San José, Costa Rica, since 1956

Public Works Plans May Shift to High Gear

Troubled by shoddy roads and crumbling bridges, lawmakers have passed a bill to promote awarding public works projects to private companies.

But some experts say the bill, which was approved last week and awaits the president’s signature, will do little to mend Costa Rica’s backlog of public works projects unless the state demonstrates a greater commitment to the projects.

Since lawmakers 14 years ago gave the state permission to grant concessions for projects to private firms, not a single project has been completed under such an arrangement.

Meanwhile, the state lacks the money and expertise to build the highways, railroads and bridges that the country desperately needs.

Costa Rica’s highways have not kept pace with the country’s 24 percent population growth during the past 10 years. In a report last year, the Japanese International Cooperation Agency (JICA) stated that “most of the 1,330 bridges on national highways suffer from severe deteriorations” (TT, Aug. 10, 2007). The country’s roads are overloaded and poorly maintained, according to a report released in December by the University of Costa Rica.

“The country began to grow, and infrastructure stayed exactly the same,” said Claudio Donato, an expert in Costa Rican concessions law at the firm Zürcher, Odio & Raven. “That created a bottleneck that the state cannot solve by itself.”

Recognizing that the original concessions law of 1994 has not produced the desired results, lawmakers are hoping the bill will make contracts more attractive for both the state and the private sector. Donato is skeptical.

“Reforming a law, improving a law, is always a good thing,” he said. “But it’s a mistake to think these reforms will substantially change the way public works projects are executed in this country.”

Under the 1994 law, the state – or another interested party – can design an infrastructure project, ranging from an airport to a jail. After a public bidding process, the winning firm builds and operates the project, charging fees to users until it recuperates its investment. The entire concession can be held for up to 50 years, after which the project is taken over by the state.

Among its biggest changes, the bill will allow construction firms to bow out of the project once construction is complete, leaving partners with management expertise to operate it.

“That’s more attractive for firms,” Donato said.“More firms will participate (in the bidding process), which leads to more competition and better offers.”

Parts of the reform also will benefit the National Concessions Council (CNC), a technical body that helps the executive branch, municipalities and other state institutions grant concession projects. In past years, if the concessionaire bailed, CNC had to redo the entire public bidding process.

Now CNC can transfer the concession directly to the runner-up.

The bill also speeds the expropriation of land required for an infrastructure project.

Acquiring land has been a major obtstacle for previous concessions.

The changes are a step forward, said Guillermo Matamoros, CNC’s technical secretary.

Still, he worries that the reform puts stricter controls over CNC’s ability to hire outside consultants. That could weaken what he sees as an already underfunded and understaffed institution faced with a Herculean task, he said.

CNC’s budget for 2008 was ¢1.3 billion (roughly $2.5 million). The institution has a staff of 36, half of which serve administrative and auditor functions.

Despite being responsible for highly complex infrastructure projects, the council’s staff includes only four engineers, two of whom are consultants whose terms will expire in the coming months. Furthermore, the institution has no economists or finance experts, both crucial for these types of projects, Matamoros said.

Under the reformed law, before hiring a consultant, CNC must first try to find someone within the civil service who meets the required qualifications and then negotiate a transfer with that person and his employer.

With the intent of attracting higher-quality personnel by offering better salaries, the reform creates new pay categories within the civil service for employees with the qualifications CNC requires.

Matamoros said the reform should have exempted CNC from civil service hiring rules altogether. This would allow the council to hire and retain employees with the specialized knowledge needed to guide projects to completion and negotiate on a level playing field with representatives of private firms.

“An excellent training program serves no purpose if there isn’t an excellent compensation program that makes it possible to retain people,”Matamoros said. “That is the CNC’s main problem right now. Retaining qualified personnel … is how an organization can guarantee that lessons learned from previous experiences are put to use.”

These handicaps have slowed the CNC’s work: It takes the council about eight years to draft feasibility studies on a proposed project and organize a public bidding. By then, the studies may be outdated, Donato said.

Controversy and a skeptical public also tend to thwart concessions projects, Donato added.

“These projects have a bad reputation. People think private companies come to this country to become millionaires, destroy the environment, and take all the wealth,” he said.

Cowed by opposition and wary of accusations of corruption or favoritism, Donato said, public officials drag their feet on concessions.


Hard Hat Areas

Caldera highway: Construction on a 77-kilometer highway connecting San José with the Pacific port of Caldera began in April after three decades of false starts. Autopistas del Sol, the consortium charged with building and operating the road for more than 25 years, is required to finish construction by July 2010.

San José-San Ramón highway: The expansion of the 68-km stretch of the

Inter-American Highway

connecting San José to the Pacific-slope town of San Ramón is stalled while CNC and Autopistas del Valle, the consortium charged with expanding and operating the highway for 25 years, renegotiate toll prices. The firm argues an increase in tolls is required to compensate for increased building costs.

CNC expects the negotiations to conclude soon and a change order to the contract submitted to the Comptroller General’s Office by July. If the modification is approved, construction could begin in a few months.

Liberia airport: The (extended) deadline for firms to issue bids for the construction and operation for 20 to 25 years of a new two-story, 13,500-square-meter terminal at DanielOduberInternationalAirport in Liberia, the capital of the northwestern province of Guanacaste, expires June 25.

Metropolitan Electric Train: Next week, CNC will re-submit to the comptroller’s office an updated version of a contract awarding a Brazilian firm permission to carry out the financial and environmental feasibility studies for a train connecting the four main Central Valley cities of San José, Heredia, Cartago and Alajuela. The comptroller rejected the original contract in April.

–Fabian Borges

Comments are closed.