Experiences with Competitive Tendering of Bus Services in Germany

Abstract

After a long transition period with only a few isolated procedures for competitive tendering, the market for German public transport bus services has seen numerous such tenders in recent years. The results are complex. From the public transport authorities’ point of view, the main effects are a decrease in subsidy payments, with relatively low expenses relating to the tendering process (allocation, contract management). The overall level of competition is high, with five to seven bidders on average, although this has been declining in recent years. Entry barriers have been identified at significant levels for several parameters, especially with respect to the volume tendered and the revenue risk to be borne by the operator out of net‐cost contracts. Demonstrably small‐ and medium‐sized transport operators have been able to increase their market share in the starting phase of introducing tendering, with diminishing success rates in recent years. Due to the increased quality requirements in competitive tendering, the quality of public transport available has improved considerably, and environmental standards have been better implemented and sustained. As far as employees are concerned, a trend towards wages below the wage rate of private operators cannot be observed. However, their level is well below the level of public incumbent operators.     

Competitive tendering versus performance-based negotiation in Swiss public transport

The purpose of this study is to assess differences in the levels of cost efficiency of bus lines operated under competitively tendered contracts and performance-based negotiated contracts. Following the revision of the Swiss railways act in 1996, regional public authorities were given the choice between two different contractual regimes to procure public passenger transport services. We directly compare the impact of competitive tendering and performance-based negotiation by applying a stochastic frontier analysis to the complete dataset of bus lines (n = 630) operated by the main Swiss company (Swiss Post) at the same time (in 2009) throughout the country. The overall results show that the differences in the levels of cost efficiency between the two contractual regimes are not significant. Our findings are in line with recent evidence of cost convergence between competitive tendering and performance-based negotiation, and suggest that the practice of using both contractual regimes is challenging for the operators in terms of competitive pressure. The threat of competitive tendering may have a disciplining effect on negotiation since it prevents bus companies from bargaining inadequate rents and inducing asymmetric information advantages.     

Risk-Sharing in Seaport Terminal Concessions

Over the last two decades, infrastructure development has often been supported by public–private partnerships, particularly under concession arrangements. This paper addresses terminal concession contracts in the seaport sector, and especially the problem of risk-sharing. An effective allocation of risks is the base for the well functioning of the market, and for the success of the ‘landlord’ model. Under this model, the relationship between concessionaires and port authorities is fully dependent on a contract that should be in force for the period of the concession (20, 30 or more years). Based on several Portuguese concession contracts, this paper addresses the issue of risk-sharing agreements. Some policy implications are drawn, namely, alternative contract arrangements to decrease opportunistic behaviour by concessionaires, and to provide incentives to improve efficiency.     

Does competitive tendering improve customer satisfaction with public transport? A case study for the Netherlands

During 10 years experience with competitive tendering of regional and local public transport in the Netherlands, national average trip satisfaction of passengers increased from 6.84 to 7.25 (+0.41). This is a remarkable improvement, but a closer look at the data reveals that also in regions without competitive tendering the improvement in satisfaction was substantial. The difference in the improvement for regions with and without tendering is only +0.06. Tendering led in the majority of concession areas to an improvement of average trip satisfaction, but in some 40% of the cases a deterioration was observed. A change of operator in general has a negative impact on satisfaction. We also find that the effect on satisfaction of early tendering is larger than of later tendering. This may well be the consequence of a shift in emphasis of authorities and operators from quality improvement to efficiency improvements. The model building and analysis is based on the comparison per year-pair of regions tendered versus regions non-tendered (in that specific year-pair). So we compare the effects on satisfaction of tendered regions relative to non-tendered regions.An analysis concerning the weighted satisfaction judgments of 15 underlying service attributes revealed that ‘service frequency, on-time performance, travel speed, and vehicle tidiness’ contribute the most to the effect on satisfaction in the tendered regions. We found that new vehicles impact highly on satisfaction with travel speed and vehicle tidiness. The emphasis in the tenders with increasing service frequency, led to an increase in satisfaction but, may have a deteriorating effect on (the satisfaction with) on-time performance.     

The economics of workplace charging

To overcome the range-anxiety problem and further shortcomings associated with electric vehicles, workplace charging (WPC) is gaining increasing attention. We propose a microeconomic model of WPC and use the approach to shed light on the incentives and barriers employees and employers face when deciding on demand for and supply of WPC. It is shown that under market conditions there is no WPC contract an employer is willing to offer and at the same time the majority of employees is willing to accept. To overcome the lack of demand or underprovision of WPC we discuss various ‘remedies’, involving subsidies to charging facility costs and adjustments in electricity tariffs or loading technologies. We find that direct subsidies to WPC facilities or subsidies combined with specific energy price policies could be a way to foster WPC provision. In contrast measures on the employee side that may help to stimulate the demand for WPC turn out to be less feasible. Hence, our results suggest that in order to promote WPC it is more promising to support employers in offering WPC contracts than to provide employees an incentive to accept WPC contracts. The study therefore gives a rationale for public initiatives being undertaken to boost WPC provision, as e.g. in the case of the US.     

Efficient contracting and incentive agreements between regulators and bus operators: The influence of risk preferences of contracting agents on contract choice

Contracts that govern transactions between regulators and operators are an important feature of service delivery in public transport. This paper reviews the literature on efficient contracting in general and its application to public transport contracts and found little empirical evidence on the influence of risk preferences of contracting agents on contract choice, a fundamental premise of classical contracting theory. Departing from the existing literature, this paper develops a choice experiment to study public transport operators’ preferences for different contractual forms. People involved in the public transport industry across Australia are invited to do the survey but the respondents are mainly bus operators in New South Wales. The respondents are offered two hypothetical contracts with different risk profiles and incentives and asked to indicate their preferences as well as their acceptance to provide the services under the contract they prefer. A non-linear scaled multinomial logit model is estimated to establish the role of risk allocation on contract preference of bus operators and the optimal amount of risks and incentives, conditioned on the operators’ attitude towards risk. The results help authorities design performance-based contracts to obtain their objectives while maintaining the operators’ level of satisfaction.     

Incentive subsidy scheme design with elastic transport demand

Huge public transport subsidies caused by deficits have become a heavy financial burden on some local governments due to the decline of bus passenger numbers. It is essential to apply the performance‐based contract to bus services considering maximization of social welfare. This paper constructs an incentive subsidy contract considering the decision‐making powers of the service level and calculating the proper frequency elasticity aiming at two problems of performance‐based contracts. Meanwhile, we consider a role of bus operators ignored by most researchers. Under the scheme, the decision‐making power of the service level is discussed based on five assumptions, and meanwhile, bus operators are motivated to reduce cost and improve service level in the scheme. The case of the bus service of Arao city indicates that the optimal frequency equals to zero when bus operators decide frequency. If bus operators determine efforts, the optimal effort also equals to zero with the goal of maximizing the profit. Also, bus operators can play their roles in lessening cost and improving service level to help bus operators and the local government achieve a win‐win situation, which maximizes the social benefit in this subsidy scheme when all factors are decided by the government. Copyright © 2013 John Wiley & Sons, Ltd.     

An analysis of public bus transit performance in Indian cities

Maintaining and enhancing public transit service in Indian cities is important, to meet rapidly growing mass mobility needs, and curb personal motor vehicle activity and its impacts at low cost. Indian cities rely predominantly on buses for public transport, and are likely to continue to do so for years. However, the public bus transit service is inadequate, and unaffordable for the urban poor. The paper explores the factors that contribute to and affect efforts to improve this situation, based on an analysis of the financial and operational performance of the public bus transit service in the four metropolitan centres and four secondary cities during the 1990s. Overall, there were persistent losses, owing to increasing input costs and declining productivity. The losses occurred despite rapidly increasing fares, and ridership declined. The situation, and the ability to address it, is worse in the secondary cities than the metropolitan centres. We suggest a disaggregated approach based on the needs and motivations of different groups in relation to public transit, along with improved operating conditions and policies to internalize costs of personal motor vehicle use, to address the challenge of providing financially viable and affordable public bus transit service.     

Transit trip distribution model considering land use differences between catchment areas

Sustainable land use planning and advanced public transport system are believed to be effective solutions to traffic congestion. To this end, it is important to reveal the relationship between transit ridership and land use. However, current Direct Ridership Models only focus on the relationship between single station's boarding volume and the corresponding catchment area land use. This paper analyzed the ridership distribution between transit stations by considering the land use difference between catchment areas. Land use difference was calculated from point of interest (POI) data extracted from an electronic map of Beijing; transit trip distribution volume was obtained from ‘automatic fare collection’ facility. After data specification, a transit ridership distribution model was proposed and calibrated. The calibration results suggest that land use difference has a directly proportional correlation with transit ridership distribution. The research findings build a bridge between detailed urban form and public transport, which is of significance for the further research of sustainable urban planning. Copyright © 2016 John Wiley & Sons, Ltd.     

Effects of subsidies on urban public transport

Because of a general trend of increasing costs of public transport operations and higher subsidies (in some cases accompanied by falling patronage) the European Conference of Ministers of Transport (ECMT) initiated a study of subsidisation and sought the help of the Transport and Road Research Laboratory. The study, in which eighteen countries took part, was concerned with the aims of subsidy, the sources and conditions attached to subsidy, trends in subsidies and the effect of subsidies on patronage, fares, service levels, costs and productivity.The qualitative information concerning the aims of subsidy was analysed in relation to the likelihood of achieving such aims, taking into account current experience of attempts to switch car drivers to public transport. The quantitative information on trends referred to public transport stage services covering where possible the entire country and relating to the period 1965–77; these data were supplemented by data from 59 cities in different parts of the world collected in the course of a TRRL-sponsored study of travel demand factors. The relationship between patronage and service levels, and between subsidies and various operating factors, including costs and productivity, were studied using regression analysis and the general conclusion reached was that although the major part of the subsidy paid was reflected by reduced fares and improved service levels there may well have been some leakage into higher unit costs and manning levels.     

Transaction Costs in Transport Public–Private Partnerships: Comparing Procurement Procedures

Abstract

In recent years, concern has grown over good practices in the procurement process in public–private partnerships (PPPs). The consensus view is that PPPs are prone to higher transaction costs than traditional public provision. In this paper, we contrast the hypothesis that transaction costs in transport PPPs depend, to a large extent, on the procurement mechanism used in each case, comparing the Negotiated and the Open procedures. Given that PPPs may offer considerable benefits and significant savings over the entire life cycle of the project, it is essential for PPPs to minimize those costs that undermine efficiency gains and that deter private involvement. The quantitative analysis undertaken in this paper highlights that there is room for important savings in the tendering of PPP transport infrastructure projects, using an Open procedure.     

Impacts of weather on public transport ridership: Results from mining data from different sources

The existing studies concerning the influence of weather on public transport have mainly focused on the impacts of average weather conditions on the aggregate ridership of public transit. Not much research has examined these impacts at disaggregate levels. This study aims to fill this gap by accounting for intra-day variations in weather as well as public transport ridership and investigating the effect of weather on the travel behavior of individual public transit users. We have collected smart card data for public transit and meteorological records from Shenzhen, China for the entire month of September 2014. The data allow us to establish association between the system-wide public transit ridership and weather condition on not only daily, but also hourly basis and for each metro station. In addition, with the detailed trip records of individual card holders, the travel pattern by public transit are constructed for card holders and this pattern is linked to the weather conditions he/she has experienced. Multivariate modeling approach is applied to analyze the influence of weather on public transit ridership and the travel behavior of regular transit users. Results show that some weather elements have more influence than others on public transportation. Metro stations located in urban areas are more vulnerable to outdoor weather in regard to ridership. Regular transit users are found to be rather resilient to changes in weather conditions. Findings contribute to a more in-depth understanding of the relationship between everyday weather and public transit travels and also provide valuable information for short-term scheduling in transit management.     

The impact of transportation demand management policies on commuting to college facilities: A case study at the University of Trieste,Italy

Universities, like other types of public and private institutions, when located in a city, have both positive and negative impacts on the area where they are situated. On the one hand, they contribute to the prestige of the area; on the other hand, they are large generators/attractors of traffic. The ability to successfully balance the pros and cons of the urban location of these large traffic-generating institutions is crucial for their success and for the livability of the city. In this paper this issue has been analyzed selecting as a representative case the University of Trieste.The aim of the research is to understand: (a) how mode choice decisions are made by the teaching and administrative staff and by the students at the various locations where academic activities take place, and (b) how they would be affected by 8 different transport management policies. It is found that changing the parking regulations (via the annual permit cost, the hourly parking fee, the number of parking spaces and the location of the parking lots) greatly influences mode choice in favor of bus use, especially for teaching and administrative staff and in the suburban locations. The students would be impacted by such changes only if an hourly parking tariff is introduced. The alternative approach of fully subsidizing the bus services would also have a large impact on bus ridership, affecting the mode choice in particular of the teaching staff and in the main university suburban sites.Since the implementation of these bus-favoring policies could face the opposition either of the university staff or of the bus company, two more balanced policy mixes were tested: the first one, increasing parking price and imposing new parking restrictions, would increase bus ridership by 19%; the second one, reducing both bus and parking subsidies, would increase bus ridership by 13%.     

Incentives in Bus Concession Contracts: A Review of Several Experiences in Latin America

Abstract

This paper reviews the incentive structure of concession contracts in several Latin American transit reforms. It also presents a conceptual analysis of the optimal design of concession contracts. The conceptual discussion and case studies reviewed indicate that payment to operators should be linked to operational variables and that some demand risk should optimally be transferred to operators. Performance standards linked to fines and penalties are not sufficient to guarantee good quality of service, particularly in citywide reforms and where institutional capacity ― in terms of size, experience and expertise of staff ― is lacking and regulatory processes are slow, bureaucratic and cumbersome. This review may be useful for policy-makers designing transit reforms in other countries. The policy lessons of the paper are particularly relevant to cities in the developing world but they are also important for reforms in other countries.     

Developing Transport Infrastructure in Sub-Saharan Africa through Public–Private Partnerships: Policy Practice and Implications

In contemporary times, Public–Private Partnership (PPP) in transport infrastructure has gained considerable attention in developing regions following its success in the developed countries. However, Sub-Saharan Africa (SSA) is among the developing regions with few transport PPP projects and among the regions with high number of failed projects. Meanwhile the region's transport infrastructure need far exceeds it current provision. This paper therefore aims to examine the project experiences (success and failure factors) of three highly profiled transport PPP projects, namely the Lekki toll road concession project (Nigeria), N4 toll road (South Africa/Mozambique) and Port of Maputo (Mozambique) in order to develop policy measures for effective future implementation. The experiences of the three projects show that transport PPP policy is indeed feasible in SSA. However, to realise its full applicability, proper policy actions and measures must be carefully observed and these include effective and efficient stakeholder management, transparent and competitive tendering process, high participation of local investors, stable macro-economic conditions and strong government commitment and regulatory framework. The projects experiences and policy actions developed are impactful in accelerating transport infrastructure development through PPP approach in SSA. Hence it is hoped that policy-makers and practitioners would be informed on the key strategies to employ in implementing future projects.     

Analyzing the gap between the QOS demanded by PT users and QOS supplied by service operators

This research evaluated the effectiveness of tendered bus public transportation (PT) in improving the attractiveness of that service in order to promote sustainable mobility. This was accomplished by characterizing the gap between the quality of service (QOS) supplied by contract regimes and that which is demanded by passengers. Analysis of a customer satisfaction survey aimed at bus users provided insight into their ranking of 14 QOS parameters while 13 active service contracts were analyzed for their impact on QOS. In-depth interviews with relevant experts completed the complex narrative that is Israel’s policy of privatization in PT. Both qualitative and quantitative analyses helped identify those QOS parameters most in demand by passengers and impacted by contracts. The results show that the gap is minimal, high demand parameters receive increased priority in contracts. In addition this research documented an evolution in the method contracts employed to provide QOS. Late model contracts define an increasingly higher minimum QOS; but also strongly limit the operator’s ability to make service changes. This is a trend which should improve QOS in Israel but reduce the incentive for operator enacted QOS initiatives. Despite its obvious success to date, it might be time to change again the contract regime for the provision of competitive bus services in Israel.     

Environmental benefits from better freight transport management: freight traffic in a VAR model

Most macro empirical studies on the price elasticity in the freight transport sector focus on the demand for transport. However, most of the external costs from the freight transport sector are more closely linked with the traffic volumes. In the paper an explicit distinction between traffic and transport demand is made by regarding traffic as an input in the shippers’ production of transport services, while transport demand is derived from firms’ production of output. An empirical analysis based on aggregate time series is carried out in a VAR model, where the stationary long run relationships are estimated using the so-called ‘Johansen Procedure’. The estimated price elasticity with respect to traffic (−0.81) is considerably higher than the elasticity with respect to transport (−0.47).     

Forecasting high-speed rail ridership using a simultaneous modeling approach

Abstract

The newly launched, June 2009, US High-Speed Intercity Passenger Rail Program has rekindled a renewed interest in forecasting high-speed rail (HSR) ridership. The first step to the concerted effort by the federal, state, rail, and other related agencies to develop a nationwide HSR network is the development of credible approaches to forecast the ridership. This article presents a nested logit/simultaneous choice model to improve the demand forecast in the context of intercity travel. In addition to incorporating the interrelationship between trip generation and mode choice decisions, the simultaneous model also provides a platform for the same utility function flowing between both the decision-making processes. Using American Travel Survey data, supplemented by various mode parameters, the proposed model improves the forecast accuracy and confirms the significant impact of travel costs on both mode choice and trip generation. Furthermore, the cross elasticity of mode choice and trip generation related to travel costs and other modal characteristics may shed some light on transportation policies in the area of intercity travel, especially in anticipation of HSR development.     

伦敦的新建轨道交通系统——Tramlink

新建轨道交通系统作为一种重要的公共交通工具,正在得到越来越广泛的应用。介绍了伦敦新建轨道交通系统——Tramlink的线路、车辆、运营管理、客流及特点等内容。作为地铁系统的补充,Tramlink在伦敦公共交通领域发挥着重要的作用。     

Performance-based quality contracts in bus service provision

Institutional reform of the bus sector is a topical discussion item in a number of countries at present. A specific focus is on ensuring a value for money (VM) regime to identify the benefits to society associated with each dollar of subsidy support from government. This paper promotes the position that a performance-based contracting (PBC) regime offers the best prospects of achieving a system-wide VM outcome. It proposes a reward system for bus operators that combines payment for delivering a minimum level of service (MSL), that meets government community service obligations, plus an incentive regime that rewards operators for patronage increases (above MSL patronage levels). The patronage incentive is based on expected user and external benefits deriving from service improvements and patronage increases. Cost benchmarking at relevant best practice levels is proposed as essential to ensure remuneration is based on efficient cost levels. The paper argues that a PBC approach is consistent with maximising social surplus from public transport provision across a geographic area, for any given budget constraint and regulatory imposed minimum service levels. The main alternative, competitive tendering (CT), is argued to be less attractive than PBCs in terms of securing the maximum social surplus to the community, given the total amount of subsidy support available, although CT is an appropriate non-compliance condition. This paper is a companion to Hensher and Houghton [Hensher, D.A., Houghton, E., Performance-based contracts for the bus sector: delivering social and commercial value for money, Trans. Res. B, in press] that details the economic framework and an application of PBCs.