Thomson-East Coast Line (Source : LTA).

LTA: Only SMRT Trains and SBS Transit to be allowed participation in limited tender on Thomson-East Coast Line

Land Transport Authority (LTA) has announced that it will conduct a limited tender for the Thomson-East Coast Line (TEL) Operator Licence in the first quarter of 2017.

According to LTA, as TEL is the most complex rail project to date, only the existing rail operators in Singapore, SMRT Trains and SBS Transit, which are familiar with the local operating context, will be invited to participate in the tender. It gave reasons such as the complexities of the first phase of the TEL’s operations, and the industry transition to the NRFF has not been completed

It wrote in a statement on the limited tender, “First, it will be developed in tandem with multiple other projects. On its northern end, it will have an interchange with the future Johor Bahru-Singapore Rapid Transit System Link. On its eastern end, feasibility studies are on-going for a connection with the future Changi Airport Terminal 5 and the existing Changi Airport MRT station.”

“Second, the TEL will open in five stages over a number of years. This is so that commuters who live along the TEL can benefit from it as soon as each phase is completed, rather than waiting for the entire line to be ready,” LTA added.

LTA said that this places the TEL in a unique situation where projection of ridership and fare revenues in the initial years will be much more uncertain and challenging than earlier train lines.

LTA stated that the New Rail Financing Framework (NRFF), where tenderers share fare revenue and cost risks with the Government and bid on the licence charge for the right to operate the train line, may therefore result in bids which are unfavourable to the Government, as the tenderers may factor in a significant risk premium.

Hence, for the initial period of the TEL operations, the Government will bear fare revenue risk and operate a model where it pays the successful tenderer a service fee to run the line.

LTA said that the first TEL licence will be awarded for nine years, with a possible extension of two years. It expect the TEL ridership to have stabilised by then. Like the Downtown Line, North-South and East-West Lines, Circle Line and Bukit Panjang LRT, the Government will own and be responsible for expanding, upgrading and renewing the TEL’s rail assets, while the operator focuses on rail operations and maintenance.

It also said that when the first licence expires, it will revert to the NRFF for subsequent tenders.

LTA said that as part of this tender, LTA will pilot a new framework to incentivise as well as penalise the TEL operator based on its performance in the key areas of service reliability, customer satisfaction, and maintenance processes.

“Similar frameworks have been used successfully by the UK, Swedish and German rail authorities to improve performance across their rail networks. If this framework is effective, LTA may consider extending it to all the other rail lines,” it noted.

Conflict of interest

However, LTA did not make any comments on the point of the abyssal operation record that SMRT has with the running of its existing lines and how is it justified to “reward” a transport company for its poor performance as a transport operator.

On 17 October this year, High Court approved the sale of SMRT shares to Temasek Holdings (TH), making SMRT privately owned by TH. Given that TH is an investment company of the Singapore government. Is there not a huge conflict of interest to limit participants to the tender of rail lines? Also, LTA will therefore, use SMRT and SBS’s prior experience in running TEL to continue to award the tender to them after the intital term is over.