The postponement of the Multi-Lane Free Flow (MLFF) project trial raises questions about the continuation of the program's implementation. Although this does not create any financial obligations for the Government of Indonesia to PT Roatex Indonesia Toll System (RITS) at present, the delay of the MLFF trial will certainly be addressed by the government, taking into consideration the terms of the Public-Private Partnership (PPP) agreement between the government and RITS.
In the common practice of PPP schemes, the extension of every project phase can be approved by the Government Contracting Agency if the delay is not caused by the fault of the Implementing Business Entity (IBE), such as due to force majeure or government policies directly affecting the project. Most PPP schemes allocate construction risks to the IBE, making the IBE responsible for the impact of construction delays and any cost overruns.
It is worth noting that the government has an interest in ensuring that infrastructure service provision programs can be achieved according to its targets. If it is proven that the IBE's fault causes the delay in commencing project operations, the IBE may be subject to liquidated damages. This approach ensures fairness and helps prevent any moral hazard that may arise from an unreliable IBE failing to complete the entire PPP project according to the agreed terms.
The implementation of the MLFF system should also consider the proper risk allocation in relation to toll road operations. In the Toll Road Concession Agreement/Perjanjian Pengusahaan Jalan Tol (PPJT) between the government and Toll Road Business Entity/Badan Usaha Jalan Tol (BUJT), the collection risk is commonly allocated to the BUJT since the operations of toll roads, including toll collection activities, are the responsibility of the BUJT. Thus, losses incurred due to the malfunction of automatic lane barriers, for instance, would be wholly borne by the BUJT. However, if the government delivers the MLFF system and RITS, then under the PPJT, would the responsibilities over the collection risk be transferred to the government?
The principle of risk allocation assigns every risk to the party most capable of managing and bearing the relevant risk. In this case, the government has appointed and entered into a contract with RITS for the purpose of MLFF service provision. Considering this fact, the government may be considered as a vendor to the BUJT in relation to toll collection activities, justified by existing plans of service payment to be paid by BUJT to the government. Hence, it seems reasonable that under the PPJT, the government would bear the collection risk against the BUJT. It may be argued that the government would bear the risk of MLFF system failure, which harms BUJT's toll revenues, regardless of whether RITS will bear such indemnity through back-to-back contractual obligations.
However, the above concept is fundamentally inconsistent with the current practice of toll road concessions, where BUJT bears the demand risk and gains its investment return from user payments. Accordingly, BUJT plays a significant role in managing the toll collection system to ensure that its revenue corresponds to the volume and classification of users' vehicles. In this regard, it would be more suitable for BUJT itself to design and operate the equipment for MLFF, as developed by PT Jasa Marga (Persero) Tbk. through Let it Flo. This differs from toll road operations, where the return on investment is generated through availability payment, and the government bears the demand risk, making the toll collection system more suitable to be managed by the government.
The MLFF PPP agreement must be honoured. However, if BUJT continues to bear responsibility for the demand risk and collection risk when the MLFF system is implemented, while BUJT no longer has control over toll collection activities, BUJT's rights to obtain revenues based on the actual volume and types of users' vehicles must remain guaranteed. For that purpose, who would be the guarantor, and what mechanism should be implemented for the guarantee? It is necessary to address these queries as they have implications for BUJT's revenue stream, which in turn affects the certainty of investment returns for its shareholders and the fulfilment of obligations towards its creditors.
It is important to provide BUJT with the opportunity to approve the success of the MLFF system trial to anticipate any potential damage caused by events associated with collection risks, such as unlawful road users, unlawful vehicles, interoperability issues, and toll settlement failures.
For the continuity of the MLFF project implementation, relevant stakeholders must synergise and agree upon project implementation mechanisms based on the principle of optimum risk allocation. This can be achieved by considering the harmonisation of interests between the BUJT and RITS, which would create a mutual understanding of the success parameters of the trial and the roadmap for further MLFF project implementation.
