As “market referees”, regulators contribute to the delivery of essential public utilities. Their organisational culture, behaviour and governance are important factors in how they, and the sectors they oversee, perform. The report uses the OECD Performance Assessment Framework for Economic Regulators to assess both the internal and external governance of Peru's Transport Infrastructure Regulator (OSITRAN). The review discusses OSITRAN's good practices, analyses the key drivers of its performance, and proposes an integrated reform package to help the regulator prepare for the future.
Driving Performance at Peru’s Transport Infrastructure Regulator
The Governance of Regulators
Abstract
Executive Summary
OSITRAN (Organismo Supervisor de la Inversión en Infraestructura de Transporte de Uso Público), Peru’s transport infrastructure regulator, was created in 1998. It supervises compliance with concession contracts in several transport infrastructure sectors (airports, ports, railways, roads and waterways). Over the past 20 years, OSITRAN has supported the implementation of projects of strategic economic importance in Peru. Today, like many other Peruvian public bodies, OSITRAN operates in a highly complex environment marked by major corruption scandals and political instability. Its leadership needs to successfully reform the identity of the regulator to address these challenges and to build relationships with external stakeholders that are based on trust and predictability. OSITRAN can leverage its institutional maturity to achieve these goals and has the opportunity to lead by example within the Peruvian public administration at this challenging time.
Role and objectives
Over the years, OSITRAN has been entrusted with a growing portfolio of contracts. The regulator has a good technical reputation among stakeholders. However, OSITRAN has been scarred by recent corruption scandals involving infrastructure investments, and its identity and internal culture have suffered in consequence.
OSITRAN supervises obligations of thirty-two concession contracts, overseeing the construction of infrastructure, delivery of investment and service quality. More recently, it has strengthened its focus on empowering users. While all of these activities are relevant to the overall performance of transport infrastructure, there may be scope for a more targeted use of resources on outcomes.
OSITRAN carries out ad hoc operational co-ordination with other public agencies, but there is a lack of system-wide formal co-ordination mechanisms.
Key recommendations
Revise the mission, vision and strategic framework of OSITRAN in a participatory manner that inspires and unifies staff, and consolidate a strategy for revitalising the regulator’s internal culture.
Implement a clear strategic focus on outcomes for the sector and society. This will allow a more targeted use of the regulator’s resources.
Advocate for more structured and collaborative relationships with other public entities and seek to create opportunities to share good practices with other regulators in Peru, as well as internationally.
Input
OSITRAN is mostly funded by resources received from the regulated sector. By law, the regulator is financially autonomous, but in practice, its budget autonomy is limited by fiscal rules. For example, since 2017, public entities are required to transfer surplus funds to the Treasury if not executed in a given fiscal year. This results in the attribution of fees from regulated entities towards funding general government activities. In addition, the regulator’s budget is capped by law rather than defined according to cost-recovery principles.
Staff salaries and benefits are governed by three parallel regimes that may undermine staff motivation. Moreover, salary caps set by central government may reduce the capacity to attract staff. OSITRAN is implementing strategies to face these challenges, such as the talent management plan and the internship programme.
Key recommendations
In light of funding uncertainty, ensure adequate prioritisation of activities during the budgeting phase and introduce principles of cost-recovery of regulatory activities.
Share the direct impacts of fiscal measures that affect the regulator’s funding model and advocate with other Peruvian regulators for a review of legal constraints on resources.
Reduce disparities among the different employment regimes and continue implementing HR measures to make OSITRAN an attractive place to work.
Process
The Board of Directors leads decision making, but its resources are insufficient to fulfil its broad mandate. The President of the Board holds a full-time position, while the other four Board members only serve on a very limited part-time basis. Part-time members have few opportunities to provide strategic input.
OSITRAN has implemented a number of ambitious integrity, anti-bribery and ethics policies, but the stated strategic importance of these measures is undermined by an apparent lack of a unified strategy and communication on results.
Regarding the use of good regulatory practices, OSITRAN was a pioneer in the Peruvian administration in implementing regulatory impact assessments (RIAs). Moreover, OSITRAN’s User Councils are effective stakeholder engagement mechanisms for dialogue with users.
Finally, OSITRAN supervises multiple obligations and devotes a high percentage of its resources to inspections. The optimisation of supervision and enforcement activities is one of the regulator’s strategic objectives; nevertheless, it lacks a clear strategy to prioritise activities.
Key recommendations
Ensure that Board members have sufficient time, resources and information to engage in decision making and strategic planning.
Consolidate the various integrity initiatives under one umbrella with clear objectives and targets, and develop a dedicated code of conduct as well as a comprehensive communications and training strategy.
Maintain momentum towards the implementation of the RIA system and continue efforts to improve regulations on an on-going basis.
Share the Users Councils’ experience and good practices with other regulators in Peru and internationally.
Improve the efficiency of inspections by adopting a compliance-driven and risk-based strategy; improve transparency with regard to their outcomes; and continue standardising consistent criteria.
Output and outcome
OSITRAN collects a vast amount of information from regulated entities and produces statistical reports. The regulator lacks the relevant IT tools for better data management and does not appear to turn the collected information into evidence for decision-making.
OSITRAN has defined a four-year strategic plan (2019-2022) with indicators focused mainly on the implementation, rather than the outcome, of activities. Monitoring is carried out twice a year but it may be under-utilised for accountability purposes. OSITRAN thus misses an opportunity to link its performance to sector performance -- and assess the impact of OSITRAN activities on the quality of services. Although it is not required to do so by law, OSITRAN prepares and submits an annual report to Congress.
Key recommendations
Adopt a comprehensive approach to data management and use the wealth of information gathered to engage with concessionaires, as well as to formulate evidence for improving regulation.
Develop outcome-focused indicators for the new strategic framework that capture the quality of activities and their impact on sector performance.
Continue monitoring the indicators twice a year and use the results for accountability purposes, while continuing to report to Congress.
