romulo Orrico Filho, professor of transport at the Coppe/Federal University of Rio de Janeiro, reiterated the need to understand bus users’ needs and expectations. In his opinion, a monthly user evaluation is important to help governments control the quality of mobility services.

São Paulo, meanwhile, is currently finalizing its own public transport bidding process. Ciro Biderman, Director of SPTrans, presented prospects for new concession contracts. For example, he described the “stylized” trunk-feeder system, which would operate in the opposite way from a typical bus service. In this system, trunk corridors operate in neighborhoods with feeder buses operating downtown. Biderman describes that the advantage of this system is that it allows “bus users [to] decide which is the 'center' they want to go to.”

Positive responses to lessons shared

After the seminar, Jose Walter Vazquez Filho, Secretary of Transportation for the Federal District described the importance of these forums for improving sustainable transport across the country. "The seminar truly exceeded my expectations. It is important to hear from those at the head of these initiatives. It is important to understand that no one has all the answers – not the academics, not the operators, nor the government. If we do not learn to listen and engage in this dialogue, we end up creating a gap," he said. "A few new ideas emerged, such as separating operations funding from the transport system’s profit, something I had never heard of. It was an intensive but important day," he added.

Otavio Cunha, president of the National Association of Transport Operators (NTU), described his lessons learned from the seminar. "We saw some very interesting cases, such as the experience of Belo Horizonte, which is very productive and shows that this new path we are taking – with the tender process, new contractual rules, and legal certainty for those who operate – is of the utmost importance to ensure a higher quality service. We all leave here today greatly motivated, having benefited from very interesting content – experiences from London, Santiago, Belo Horizonte, Porto Alegre and São Paulo. We leave here enriched."

The presentations from the seminar are available for download:

• Public Transport Concession in Latin America: Bogotá case - Camila Rodriguez, Senior Infrastructure Specialist in the World Bank’s Latin America Region
• Overview of Recent Concession Contracts for Public Transport in Brazil (Portuguese) – Romulo Orrico Filho, professor at COPPE/Federal University of Rio de Janeiro
• Economic Bases to Competitive Contracts (Portuguese) – Carlos Henrique Ribeiro de Carvalho, Technical Research and Planning of IPEA
• Overview of the State Financial Courts on the Tenders Process (Portuguese) – Airton Roberto Rehbein, Public External Auditor of Financial Court of Rio Grande do Sul State
• Prospects for a New Signing of Municipal Transport System of São Paulo (Portuguese) – Ciro Biderman, Director of SPTrans
• Belo Horizonte: Independent Verification of the Concession Contracts (Portuguese) – Daniel Marx Couto, Public Transport Director of BHTRANS
• The Process of Contracts Renegotiation in Santiago – Carolina Simonetti, Development Manager of Metropolitan Public Transportation Directory
• Critical Analysis of Bus Financing in Bus Rapid Transit Projects – Abel Dodero, Infrastructure Specialist of World Bank
• The Evolution of the Public Transport Concession Contracts in London - Alex Moffat, Performance Manager of Transport for London
• Public Transport Concession Models: Brasília case (Portuguese) - Jose Walter Vazquez Filho, Secretary of Transportation of the Federal District