Sun, Mar 05, 2006 - Page 8 News List

Solving the ETC crisis will be no easy matter

By Huang Yu-lin 黃玉霖

After a wave of complaints as a result of the controversial measures adopted by Far Eastern Toll Collection Co for its electronic toll collection (ETC) build-operate-transfer project, the Taipei High Administrative Court issued a verdict saying the Taiwan Area National Freeway Bureau violated the public interest when it chose the company as the best candidate to execute the project. As a result, the court disqualified the company's best candidate status.

The Ministry of Transportation and Communication must now decide whether to appeal. If it decides not to, it has to deal with Far Eastern claims for compensation and look into whether the second-best candidate can replace Far Eastern. If so, the freeway bureau will have to hold contract negotiations with Aviso Tech. Inc, launch a new bidding process to open the project to a new group of bidders or bring it back and run it as a state-run enterprise.

If the ministry decides to appeal, it has to consider whether the High Administrative Court will prioritize the appeal and whether it will uphold the previous verdict. If the appeal is not prioritized, the uncertainty of the project's future will mean the public may doubt the government's ability to manage the project and the 's follow-up investments will be at tremendous risk and, as a result, the ETC project might be stopped. That would incur huge delay costs. If the verdict is upheld, the ministry is once again left with the option of conducting a contract negotiation with AvisoTech, finding new potential bidders or running it as a state-run enterprise.

Given that the ministry has said it may appeal the court's decision, it is confronted with four questions. First, will the court prioritize the appeal? Second, will the verdict be upheld or overturned? Third, does AvisoTech contract negotiation rights? Fourth, will the ministry issue a new tender or will it run the project as a state-run enterprise? These variables offer 16 possible outcomes.

Each outcome also produces different effects and has different consequences for the validity of investment contracts, consumers' rights, Far Eastern's investment risk, the government's compensation and whether or not to set up a mechanism for the government to pull out. The ministry should thoroughly evaluate each outcome and its results.

There are pros and cons to each scenario. The best scenario is that the court overturns the verdict in the government's favor. Far Eastern could then continue to invest in and run the project.

The worst-case scenario would be a delayed decision with the verdict upheld in the end and the ministry deciding to seek a new contractor. In that case, Far Eastern would have to pull out of the project and the government would have to pay compensation.

If the court makes a quick decision to uphold the original court decision, and if AvisoTech has contract negotiation rights, then the ministry could possibly consider ways of promoting cooperation between AvisoTech and Far Eastern, thus reducing the damage to each party. Only if AvisoTech does not have contract negotiation rights does the government have the possibility of buying back the project or finding someone else to run it.

Currently, the ministry has asked Far Eastern to stop accepting applications to install on-board units, which is a good way to stop further losses. Nevertheless, the ministry still has to study different scenarios and response measures and implement its crisis-management strategies as soon as possible. As for a concrete response, the ministry must follow the basic principles on which it based its considerations when first deciding to appeal the court decision.

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