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EC Contracts –Final Report
Colin Buchanan and Partners
EC Contracts –Final Report
1. INTRODUCTION 1.1 Background 1.2 Report Structure 2. STATISTICAL ANALYSIS 2.1 Introduction 2.2 Dataset 2.3 Data issues and problems 2.4 Data Analysis 2.5 Impact on Demand Growth of Public Transport Usage 2.6 Conclusions 2.7 Commentary on the Results 3. CONTRACT SUMMARIES 3.1 Collection to date 3.2 Description of and Results from the Collected Contracts 3.3 Distribution of Contracts between Gross and Net Cost 3.4 Scope 3.5 Contract Length 3.6 Penalty and Incentive Regimes 4. CASE STUDIES 4.1 Introduction 4.2 Tendering Authorities 4.3 Services tendered 4.4 Bus services 4.5 Light Rail/Metros/Trams 4.6 Heavy rail 4.7 Ferry and air services 4.8 Other services 4.9 Operators 4.10 Tendering 4.11 Risks and Rewards 4.12 Quality Monitoring 4.13 Potential Improvements 5. GUIDE INTRODUCTION 5.1 Purpose and Organisation of Guide 5.2 Definitions 5.3 Other Information sources
1-1 1-1 1-1 2-4 2-4 2-4 2-5 2-6 2-8 2-10 2-10 3-12 3-12 3-14 3-15 3-16 3-16 3-16 4-17 4-17 4-17 4-17 4-18 4-18 4-18 4-19 4-19 4-19 4-20 4-21 4-21 4-22 5-23 5-23 5-25 5-25
Colin Buchanan and Partners
EC Contracts –Final Report
APPENDIX A – CONTRACT SUMMARIES APPENDIX B – CASE STUDIES APPENDIX C – CONTRACT GUIDE
1.2 The report then proceeds to examine specific contract details. based on publicly available data.2 Report Structure 1.1 Background 1. distinguishing between controlled competition.2 The study team comprises CBP in association with Hamburg Consult (HC).1. To undertake interviews with a sample of authorities and operators to understand their views and experience on how contracts have worked. closed markets and deregulation (open access).1 The European Commission DGTREN appointed Colin Buchanan and Partners (CBP) to lead a study into contracts for public passenger transport. to translate those summaries into English. and employee numbers. Data collection is focussed on the UK. To analyse the contracts collected and compare and contrast their contents. 1. of changes since around 1990 in the performance of urban transport systems.1.2.1 The first stage of the report is an analysis.Colin Buchanan and Partners EC Contracts –Final Report 1.2. INTRODUCTION 1. 1. to prepare standardised summaries of those. The overall aims of this study are: • To collect a sample of existing contracts. focussing on the roles and responsibilities of the contracting authority and the operator. Italy. The information gathered from this exercise has been 1-1 . The results of this analysis can be found in Chapter 2. Germany. • • • 1. the balance of revenue between fares and subsidies. Trasporti e Territorio (TRT) and Daniel le Maire. France and Sweden. with respect to passenger numbers. To produce guides on good practice in Contract Design and Management to assist those with little practical experience.1. German and French and to put them on a database accessible via ELTIS.3 This report is the Final Report.
2. 1.5 Conclusions to the report are presented in Chapter 6.2.Colin Buchanan and Partners EC Contracts –Final Report summarised into a database of all the summaries collected. to highlight areas of good practice and identify where improvements can be made. countries. 1.2. 1-2 .4 The knowledge accrued from the contract summaries and case studies has been used to develop guide to contract design and management in Chapter 5.3 Chapter 4 introduces more detailed case studies. Its key objectives are to inform those embarking on such ventures of the options available and to give guidance on good practice when tendering and preparing contracts/franchises. contracting authorities and operators.1 overleaf demonstrates the links between the different parts of the report. The purpose of the case studies was to ascertain how contracts have operated in practice. Chapter 3 also examines some key results arising from an initial analysis of this database. 1. covering cities. Figure 1.
Colin Buchanan and Partners EC Contracts –Final Report Figure 1. operators and contracting authorities 5.1 REPORT STRUCTURE – OVERVIEW 1. Contract Summaries and Database Describes the procedure for summarising contracts and includes a database and key results 4. Introduction Describes the background to the report and how it was prepared. 2. countries. Statistical Analysis How effective is competitively tendered compared with non-competitive public transport ? 3. Case Studies How have contracts worked in practice? Detailed studies of cities. Conclusions 1-3 . Contract Guide Gives guidance on contract options and good practice 6.
Cities using deregulation without significant control by public authorities experienced a 3. The proportion of operating costs covered by fares increased by 1.7% a year for cities using controlled competition whilst cities without competition and cities using deregulation without significant control experienced a 0. - As there were insufficient cities available with controlled competition. The next part of this chapter examines CBP’s data and looks at the various performance indicators. and cities with a population of at least 500.7% decrease for cities without competition in public transport. expand on and validate the analysis undertaken and the conclusions drawn.000. 10 with controlled competition and 4 with deregulated competition (the data for deregulated cities in the UK were drawn from the DfT report “Transport Statistics 2001”).1 In 2001.8% increase in the annual rate of change in numbers of passenger journeys compared to a 0.000 was required.1 Introduction 2. fare coverage and change in employees for the combined public transport system in the city. The criteria for city selection were: data for at least 6 years (thus enabling a comparison over a five year period). the European Commission (EC) collected some data that found that cities using controlled competition experienced a 1. The aim was to review. the condition was relaxed for controlled competition cities so that a minimum population of 200.2 Dataset The data gathered for the individual cities contained changes in passenger journeys.1.Colin Buchanan and Partners EC Contracts –Final Report 2.1% per annum decrease in numbers of passenger trips. STATISTICAL ANALYSIS 2. CBP gathered data from Jane’s Urban Transport Systems for 43 EU cities: 29 with no competition. 2. The final part compares CBP’s analysis with the EC’s and draws some conclusions.3% increase. Changes between start and 2-4 .
Different countries may have implemented their competitive environments in different ways with different outcomes. Data were constrained by the information that the operator or authority published. Comparisons were only therefore possible where the authority/operator provided the data and where the data were available for two different years to enable a change in the efficiency ratio to be calculated.000 (but see para. The key data collated were: • • • • Passenger journeys Vehicle kilometres Number of employees Fare coverage: operating costs ratio The initial criteria for including cities was: population in excess of 500. 2. The data may not always have been consistent. 3. and at least 6 years of data in order for 5 year comparisons to be made. both of which would result in the start and end periods not being directly comparable.3 Data issues and problems The data used had various associated problems which will have influenced the findings. The most recent data available varied from 1999 to 1995. 2. Many other factors can contribute to the performance of the respective cities or individual modes. External factors such as population and economic 2-5 .1). 2. The key issues were : 1. The type of data available varied between city and mode. Changes in the approach to data collection and changes to the network (number of routes or lines) could have been made. Data were collected that would be able to provide indicators of operating efficiency and demand for public transport.Colin Buchanan and Partners EC Contracts –Final Report end years for each city were used to give an annual average percentage change.
For de-regulated competition. as this is the only EU country where public transport operates in a deregulated market. Table 2. There was an average annual decrease in the number of employees of 2.2%) for cities with controlled competition than cities with no competition (0. data were not available on employees for the period covered. given the short length of the time-series. Table 2.1% in cities with no competition and an increase of 1. The fare coverage ratio has increased at a slightly higher rate (1. that the process of planning and implementing of controlled competition would already be a strong influence on performance. fare coverage ratios and the number of employees for cities with no competition over the range for which data were collected.4 Data Analysis The data collected have been broken down by the existence of different forms of competition and by city.2% in cities with controlled competition. 4. 2.2% for cities with no competition and an annual increase of 1. 2-6 .6% each year with deregulated competition. where controlled competition has been introduced. There has been a drop of 2.1 shows the changes in passenger journeys.Colin Buchanan and Partners EC Contracts –Final Report growth and changes to transport policy significantly affect public transport usage.5%). it is likely nonetheless that where the market change has taken place during the time-series.1%. although in these cases fares tended to cover most of the operating costs already.7%. The CBP analysis found that there has been a small average annual decrease in passenger numbers of 0. or where public transport has been deregulated. The 4 deregulated cities were all taken from the UK. With deregulated competition.2 shows the same results for cities where there is an element of controlled competition. While the data may not necessarily match up with the timing of introduction of changes to the market structure in all cases . there is also a low increase of 0. it would expected that. The changes in relevant indicators of public transport performance have been calculated to provide an indication whether there is an association between competition and effectiveness.
9% n/a -1.4% 0.6% -2.6% 0.9% 0.3% -4.5% 3.8% 3.9% 0.4% -0.5% -1. This may be because they are all from the same country.5% -5.5% -2.7% -2.6% -3.8% 0.8% -3.2% 0.3% 0. There is greater variability in changes to average annual passenger numbers.9% -1.6% 1.5% -2.9% 2. that these data are not statistically significant.2% -0.4% 0.9% -4.1% -3.1% 2.4% -1.7% 1.Colin Buchanan and Partners EC Contracts –Final Report It is important to underline. only one of which is the introduction of controlled competition.1% -3.2% 0.5% -3.0% -2.0% -1.8% 1.1% -1.8% 1.5% -5.2% 1.8% -0.1% 0.8% 0.2% 4.7% -0.8% -2.6% 1.1% 2. in the controlled competition group than in the group with no competition.1% -0. fare coverage ratio and employees.2% -6.5% -1.0% 1.8% 1.8% -0.7% 4.6% 2-7 . The results with the lowest variability are with deregulated competition.4% 0.5% -0. however.3% -1.2% -1.4% Employees 2.3% -2.3% -2.9% 0.1% -1.1 Average Annual Percentage Change in Key Indicators: Cities with No Competition.3% -1.1% 2.6% 0.6% -6.3% -6.2% 2.6% 1. Table 2.1% 1.5% 1. Changes in public transport performance indicators depend on a number of possible factors.0% -2.5% -0.8% 0.3% -1.5% 2.5% 1.7% -2.8% -2.7% 0.1% -0.6% -3.3% -6.9% 0.2% -1. Start City Amsterdam Barcelona Berlin Bochum Bologna Brussels Cologne Dortmund Dresden Dublin Dusseldorf Essen Frankfurt Genoa The Hague Hamburg Hannover Lisbon Marseille Milan Munich Nuremburg Paris Porto Rotterdam Stuttgart Valencia Venice Vienna Average Maximum Minimum 1992 1991 1991 1991 1991 1991 1992 1991 1991 1992 1991 1991 1992 1990 1991 1991 1991 1991 1992 1991 1993 1991 1992 1990 1992 1992 1991 1991 1991 End 1999 1997 1998 1999 1996 1996 1999 1999 1999 1999 1999 1999 1999 1997 1997 1999 1999 1996 1998 1996 1998 1999 1999 1999 1997 1999 1997 1996 1997 Passengers Fare Coverage 0.6% 0.1% 2.2% 0.7% 2.2% -0.5% 1.6% -2.
4% n/a n/a Liverpool 1990 1999 -2.3 shows public transport usage in cities with no competition.4% -4. Demand has declined from 150 to 110 trips per head per annum.8% n/a n/a Average -2. In cities with deregulated competition.1% -0. Passenger trips per capita are presented in tables 2. an average annual drop of 2.1% n/a Maximum -1. demand for trips per head of population has declined by 0. to show demand in the cities.5% Nancy 1990 1995 -3.4.1% with controlled competition from 260 to 270.4.6% Minimum -3.4% per annum from 350 to 340 per annum.2% Gothenburg 1990 1996 1.3% Strasbourg 1992 1997 6. Demand has therefore remained broadly stable across all the cities.2% -4.1% -1.9% London 1991 1997 1.0% 0.1% Deregulated Competition Birmingham 1990 1999 -1.5% 8.0% Lille 1992 1999 0. Start End Passengers Fare Coverage Employees Controlled Competition Copenhagen 1992 1998 3.3% 8. there has been a consistent drop in passenger journeys per capita across all the cities.6%.0% Bordeaux 1991 1999 -0.6% 0.1% 4. On average.4% -0.4% n/a n/a Manchester 1990 1999 -2.8% 8.5 Impact on Demand Growth of Public Transport Usage Table 2.9% n/a n/a Newcastle 1990 1999 -3.6% 0.3 and 2. with no clear relationship between the scale of usage in a city and the trend in demand.7% 1.3% Helsinki 1992 1997 1.6% 0.3% 0.2% -4.0% 1. This compares to Table 2.2% -0.2 Average Annual Percentage Change in Key Indicators: Cities with Controlled or Deregulated Competition.8% n/a n/a 2.9% 1.1% Lyon 1991 1997 -0.8% -4.7% 0.9% 1.6% 0.6% Average 1. 2-8 .9% 2.Colin Buchanan and Partners EC Contracts –Final Report Table 2.4% n/a n/a Minimum -3.6% 5.8% 5.1% Stockholm 1992 1997 1. Population data were taken from Jane’s Urban Transport Systems and are consistent with the other data gathered.2% Maximum 6.2% 1. which shows an increase of 1.
Table 2.1% -1.1% 1.8% -3.7% 2-9 .7% -0.4 Public Transport Usage In Cites with Controlled or Deregulated Competition.7% 4.4% The figures show that on average. and is at its lowest for cities that have deregulated.9% 0.4% 1.0% 0.2% -3.Colin Buchanan and Partners EC Contracts –Final Report Table 2.0% 0. Before Controlled Competition Copenhagen Helsinki London Lyon 170 370 280 180 After 210 370 330 170 Annual Change 3.3 Public Transport Usage In Cites without Competition. The key to the impacts is the growth rate in each city.2% -1.4% -2.240 820 200 310 160 570 440 340 -1.0% 3.8% -2.8% -2.7% -3.2% -0.9% -0. Paris. for example.9% 1. This is probably because trips in Jane’s include trips by people (such as commuters and tourists) not included in the overall population figures. demand for public transport is highest in cities with no competition for public transport contracts.5% -2.0% 1.150 770 210 270 160 600 410 350 340 290 230 150 250 190 230 180 300 140 350 170 240 240 200 160 270 830 170 580 330 300 1.2% 2. Some cities.2% -0.1% 0. show very high trips per capita.4% 0. Passenger Trips Per Capita Before After Annual Change No Competition Amsterdam Barcelona Berlin Bochum Bologna Brussels Cologne Dortmund Dresden Dublin Dusseldorf Essen Frankfurt Genoa The Hague Hamburg Hannover Lisbon Marseille Milan Munich Nuremburg Paris Porto Rotterdam Stuttgart Valencia Venice Vienna Average 360 280 290 200 310 180 180 150 310 170 320 150 250 300 240 220 270 910 180 650 330 260 1.2% -0.7% -1.2% 2.2% -0.7% 1.9% -2.5% -0.
1% -1.1% The same trends are observed even if the magnitude is slightly different.8% -2.2% 0. Political decisions about how public transport is used to 2-10 . Table 2.1% -0. Changes in the supply-side of the public transport sector in major European cities are also affected by any number of economic and political factors.6% Fare Coverage EC CBP 0.4% 1.7% 1. Methods of introducing controlled competition also vary between cities and modes and may achieve differing levels of success. economic and political factors.6% 2.5) shows that CBP’s data is broadly in line with the EC’s analysis.6 Conclusions A comparison between CBP and the commission’s data (see table 2.9% 0. which vary widely between individual cities and countries.9% -3.3% 0.7 Commentary on the Results Role of External Factors Changes in cities’ transport sectors are influenced by demographic. although there are some discrepancies due to the expansion of the datasets. It is therefore reasonable to conclude that CBP’s analysis validates the work undertaken by the EC.4% -2.1% -3. 2.7% -0.2% -4.1% 7.1% -2.5% 1.4% -2.8% 1.3% 0.3% 0.3% 1.5 Comparison of EC and CBP data on annual average changes in Public Transport Performance Indicators Competition None Controlled Deregulated Passenger Journeys EC CBP -0.Colin Buchanan and Partners EC Contracts –Final Report Stockholm Lille Gothenburg Bordeaux Nancy Strasbourg Average Deregulated Competition Birmingham Liverpool Manchester Newcastle Average 810 90 190 310 110 110 260 160 130 100 210 150 830 100 190 310 90 150 270 140 100 80 140 110 0.
cities with no competition have cut staff whilst maintaining services. that the number of employees employed by a company will be determined not only by efficiency measures but also by the size of the network served and the intensity (i. frequency) with which this network is exploited. In London. Therefore. Employee Numbers The chief impacts have come from the supply-side. It is important to note. great care should be taken in using figures pertaining to employment levels. There will also be differing numbers of operators in certain markets depending on their size. and so the data produced make for a more consistent comparison. the mayor has cut bus fares to promote their use. however.e. whilst employment in cities with controlled competition has increased slightly. for example.Colin Buchanan and Partners EC Contracts –Final Report further urban transport strategies are a major factor. For example in London there are 39 different bus operators compared to 5 private and 1 municipally owned in Helsinki. The Process of Introducing Competition Countries introduce controlled competition at different rates. In terms of absolute numbers. 2-11 . The UK privatised its rail operations over two years whilst The Netherlands. Germany and Sweden have a combination of public and private involvement and of open and closed markets. Deregulation of public transport has occurred only in the UK and under the same legislative requirements.
We have chosen to summarise contracts into a consistent format. The summary format will enable users to access and compare what different contracts say about (for example) variation clauses much more easily than a reproduction of the entire contract would do. This chapter describes the summarisation process.the outputs to this study are intended to inform interested parties as to the differences between different contract types in terms of their contents.1 lists the contracts collected and their characteristics. CONTRACT SUMMARIES 3. The main issues concerning the collection of the contracts are: • Contract length/complexity .the team have encountered some issues about confidentiality. application and outcomes.many of the contracts are extremely long and complex. Some extend to 500 or 1. people who although willing to release the contracts require authorisation from all the involved parties (difficult to obtain) and people who although happy to talk about the contracts are not willing to release written versions.Colin Buchanan and Partners EC Contracts –Final Report 3. people reluctant to discuss contracts. Table 3. The consultants have collected 49 such contracts in total. Contract Comparability . • • Table 3. the development of a database for these summaries and key results arising from the database.1 Collection to date A significant element of the study is the collection of actual contracts between authorities and operators. in order to make them more understandable and to illustrate the implications rather than reproduce the legal jargon. Confidentiality .1 List of collected contracts COUNTRY Germany Germany Germany Germany Germany Germany Germany Germany Germany Germany Germany Ireland MODE Rail Rail Rail Rail Rail Rail Rail Bus Rail Bus Rail Air AREA Westfalen Sud Oberelbe Thuringia Muensterland Schleswig Holstein Rheinland Pfalz N Erfurt Bad Segeburg Brandenburg Steinburg Rhein-Ruhr National 3-12 .000 pages.
2: Contracts by mode UK 11 5 2 1 19 11 5 7 2 1 5 GER 2 9 ITA 2 3 FRA 4 SWE 1 1 OTHER 2 1 1 Bus Rail Metro/LRT Combined Ferry Air TOTAL 3 giving a total of 49 contracts.Colin Buchanan and Partners EC Contracts –Final Report Ireland France France France France France France France Italy Italy Italy Italy Italy China Australia Australia Sweden Sweden United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom Metro Combined Combined Bus Combined Bus Bus Bus Rail Bus Bus Rail Rail Bus Bus Rail Bus Rail Bus Bus Bus Bus Bus Bus Bus Bus Bus Bus Bus Ferry Light Rail Light Rail Rail Rail Rail Rail Rail Dublin Lille Bordeaux Dunkerque Toulouse Creil Perpignan Lorient Rome Rome Rimini Lombardy Lombardy Hong Kong New South Wales Victoria Stockholm Stockholm Lincolnshire West Sussex Cheshire London London Merseyside Merseyside Merseyside Staffordshire Strathclyde Strathclyde Scotland Croydon Manchester Chiltern East Midlands National Gatwick West Midlands Table 3. 3-13 . French and German). Each of these contracts has been summarised and they are reproduced in Appendix A (in English.
asset ownership. The former is classified in the database as gross cost and the latter as net cost. so that the operator hands over all revenue to the authority. bus. operating cost risk (maintenance costs. The key factors used to determine contract type are risk. scope. light rail/metro. service quality is poor. which renders a classification system effectively useless.Colin Buchanan and Partners EC Contracts –Final Report 3. and vehicles) may either be the responsibility of the contracted ownership or else the tendering authority 3-14 . There are therefore six mode classifications in the database. Germany.). Contract Type Classifying contracts needs to strike a happy medium between being over-complex. This last category is dealt with under asset ownership. etc. fuel bills. Mode Contracts have been collected covering several modes: heavy rail. rolling stock. ferry and combined (principally bus and light rail). France. Italy. there are three contracts from outside the EU (Hong Kong and Australia). regional or national in nature. air. Operating cost risk is usually transferred to the operator whilst revenue risk may stay with the authority. which will adversely affect the quality of any queries made of the database. Asset Ownership Assets (infrastructure. or else the revenue risk may also transfer to the operator. and over-simplification. Sweden and Ireland. These are designated as N (for Non-EU) contracts in the database. this is referred to as a management contract. incentive regime and tariff freedom. In addition. Risk There are three major risks associated with transport operation: revenue risk (demand is below expectation. Area The area in the database enables the user not only to focus on geographical areas of interest but also to determine whether a particular contract is urban. When the tendering authority retains both types of risk.2 Description of and Results from the Collected Contracts Country Contracts have been collated from six EU member states: UK. and so on) and capital cost risk (purchasing and replacing assets).
There is a difference between the two key modes of bus and rail. In the case of UK rail services. 3-15 . Scope Contracts range in scope from tendering a single bus route to an entire multimodal urban network. however. all contracts in the database are let on the basis of the entire network. Tariff Freedom An overview of the contract summaries indicates that there are effectively just two levels of freedom. 3.3 demonstrates. Some freedom means that the authority sets maximum fares and the operator is at liberty to price below these maximum levels and/or introduce new promotional fares.Colin Buchanan and Partners EC Contracts –Final Report may specify what vehicles should be used. several (routes) or the entire network. Other fares.3 Distribution of Contracts between Gross and Net Cost Some 45% of contracts are net cost. with the operator taking most risks for both revenue and costs with the remainder. by definition. heavy rail and air: one (route). Scope is therefore defined as follows: • for buses. • for metro and light rail. Incentive Regime Certain contracts have explicit penalty and incentive regimes for operator performance measured against targeted outputs. the database will classify contracts as either “Operator” in the first instance and “Authority” in the second. there are some fares which are regulated by the Strategic Rail Authority. This classification is therefore limited to yes or no. are unregulated. as table 3. mainly season ticket and Saver (advance purchase) fares. These contracts are classified in the data base as having some tariff freedom. however. bar two. and • combined networks will be classified as either several or entire. such as “walk on” single fares on long distance routes. None applies to contracts in which the Authority sets all fares. being gross cost contracts. Although there are “shades of grey” in this area.
ferry. contractors. 3. etc.6 Penalty and Incentive Regimes Almost all contracts have penalty clauses for underperformance which is defined in various ways. Melbourne explicitly rewards operators for increasing passenger volumes.6) whereas for bus the average contract length is 4. Relatively few contracts appear to include bonus systems. Single route contracts generally are only used in a rural (bus) or regional rail context. The contract length for rail services. however. falls far short of the average life span of rolling stock.5 years (SD: 1. One reason for the difference may be to do with the life of the assets. operating cost risk is borne by the operator). Presumably. 3-16 .) Gross Bus Rail 15 7 Net 8 10 3. award themselves ‘bonuses’ by reducing their operating costs (in almost all contracts. as buses have a significantly shorter life than rail rolling stock. in effect.4 Scope The vast majority of contracts are for several routes or the entire network. however. cancellations and customer satisfaction surveys. 3.Colin Buchanan and Partners EC Contracts –Final Report Table 3.7).5 Contract Length The average length for rail contracts is 10.3 years (standard deviation1: 4. which is in excess of 20 years.3: Distribution of Gross vs Net Contracts between Bus and Rail (number of contracts excluding air. including punctuality. 1 Standard deviation is a measure of variability about the mean.
2 Tendering Authorities The tendering authorities vary in scale from national bodies such as the Strategic Rail Authority in Great Britain to small regional Counties in Sweden. CASE STUDIES 4. Whilst tendering has principally been introduced to reduce costs there has also often been a desire to increase private sector involvement and competition in public transport provision.3 Services tendered Tendering has mainly covered the provision of local bus services but the process is being steadily extended to light rail (eg Croydon). Copies of the Case Studies are at Appendix B and cover • London • Helsinki • Sweden • Italian rail • Strategic Rail Authority • Arriva • Emilia Romagna • Strathclyde • Rome • Lombardy This chapter provides a brief overview of the Case Studies main points of interest. Authorities have tended to encourage competition for the market rather than within it although there are examples of the latter in both the bus and rail sectors and between modes as well. However. tendering authorities and other stakeholders. the latter is often at the expense of integration between modes. 4. 4. The purpose of the case studies was to ascertain how contracts have operated in practice. to highlight areas of good practice and identify where improvements can be made.1 Introduction Ten Case Studies were undertaken based on discussions with operators.Colin Buchanan and Partners EC Contracts –Final Report 4. metros (eg 4-17 . They operate under various EC Directives principally relating to public procurement and national legislation depending on the policy and strategic goals of the national and regional governments.
There are several examples of direct competition in rail services in Great Britain. 4.5 Light Rail/Metros/Trams The main activity in tendering services has occurred as new lines are built and brought into service eg Dublin and Copenhagen. eg Stockholm and Melbourne.4 Bus services A wide range of tendering procedures have been used for bus services ranging from whole networks through area contracts to individual routes. Examples include: London – Birmingham (two companies on one line and a third on a different line). However. London to Gatwick Airport (three companies using two different London termini). 4. London – Ipswich ( identical lines and termini) London – Glasgow (two companies using entirely different termini and lines).Colin Buchanan and Partners EC Contracts –Final Report Stockholm). ferries (eg Strathclyde). these examples are principally the result of the tendering system rather than an explicit desire to have competition within the rail system. The Authority usually retains responsibility for route planning. Rail is the area where the least progress has tended to be made and outside Great Britain tends to be limited to local rather than long distance services. there are examples of existing routes or networks being tendered. Here the operator may be involved in the consortium building the new line or come in at the end once the line has been built. responsibility for funding local rail services has started to be delegated to regional or local 4-18 . timetabling and fares. However. air services (eg Ireland) and heavy rail services (eg Great Britain).6 Heavy rail Heavy rail services have traditionally been the responsibility of the national state owned rail companies. 4.
Sweden and Italy. Great Britain has gone one step further by tendering the whole of its passenger rail services. This has led to the tendering of some of these services.7 Ferry and air services A wide range of revenue supported ferry services operate throughout the EU ranging from local estuary crossings to international services. over time the sector has rapidly consolidated so that most markets are dominated by 4-5 companies.9 Operators A similar pattern has evolved in virtually all countries where public transport services have been competitively tendered. This led to a large number of bids as the first contracts were let. 4. and Portugal. This has resulted in a reduction in competition for future contracts. Such services now operate in. often pan-European. In Great Britain there is the interesting situation where the main national coach operator (which is a private company) sub contracts almost all its commercially operated services to local operators. However. EU Regulations allow national governments to procure. France. for example.Colin Buchanan and Partners EC Contracts –Final Report authorities as in Germany. Many of these supported-services are now tendered. Ireland. Authorities have taken various measures to encourage new entrants including: • Moving to gross cost contracts thereby reducing the bidders’ risk 4-19 . in line with EU legislation. Coach services have historically been operated commercially and there are few examples of tendered services. 4. air services on routes that are not provided commercially.8 Other services Many authorities provide special services to meet the needs of the mobility impaired often using demand responsive services and school children. 4. The former were either privatised or allowed to bid for contracts outside their area. The latter especially have had a long history of being tendered out to the private sector and were often the only bus services operated by non-publicly owned companies. through competitive tendering for time-limited contracts. In the bus sector there tended to be a number of medium sized municipally owned companies and a large number of small private operators.
In part. this is due to the small aircraft used for most tendered air services which tends to favour smaller operators and the need for local knowledge for many of the ferry services. This led to new bidders (either existing management teams or the larger bus companies).Colin Buchanan and Partners EC Contracts –Final Report • • • Letting route rather than area contracts to encourage smaller companies to bid Requiring bidders to sub contract a certain proportion of services Maintaining ownership of local depots and specialist equipment as lack of access to local depots has been found to be a key entry barrier. rail contracts are now predominantly held by large multinational public transport operators. with little synergy arising from running a large number of operations that are spatially very dispersed. smaller companies have also grouped themselves into cooperatives to bid for contracts thereby enabling them to compete for large contracts while maintaining their independence. In Sweden. For heavy and light rail far longer contracts are usual (sometimes in excess of 15 years). With a few exceptions. 4-20 . 4. depending on the scale of capital investment required. The rail sector was very different with virtually no significant private passenger operators in most countries before tendering started. EU law also requires most ferry contracts to be limited to 5 years.10 Tendering In the vast majority of cases the Authority tendering the service provides information on • • Service specification ie the route(s) and frequency which they wish to be provided Vehicle specification ie the capacity and characteristics of the vehicles to be used Contracts for buses were generally for a three year period although there is now a move to longer contracts often five years but in some cases up to ten years. The opposite position has tended to occur with air and ferry services: these are mostly provided by local small companies rather than by multinationals. Air service contracts awarding an exclusive right are subject to a three year maximum period by EU law.
4-21 . However. • Reduces risk for the operator thereby encouraging more bids for the contract • Fares are usually set by the Authority thereby reducing the scope for operators to significantly increase patronage and revenue.Colin Buchanan and Partners EC Contracts –Final Report 4. (Again a problem for Authorities is that this requires expensive passenger surveys to accurately assess numbers carried.) These issues are covered in much greater depth in the Guide to Contracting (Appendix C). However. Authorities therefore began to build into their contracts incentives and penalties depending on performance. These can either be contract extensions or cash payments or deductions. In some cases the operator also retains a share of additional revenue achieved over and above a certain target level. it soon became apparent in many locations that gross cost contracts incentivised operators to reduce costs at the expense of service quality. such as retail stores). there is a tendency for contracts to be let on a gross cost basis. There are a number of reasons for this including: • Reduces the need for expensive customer surveys to allocate revenue between operators where there are extensive off-bus revenues (for example. Operators complained however that many incentive payments did not cover what they believed to the key measure of their performance and that was patronage.12 Quality Monitoring This initially tended to focus on key outputs such as reliability and punctuality. as greater emphasis was placed on quality issues this has been extended to include customer surveys to collect information on softer issues such as • Driving standards • Information provision • Cleanliness of vehicles • Helpfulness of staff etc This information is used either to enable Authorities and operators to discuss areas of concern or to calculate penalty or incentive payments. 4.11 Risks and Rewards Overall. where tickets are widely available through other operators – a ticket bought at a railway station which is valid on buses operated by another party – or through non operators.
As contracts have been renewed quality standards have been raised with contract specifications now covering in more detail a wide range of quality issues covering • Vehicle specification especially with regard to accessibility • Reliability and punctuality • Information provision on board and off vehicles • Staffing and training Authorities have also tried to identify barriers to entry and reduce them wherever possible to increase the level of competition. As the easiest cost cutting measures have already been achieved.13 Potential Improvements Similar patterns have occurred across Europe with the tendering process. With the tendering of new light or heavy rail lines it is important to have the operator involved during the construction stage to ensure the built system can be operated efficiently.org.atco. the level of competition reduced and the requirement in new contracts for improved quality standards.2 Where Authorities used the initial cost savings to reduce their overall transport budget this has led to problems as they are unable now to procure the same level of service provision as previously. it is now recognised that this was at least in part at the expense of quality. More enlightened authorities such as Helsinki used cost savings to the benefit of all stakeholders by splitting them three ways to increase service provision. because of cost over-runs. 2 please see http://www. tender prices have risen in the UK faster than inflation in the last few years according to a report by the Association of Transport Co-ordinating Officers. There are a number of examples where the operator is unable to provide the level of service it desires due to cost cutting measures during construction which in the long term result in reduced revenues or higher operating costs. The result is that the speed and frequency of service are restricted. When services were originally tendered the key issue tended to be reducing costs and this was done successfully with substantial savings of up to a third. Tender cost increases can therefore be more easily handled as the Authority has retained within its budget the majority of past cost savings.Colin Buchanan and Partners EC Contracts –Final Report 4. reduce fares and reduce the overall level of subsidy.htm for more details 4-22 . economies in the later stage of development included putting in single rather than double track in some places. One example is the Croydon Tramlink.uk/policy/contpr00. However.
1 Purpose and Organisation of Guide The European Commission has introduced a proposal for a Regulation of Public Service Requirements in Public Passenger Transport. and good practice when: tendering. and the decision-making process when designing a contract is outlined. Specifically. The Introduction is followed by: (a) (b) (c) (d) An overview of contracts for public passenger transport (Chapter 2). Analysis of key contractual issues which can be included within most contract types (Chapter 4) some important considerations with regard to tendering (Chapter 5). negotiating contracts. This Guide to Contract Design and Management provides a practical information source for authorities and operators who are either facing the need to contract for the first time or who are interested in improving how contracts are awarded and managed. This will require that whenever an authority awards an exclusive right and/or operating cost subsidy. The Regulation will also require the opening of most remaining closed public transport to "controlled competition". 5-23 . that it does so through a public service contract. it informs those embarking on such ventures of: (a) (b) the options available. the various types and categorisations for contracts are listed (and their defining features summarised).Colin Buchanan and Partners EC Contracts –Final Report 5. Analysis of the key policy issues and how these interact with different contract types (Chapter 3). GUIDE INTRODUCTION 5. designing contracts/franchises and managing those contracts once in place In this first chapter: a number of important terms are defined.
5-24 .Colin Buchanan and Partners EC Contracts –Final Report (e) (f) key issues relating to contract management and monitoring (chapter 6) conclusions (Chapter 7).
3 Other Information sources This Guide has been produced as part of a research study for DG TREN which included the collection of a number of contracts between authorities and operators.some combination of track.Colin Buchanan and Partners EC Contracts –Final Report 5. "Net Cost Contract with Investment (NCCI)" refers to a contract (normally also for a fixed period of time) that involves operators providing. depots and/or stations (b) (c) (d) "Deregulation" refers to a situation in which operators are largely free to enter and exit the market for transport services at will though in certain circumstances.depots (and perhaps bus stops) rail operators . both the required vehicles/rolling stock and any fixed infrastructural facilities . irrespective of whether services were tendered or how this tendering took place. in the case of: (e) bus operators . 5. inter alia: Arriva. "Authority" refers to a publicly-owned organisation with a legal responsibility to provide and/or regulate public transport services in a specified geographic area. there may remain fixed periods of notice for start-up and service withdrawal and caps on the maximum fares that might be charged.along with the exclusive right.for example. The study team also undertook a number of interviews with authorities and operators which have helped to inform the analysis presented within this guide. “Operator” is used to denote the company operating the public transport services. to a single operator (or possibly consortium) following a competitive tendering process . 5-25 . in addition to the more normally specified public transport services. Interviews were held with. the authority may also grant subsidies to the successful operator in compensation for the fulfilment of public service requirements. Summaries of these contracts have been placed in a database available through ELTIS. or a number of network routes.2 Definitions For the purposes of this Guide the term: (a) "Controlled Competition" refers to the awarding of an exclusive right to operate a route.
Colin Buchanan and Partners EC Contracts –Final Report - Strathclyde Passenger Transport Executive. Arriva plc Tony Depledge. Manager (Programs and Studies Department). Department of Infrastructure and Mobility. Rimini Lars Nordstrand. Region Lombardy Gianni Scarfone. Gustavo Minguzzi. Dublin Mohamed Mezghani. Stockholm Transport Marta-Lena Schwaiger. Regional Agency for LPT. Svenska Lokaltrafikföreningen (Swedish Public Transport Association) Ian Morton. Head of Business Development. Development Executive International.Atac Spa. Department for Public Enterprise. UITP 5-26 . Development Director. FNME Spa. Director (Programs and Studies). Technical Committee for Management of Contract. Contract Management Committee. Francesco Salvelli. Svenska BusbranchenRiksfoerbund A full list of contacts made and meetings held by consultants: Bruno Ginocchini. Transport for London. Bologna Benedetta Sevi. Rome Pier Luigi Martini. Milano Carlo Scoppola. UITP Cécile Sadoux. and. Ireland. Roma Andrea Boitani. Railway Procurement Agency. Contracts Manager. Stockholm Transport Kenneth Burre. Croydon Tramlink. Tram Servizi Spa. Tram Agenzia. Arriva plc Rory O'Connor. Stockholms Lokaltrafik. Rimini Sergi Amadori.
Policy Development Manager.Colin Buchanan and Partners EC Contracts –Final Report Hilary J Howatt. Strathclyde Passenger Transport Malcolm Reed. Verkehrsverbund Ostwestfalen Lippe Herr Gorka. Director General. Strathclyde Passenger Transport Herr Bernd Wewers. 5-27 . Landesnahverkehrsgesellschaft Niedersachsen mbH We are very grateful for the assistance provided by all the above organisations. but the opinions presented are exclusively those of the consultants. LVS Schleswig-Holstein Landesweite Verkehrsservicegesellschaft mbH Herr Uwe Brücher. Connex Regiobahn GmbH Herr Bernd Siemer.
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