Workshop 3A: Governance,contracting, ownership and competition issues in public transport: Looking up not down

Workshop 3A focussed on matters of institutional design that seem likely to improve public transport outcomes. It started by defining high level outcome goals, as measures of ultimate public transport success, and then identified the major societal issues that public transport systems can help to resolve. These issues were separately defined for Southern African and western settings. The importance of taking an integrated approach to transport, particularly land use/transport integration, was seen as fundamental to goal achievement. Workshop papers provided many and varied examples of this importance, ranging from PPPs for major public transport projects to system design issues and contracting out of services. The Workshop included detailed discussion on paratransit development in Southern Africa, where relationship management is proving to be critical, in-line with much previous Thredbo discussion about the important role of trusting partnerships. Parallels and contrasts were drawn with paratransit in western settings. Competition in passenger rail was also a focus, with some questioning of the benefits of franchising. Discussion concluded by proposing recommendations for policy and research and suggesting agenda items for future Thredbo Conferences.     

Workshop 1: Performance measurement and compliance

This workshop discussed challenges of measuring the performance of transport contracts, which is usually achieved by benchmarking the relevant services against a few key performance indicators (KPIs). Such KPIs (the workshop identified cost efficiency, service quality and safety/security as the top three) can be explicitly included in the contracts (with a focus on compliance) or can be rather informal and part of a trusting partnership. Limited availability of good data and appropriate information technology systems appear to be the greatest challenges within developed markets. In the context of creating a formal market (such as the South African taxi market), which encourages public transport measurement and compliance, our findings suggest that it is important to set as a first step minimum standards to address the backlog with respect to establishing performance measurement regimes.     

Risk and reward in public transport contracting

This paper synthesizes evidence from the workshop on risk and reward in public transport contracting. It broadens the usual risk/reward framework to encompass strategic/tactical level issues, identifying high level community goals as the ultimate risk/reward pay-off. The evolution of tactical level public transport planning is reviewed, noting considerable change in functional roles between purchaser and provider in some jurisdictions. No single “best” approach is evident but an emerging interest in relational contracting founded on trust is apparent. Risk allocation between purchaser and provider is considered, a key debate concerning the extent to which providers should be exposed to revenue risk.     

Workshop report - A successful contractual setting

Successful public transport service contracts can be judged against procedural and outcome criteria, located within an integrated strategic, tactical and operational level framework for planning and delivery. Clear goal setting at the strategic level sets the basis for supportive tactical system planning and for service delivery that meets goals. The workshop considers relevant success criteria and key matters that need to be resolved for their achievement. Market growth potential and the governmental attitude to supporting service growth are important issues shaping the contractual environment. The growing interest in negotiated performance-based contracts and the role of trust between the operator and the authority are also matters for particular attention.     

Incorporation of customer satisfaction in public transport contracts – A preliminary analysis

The design of public transport contracts provides an opportunity to define service quality standards to which an operator can be held accountable. While the specification of service quality standards is a common practice, the relationships between the specifications and customer satisfaction are often methodologically unclear. Based on a South African case study, the paper uses data collected from a group of passengers who have personal cars but choose to use public transport, and a control group of passengers who only use their cars, in the same corridor as the user group, to estimate a service quality conjoint model. The model is used to evaluate the effect of different public transport service packages, defined in terms of different combinations of service attributes, on passenger satisfaction. The paper confirms the need to classify service attributes in terms of their relative impact on passenger satisfaction, at the service design stages, where performance in respect of some attributes has a disproportionate impact on satisfaction, especially where public transport is competing directly with private transport. Practical applications and limitations of the methodology are also discussed.     

Social exclusion: What can public transport offer?

A new workshop on ‘Social exclusion: What can public transport offer?’ was introduced in the Thredbo 10 program. The workshop examined the concept of social exclusion in a transport context, looking briefly at the history and comprehensiveness of the term for social policy in transport. Other concepts, such as well-being and social capital, were determined to be also needed. While important research was reported to the workshop, it was clear that social exclusion was at an early stage of empirical development. Gaps were highlighted, particularly in evaluation and cost-benefit analysis. Examples of service systems designed to address social exclusion were presented at the workshop, revealing the need to better understand governance arrangements. The workshop developed recommendations for future research and policy, particularly emphasising the need to integrate social outcomes with economic and environmental transport policy at the strategic, tactical and operational levels. Finally, ideas for further exploration of social exclusion in Thredbo 11, were outlined.     

Workshop 6: The public agenda: What is working and what is missing

Workshop 6 topics covered social inclusion, the informal transport sector, transport in developing countries and sustainability. The strong connections and complimentary goals were noted, where solutions to social exclusion and greenhouse gas reduction can both be realised with good transport and urban planning. There is an opportunity for developing countries to avoid the transport mistakes in many developed countries, such as car dependence. This will involve the development of infrastructure that offers accessible public transport to the majority of people, providing resources to the informal transport system and integrating this with public transport. The workshop considered specific issues such as rural transport, new technology, car tolls to subsidise public transport, safety issues with informal transport and the failure to evaluate the longer-term impacts of many major transport infrastructure developments. Recommendations were made in relation to research and policy and future Thredbo topics.     

Incompleteness and clarity in bus contracts: Identifying the nature of the ex ante and ex post perceptual divide

In the transport sector, many types of contracts exist. Some are very precise, and strive for completeness; others are very ‘light-weight’ and are incomplete. Bus and coach contracts, won through competitive tendering or negotiation, are typically incomplete in the sense of an inability to verify all the relevant obligations, as articulated through a set of deliverables. This paper draws on recent experiences in contract negotiation, and subsequent commitment in the bus sector, to identify what elements of the contracting regime have exposed ambiguity and significant gaps in what the principal expected, and what the agent believed they were obliged to deliver. We develop a series of regression models to investigate the extent of discrepancy between the principal and the agents perceived ‘understanding’ of contract obligations. The empirical evidence, from a sample of bus operators, is used to identify the extent of perceived incompleteness and clarity across a sample of bus contracts. A noteworthy finding is the important role that a trusting partnership plays in reducing the barriers to establishing greater clarity of contract specification and obligations, and in recognition of the degree of contract completeness.     

Regulating the regulator: The impact of professional procuring bodies on local public transport policy and its effectiveness

During the past 15 years competitive tenders have become a common procedure when procuring local bus services in Europe. In particular, tenders with gross cost contracts and the so-called Scandinavian model have gained popularity, resulting in a vast amount of research on optimal contractual relationships between government and operators. This paper pays attention to a rather neglected part of the Scandinavian model: the construction of professional procuring bodies and their relationship to the local public administration, focusing on its implications for policy steering and service performance.The paper outlines briefly two different perspectives of analyses of organisational models: one perspective is anchored in principal-agent theory and institutional economics; and the other perspective in political science. Empirically, the article is based on an evaluation of the relation between two Norwegian counties and the administrative company responsible for planning and procuring public transport services. This evaluation indicates, firstly, important common challenges for the county administration due to lack of regional administrative competencies in relation to the administrative company, which also hampers the county’s role as coordinator of policy areas of importance for public transport. Secondly, due to increased transaction costs, the establishment of administrative companies does not seem compatible with contracts relying on net cost solutions with huge scope for operator initiatives.     

Is the bus transport contracting system in South Africa leading to trusting relationships between contracted parties? An analysis of funding issues and the impact on relations between government and operators

The 1996 South African White Paper on National Transport policy provided the guidelines for the restructuring of the commuter bus industry. The restructuring objectives were based on improving the competitiveness of and service levels within the industry through a competitive tendering regime, the selective implementation of negotiated contracts and the general transformation of the industry to also include improved transparency in the funding arrangements between government and operators.In order to set the context of the paper, a brief overview is provided of the progress made with policy implementation and the background to funding issues that are experienced in the bus transport sector. To gauge the impact of the funding issues on the relationship between government and operators, a survey of the largest contracted operators was undertaken to determine, amongst other, how these funding issues have potentially impacted on trusting relationships between contracted parties.     

Regulation,trust and contractual incentives around transport contracts – Is there anything bus operators can learn from public air service contracts?

This paper compares recent experiences in contract negotiation and subsequent commitment in public air services with the bus industry. The heart of the paper is a survey of European and Australian regional airlines, which we mirror with revealed experiences of bus operators. We aim to identify a number of elements in the contracting regimes that have exposed ambiguity and significant gaps in what the principal (e.g., transport department) expected, and what the agent (airline or bus operator) believed they were obliged to deliver. Ultimately airline and bus services are similar in that public authorities procure transport services that are desirable for the society but would be unprofitable without government involvement. In both sectors (theoretically fairly similar) public transport contracts are used, and those usually include obligations and performance measurements. In terms of similarities, one of the surveyed contract details that had a perceived high clarity in both industries was “payment procedures” and amongst those with rather poor clarity was also in both industries “incentives to improve performance and grow patronage”. We also show differences between regional air services and bus operations with regard to performance measurement and pre-specified obligations. Because of the strong safety culture around air services we find that regulation and trusting partnerships are even more important to aviation than to the bus sector. Because of the high level of trust but also because of simpler and more complete contracts in aviation, there is much less (re-)negotiation going on compared to the bus operations.     

Workshop report - Social inclusion

The topic of social inclusion is now maturing in the Thredbo conference series, being viewed as an important consideration in many aspects of land transport, the benefits extending beyond the socially excluded targeted population. The social inclusion workshop included presentations on new empirical evidence on the value of providing those at risk of social exclusion with mobility options, and how this links to improvements in personal wellbeing, often through mediating influences such as social capital. Work was presented on the role of transport services specifically targeted to those at risk of exclusion, particularly taxi services and school bus services, as well as how to modify fare structures to maximise inclusion in an efficient, mature transport system. The value of Universal Design principles to groups both at risk of being excluded as well as the current travelling public, was shown. The workshop affirmed the importance of including these wider benefits of inclusion in cost-benefit evaluations of transport. The issue of how best to move knowledge into strategic and operational policy, and the transferability of both knowledge and policy between different countries and settings, was discussed. This paper concludes with suggestions arising from the workshop in relation to policy and research, as well as recommendations for Thredbo 12.     

Workshop 5: Network and system planning

A renewed interest in public transport analysis and development has triggered a debate among policy makers, practitioners and stakeholders regarding technologies, design, pricing, subsidies and contract forms for optimal policy, including social well-being and the financing of public transport reform. Here we present contents and conclusions of workshop 5 of the Thredbo 12 Conference held in Durban, South Africa, where we analysed a series of recent theoretical developments on the links among demand, technology and the design of public transport systems, which we coupled with the examination of several case studies in order to feed the discussion regarding the relations among the strategic, tactical and operational elements that should be considered when designing a public transport policy.     

Contracting regimes for bus services: What have we learnt after 20 years?

This paper reviews a number of themes that have played a crucial role in the debate on alternative contracting regimes for the provision of urban bus services. We have selected four crucial issues to reflect on: (i) contractual regimes (in particular competitive tendering as compared to negotiated performance-based contracts, as means to award the rights to provide service); (ii) contract completeness (focussing on ex ante and ex post elements); (iii) building trust through partnership; and (iv) tactical or system level planning for bus services. Experience in these areas suggests that competitive tendering has frequently not lived up to expectations and that negotiation is likely in many circumstances to deliver better value for money.     

Competing for level of service in the provision of mobility services: Concepts, processes and measures

One of the most striking problems societies currently deal with is to assure adequate quality standards while improving accessibility within and between cities. In addition there is also a growing awareness that, to achieve a sustainable balance between private and public means of mobility, policies have to be able to send the correct signals in order to induce users adaptive behaviour, which in turn will provide the system with a reliable feedback on the needs for further investment and expansion of transport facilities. The definition and measurement of quality of service of the transport system is thus an objective aimed by both users and producers and it is often represented by the rather holistic concept of Level of Service (LoS). However, the LoS concept is not consciously used by users, on the contrary the user concentrates her comparative evaluation on what is simply known as quality. It is the planner that translates planned quality into LoS concept. So, LoS is a concept at the interface between the provider and the user. Given the interface character of the LoS concept an accounting framework for LoS should thus take into account the need to segregate the evaluation for passengers and freight transport and also distinguish between types of travellers in the case of passenger transport and types of commodities or logistic families in the case of freight transport. Moreover the bridge between the planner and the user view must be ensured. This paper reports the results of a research work dedicated to this topic.     

Workshop 4: Designing contracts/concessions: What has worked and what has not and why?: 12th International Conference Series on Competition and Ownership in Land Passenger Transport

A contract establishes a mutual relationship between an authority and an operator. From the point of view of the authority, it is a tactical level mechanism to achieve the strategic objectives of government. Management of contractors translate the requirements of contracts into operational practices to guide the day-to-day work of staff for the delivery of services. Much can go wrong with contracts for the provision of public transport services. Workshop participants identified and ranked 25 potential risk factors. The five most important factors, which relate to objectives, tender assessment, allocation of risks, financial viability and dispute management, were examined drawing on the 11 papers presented to the workshop. Matters that work, that do not and would make the most difference to the success of contracts were identified.     

Hybrid steering cultures in the governance of public transport: A successful way to meet demands?

This paper concerns steering aspects in the governance context of public transport. Various theoretical views of steering have been presented over the years, and it has been argued that a multiple-principal context often leads to fragmented steering. The paper aims to identify steering culture models found among principals operating in the same public transport context, and to explain how a successful procurement outcome is possible, despite the hybrid of steering cultures. The paper is based on an empirical analysis of a Swedish county's planning process that resulted in a very successful procurement outcome that met high environmental and safety standards at a relatively low cost. This procurement was seen as a triumph by principals. The findings presents the existence of various steering cultures among the principals, leading to the conclusion that a “metagovernor,” in this case the PTA, is central to achieving successful outcomes. The metagovernor designed the planning process and formulated a procurement document that satisfied the principals. In this process, the metagovernor negotiated separately with each principal, focusing on the particular characteristics of each principal.     

Towards a simplified performance-linked value for money model as a reference point for bus contract payments

The burgeoning commitment to contracting the delivery of bus services through competitive tendering or negotiated performance-based contracts has been accompanied by as many contract payments schemes as there are contracts. We are now well placed to design a simplified performance-linked payment (SPLP) model that can be used as a reference point to ensure value for money, given the accumulation of experiences throughout the world which have revealed substantive common elements in contracts. Whether the payment to the operator is framed as a payment per passenger or as a payment per service kilometre, the SPLP identifies efficient subsidy outcomes that are linked to a proxy indicator of net social benefit per dollar of subsidy. We illustrate how the SPLP model can be applied to obtain the gross (subsidy) cost per passenger (or per passenger km) from measures of gross cost efficiency and network effectiveness. This model can then be used as part of a benchmarking activity to identify reference value of money prospects in respect of passengers per $ subsidy outlay by adjusting for influences not under the control of the service provider. A single framework to identify contract payments to operators, and to assess (i.e., benchmark) operator performance on critical KPIs, is provided by internalising critical key performance indicators (KPIs) in the design of the SPLP. The proposed SPLP model is sufficiently general to be independent of the procurement method (competitive tendered or negotiated, for example) and of the treatment of revenue allocation (net or gross based contracts), with the additional advantage of being able to assess value for money for government.     

Risk and reward in rail contracting

This workshop considered the role of risks and rewards in rail transport by considering evidence on the impacts of industry structure, franchising and infrastructure charges. A schema for the allocation of risks and rewards was developed, which indicated that strategic risks should be borne by authorities and operational risks by operators, but that tactical risks were more difficult to allocate and appropriate reward mechanisms more difficult to design. The extent to which these difficulties can be addressed by competitive tendering and alternatives such as trusting partnerships and negotiated performance based contracts was considered.     

Quality incentives and quality outcomes in procured public transport - Case study Stockholm

Gross contracts appear to be the most common contract form for procured public transport in Sweden and elsewhere. This contract form, it has been argued, gives weak incentives for operators to deliver the desired quality level. Therefore many procuring public transport authorities amend contracts with quality incentives.This paper examines how such quality incentives influence quality outcomes with focus on cancelled departures and delays. The main findings are that the introduction of quality incentives are correlated with both increases and decreases of measured quality outcomes.We hypothesise that the results are driven by underlying cost changes for achieving desired quality objectives that exceed the possible revenues from the incentives. In interviews with the Stockholm public transport authority (SL) and some operators, two central observations surface. The first is that there are causes for quality failures that are not solely the responsibility of operators and that these are therefore not fully reached by the incentives, and the second is that the operators believe that they have exhausted what they can do under the current contracts.