propose to monopolize the industry the lowest number of years or to charge the lowest fare to final users, provided this fare can be properly defined. Sometimes, as in the case of rail freight, the traffic mix makes the price structure very complex, so that this mechanism becomes impractical. Moreover, using tariffs as an award criterion for rail concessions limits later possibilities of regulatory interventions on prices and demands an adequate definition of quality standards.

Many concessions in the rail industry have been awarded using a multicriteria points formulae, where it is possible to take into account a larger number of objectives. This method was used in Argentina, where the bids for the six freight packages that were concessioned were evaluated using the net present value of the canon to be paid to the government during the first fifteen years of the concession, the quality of business and investment plans, staffing levels, the proposed track fee for passenger trains, and the share of Argentine interest in the consortium. The weighting of these criteria reflected the importance attributed to investment in the railways, but also political compromises on employment.

The rule of keeping things simpler was later adopted for the award of metropolitan commuter railways in order to make the bidding process and the final selection as transparent as possible and not to induce exaggerated or misleading assumptions. Thus, the Argentinean authorities learned from the freight concession experience that trying to select the winning bid through numerous cumbersome criteria with discretional weights was more likely to reduce the efficiency of the bidding process than to improve it. Instead, the terms of the concession should be made clear and known to all potential bidders and bidding should take place on the basis of a single parameter, which encompassed the economic assumptions made by the bidders in relation to the terms of the concession. In the case of the metropolitan railways concession, for instance, each concessionaire calculated her expected revenue from operations, then compared it with the capital investment programs and finally estimated the subsidy amount to be requested (The World Bank, 1996).

With regard to the optimal duration of the concession contract, the tradeoff is evident in terms of efficiency, since the shorter the concession, the more immediate the competitive pressure, but the less the incentive to invest and develop the business. Longer concessions, in contrast, tend to diminish the regulator's enforcement capacity and soften the incentives to promote efficient outcomes. The general rule is to adapt the concession period to the economic life of the assets and to make this compatible with the objectives of the regulator. This balance often creates conflict. Thus, while concessionaires argue in general for long contracts on the grounds that this provides them with incentives to build up the business and purchase or replace long-lived assets, regulators prefer shorter lengths to favor the achievement of efficiency (by the implicit threat of not renewal) and fiscal goals (since the canon or auction price may be increased after the first years of the concession). Only if sunk investments are minimal and asset re-utilization is possible, are shorter periods advisable for particular rail services (those related to signals, track and station maintenance).

Shaw, Gwilliam and Thompson (1996) point out that the average duration of rail concessions is about five or ten years when they refer only to services and up to thirty when

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