You are on page 1of 13

Research in Transportation Economics 59 (2016) 94e106

Contents lists available at ScienceDirect

Research in Transportation Economics


journal homepage: www.elsevier.com/locate/retrec

A review of general practice in contracting public transport services


and transfer to BRT systems
Marisa J.G. Pedro*, Rosa
rio Maca
rio
CEris-CESUR, Instituto Superior T
ecnico, Universidade de Lisboa, Av. Rovisco Pais 1049-001, Lisboa, Portugal

a r t i c l e i n f o a b s t r a c t

Article history: Public transport is dened and structured in a wide variety of contractual practices, particularly the way
Received 10 November 2015 authorities divide regulatory powers upon public transport, the way funding is organised, the ownership
Received in revised form and transport operators' structure, the nature of the relationship between authorities and operators and
29 May 2016
the type of regulatory regime.
Accepted 13 July 2016
Through a large set of public transport service contracts covering the most practices on Public Service
Available online 27 September 2016
Obligations across world, this paper provides a review of general practice in contracting for public
transport services, bus rapid transit systems as well. This database covers around 50 contracts, including
Keywords:
Awarding
contracts set up under various institutional regimes, with various forms of risk allocation and many kinds
BRT of awarding procedures. There are also a wide set of different institutional arrangements models for BRT
BHLS implementation and operation and a growing interest in developing these agreements with the private
Case studies sector. Thus, it is important understand how the planning, procurement, contracts, quality payments,
Contracts management and other dimensions of BRT are different from how it is done for conventional bus
Public service services.
Tendering More case studies collection will improve the research and the ndings achieved; namely contractual
Transport system
arrangements for BRT systems.
2016 Elsevier Ltd. All rights reserved.

1. Introduction national or local (e.g. typical situation in Europe) or free competi-


tion (e.g. typical situation in South America). In Europe a major
Public passenger transport provision has been changed through share of public transport was provided by public administrations or
decades. Contracting is the main trend, which can indeed take public companies holding monopoly positions. In whatever way,
many forms, as many kinds of relationships are possible between this monopoly was subject of several sources of discontent,
transport authorities and transport operators, the way authorities increasing pressure to consider alternatives. This resulted in cost
divide regulatory powers upon public transport, the way public escalations (Cox, 2004). Many countries who relied upon public
transport funding is organised, the type of regulatory regime and so monopoly saw unit costs escalated (Canada, Australia, New Zealand
forth. Public Service Contracts is the normal method of securing the are some examples). As a result, reforms in order to implement
fullment of public service objectives. Contracts have been used to competition, reduce costs and expand service have been under-
change the relationship between authorities and operators, either taken in several of them during the last 25 years. It was then that
by these providers being replaced by new operators or make them several member states had introduced some elements of compe-
clearly accountable for quality-of-service (Colin Buchanan et al., tition in their legislation (Van de Velde, 2008). The private sector
2001a). began to have greater prominence in the eighties, mostly driven by
Competition and contracting issues were hardly relevant until a desire to reduce the growing call of services on the public purse
the last decade of the 20th century. Public transport markets were and to provide scope for private sector innovation, which was
either not opened to competition and operators were exclusively thought likely to improve customer services and reduce costs
(Hensher & Stanley, 2010). Also by the eighties, the British regu-
lation changed the European land scape of public passenger
* Corresponding author. transport services. London Transport's bus system was competi-
E-mail addresses: marisa.pedro@tecnico.ulisboa.pt (M.J.G. Pedro), tively tendered over a 15 years period beginning in 1985, while
rosariomacario@tecnico.ulisboa.pt (R. Mac
ario).

http://dx.doi.org/10.1016/j.retrec.2016.07.010
0739-8859/ 2016 Elsevier Ltd. All rights reserved.
rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca 95

public transport services were deregulated (free market) outside i. The country and city where the project was located;
London. Numerous countries then followed the competitive ii The type of transport service (Bus, Subway, Tram, etc.)
tendering. Nowadays, competitive tendering and privatization are iii. The type of contract (Gross cost contract, Net cost contract,
still dominant features of the local public transport world in Management contract, etc.);
Europe. It is dominant in Sweden, Denmark, the Netherlands iv. The type of project delivery and sponsors (public procure-
(except the main cities), France (outside Paris) and London. On the ment, private initiative and PPPs);
contrary, direct award and historical rights to municipal/public v. Dates and durations of the contracts;
operators are far more dominant in countries like Germany, Austria, vi. Funding and nancing scheme (if it is from users or indirectly
Switzerland, Spain, Italy, Belgium, Ireland, Poland and Czech Re- through taxes and charges; the source of nancing. Either
public. Deregulated markets continue to be uncommon in local public Sector or privates).
public transport, despite free markets can appear in interurban vii. Information about risk sharing, either who carries the risks
trafc, such as in Sweden, Norway or United Kingdom and grow- or only the existence of it;
ingly also in Eastern European states (Van de Velde, 2008). In the viii. Existence or types of other incentives;
United Kingdom (outside London) and in New Zealand, for ix. Stakeholders involvement;
instance, economic deregulation was the major way in which pri- x. Among others.
vate sector participation succeeded. The scenario is almost the
same in USA. In sixties/seventies, the public passenger transport Not all of this information was available for all cases. The
services were publicly owned and operated without competition missing information was essentially related with contract price.
(Wilson, 1991). Then, costs escalations were observed, leading to Those indicators describing the sample used are also presented on
reforms to implement competition and, therefore, leading to pri- Table 1. The template aims to present synthetic information
vate sector entry. Competitive tendering and privatization are still regarding the contractual practices currently encountered in
dominant features of public transport. However some contest- worldwide in order to design a global contractual practices data-
ability emerges, questioning effectiveness of the process, trans- base (it was adapted from Van de Velde, Beck, van Elburg, and
actions costs, and impacts over the different agents. Terschren (2008b). It was divided into sub-topics as General In-
This paper contains an analysis of a set of general public trans- formation, Economic information, Risk Allocation Scheme, In-
port service contracts selected covering the most practices on centives and Penalties, Service Scheme, Performance Issues and
public transport across world. These include contracts set up under Monitoring and Arbitration. It is believed that those information
various institutional regimes - market initiative regimes (deregu- are essential to design an adequate contract.
lated free-entry regimes) and authority initiative regimes (with or
without competitive tendering) e, including contracts with various 3. Regulation and contracting
forms of risk allocation (cost risk and revenue risk, with gross-cost,
net-cost and super-incentive contracts) and various kinds of Regulatory concepts among different countries vary from
awarding procedures (direct award, competitive tendering pro- setting up minimal rules for public transport to highly regulated
cedures). Through literature review and database design and con- markets. In pure authority-initiated regimes only the public
struction, this article aims to be a review and reection process transport authority may take the initiative to produce or request
regarding public transport contracting subject, trying to devise the production of transport services (Mac ario, 2006). It can even be
insights about the potential features that may have contributed to a divided into (i) public management of concessions (Belgium and
successful transport service contract. Further, bus rapid transit Portugal cases); and (ii) delegated management in cases the au-
systems has supported the evolution of several developing cities thority makes the assets available to a private operator. In con-
from unregulated private procedures to more organized forms of cessions regimes, the authority selects a company to operate the
public transport provision, well dened contracts with adequate service and to be responsible for the vehicles and facilities. In
assignment of responsibilities, revenues and risks (Hidalgo & market-initiated regimes, on the contrary, companies can enter the
Gutierrez, 2013). Therefore, lessons learned from those experi- market autonomously, but there may be regulation of both market
ences may enrich the research across world and ensure the success entry and market behaviour (supply and fares). It can also be
of those transport systems' provision. divided into (Anderson et al., 2009) (i) Regulation market, a balance
Finally, the paper is organised as follows. Section 2 outlines the between the monopoly management of public service and the total
data analysis, describing the sample of contracts for public trans- deregulation of the market; and (ii) Free/deregulation market. An
port services. Section 3 and Section 4 present a review of the example of deregulation market is the United Kingdom (outside
literature on regulation and contracting for public transport pro- London) system, where operators have the right to provide services
vision as well as contract design and typologies in order to un- upon their own initiative, according to routes, timetables and fares
derstand the common practice in contracting for public transport determined by their own commercial insights. There are no
services. Bus rapid transit systems in particular are presented in exclusive rights, meaning that direct competition between bus
Section 5, providing some recommendations and next steps on operators on the streets is allowed (Beck, 2012). On the other hand,
Conclusions section. Section 6 discusses the lessons learned from Germany practice is one example of regulation: the public trans-
previous sections and Section 7 concludes, highlighting further port is considered to have to full public service requirements and
research needs. it is considered that the product design cannot be left to the market.
In reality, combinations of the two systems can also be found. In
2. Data analysis a deregulated system, state intervention may take the form of
minimum service requirements for operators. The authority can
The sample used in this article covers around 50 case studies in furthermore complement the private initiative by tendering for
23 countries across world (please see the database in Appendix A). supplementary services that cannot be provided on a commercial
The sample is from 1990s to 2000s and include gross cost contracts, basis, but that are nonetheless desirable from a social point of view.
net cost contracts and management procedure. It also includes 42 As extreme of regulatory frameworks are public monopolies and
bus, 12 subways and 13 tram services as well as relevant informa- market liberalisation. In public monopolies the private sector may
tion such as. have an external role through subcontracting. Market liberalisation
96 rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca

Table 1
Draft of contract practices template.

Template
Case study name
Summary:
 Brief description of the case study.
 Brief information about the contractual statement.
Main description
General framework City The city where the case study is implemented
Country The country where the case study is implemented
Size of urban area Size of city area as number of inhabitants and square kilometres. Is dened as Small, Medium, Large according the
following criteria: (i) Small (density < 500 inh./Km2); (ii) Medium (density 500e4999 inh./Km2); (iii) Large
(density > 5000 inh./Km2).
Modes concerned Mode of transport concerned: Conventional Bus; BRT - Bus Rapid Transit; BHS e Tram & Bus with a High level of
Service; Tram; Underground/Subway; Trolleybus; Cable car system; Suburban rail; Rapid light rail; Waterborne
among others
Contract type The type of contract: Management contract (MC); Gross cost contract (GCC); Net cost contract (NCC); Net cost
contract with investment (NCCI); Public-Private Partnership (PPP) or other
Award procedure The method used during the procurement in order to evaluate the proposals (tender offers) taking part and award
the relevant contract. It could be open, restricted, negotiated procedure, competitive dialogue procedure (as PPPs),
negotiated Procedure with a call for competition or other type.
Regime for PSO Present the legal feature used for the Public Service Obligations (PSO). Note: this may be several features: a contract,
a nancial allocation decision, an authorisation, or other legal features specic to the country studied
Year The year when the contract was signed/done
Contract length How long the contract is (months/years)
Contract size Vehicle eet size
Stakeholders The authorities, operators and other contracting parties involved.
Economic Contract value Indicate the contract value/price per year
Funding Funding involved. Funding can be sourced directly from users or indirectly through taxes and charges (or rates for
local government). It must be present to support nance.
Financing Indicate the source of nancing, where the money comes from. Public Sector Financing: the state (and federal)
government. Private Sector Financing: Private investors; Banks and other lending institutions.
Risk allocation Risk sharing If there is risk involved, the type of risk and between who.
Cost risks Who carries the risk on possible variations of the operating cost (maintenance, fuel bills) and capital costs
(investments, purchasing and replacing assets). Who will support the additional loss/benet, if operational costs are
higher/lower than predicted.
Revenues Who carries the risk related to the amount of revenue expected from passenger receipts. Who will benet, if
passenger revenues are higher/lower than expected. Demand is below expectation, service quality is poor, etc.
Incentives & penalties Additional incentives If there are additional incentives and which they are, to increase the public transport ridership. Eg. linking payments
to the operator to revenue realisation (V1 subsidy for each V1 of revenue collected from passengers), or to supply
realisation (Vx payment for each bus-km produced at peak-hour).
Penalties Penalties described in the contract
Service Fares Which type of fares exists in contract.
Asset ownership Assets (infrastructure, rolling stock, and vehicles) may either be the responsibility of the contracted ownership or
else the tendering authority may specify what vehicles should be used.
Constrains Budgetary: The extent of subsidy that Authorities are able and prepared to pay. The level of funding available will
inuence decisions not only on the type of contract but also on contract size and on policies towards fares (including
concessionary fares) and integrated ticketing
External: Take into account any over-riding legal and physical restrictions on the operating environment (eg,
reducing the number of operators to ensure that the impact of physical constraints of the railway network is
reduced). Ex. Flooding of streets in case of natural disaster; energy price, staff costs.
Service Tactical level: Describe the allocation of tactical competences between authority and operator (How much of the
service design e routes, timetable, fares e is dened by the authority/operator; how much freedom to change
service design does the operator have)
Operational level: Describe the allocation of operational competences between authority and operator (are
operational decisions, such as the allocation of vehicles to the timetable, predetermined by the contracting body, or
does the operator decide on this autonomously).
Performance Performance objectives Describe the specic contract goals related to the performance objectives.
Criteria measure Which criteria are used for performance measure. Service quality criteria? Minimum level of service (MSL)?
Minimum amount of service vehicle kilometres (VKM)? Others?
Deliverables/Outputs Deliverables and outputs of the project/contract.
Outcomes Desired impact on customers. Results/benets of the outputs.
Monitoring & arbitration Audits If there are any examination of records or nancial accounts to check their accuracy; and how many times per year
there are made.
Monitoring Which procedures have been agreed to monitor correct contract execution.

NOTES: Notes added.


Sources: Sources where data came from

(or open market) allows for the provision of public transport ser- delivering the services; these are contracting regimes or controlled
vices by any interested party as long as the service standards set by competition regimes (Karlaftis, 2007). These regimes can be
higher authorities are met. In market liberalisation, the public divided into competitive contracting, where private operators un-
sector not only assumes an important regulatory role as can also dertake transport services after tendering procedures; franchising
participate as an operator in the provision of services. Between and licencing. Some examples of competitive contracting are the
them we can have mixture regimes that are market structures buses contracts in Curitiba, Copenhagen, France and some cities in
where the private and public sector share responsibility for USA (OECD/ITF, 2008). Under a franchising agreement, the
rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca 97

franchisee is granted an exclusive right to provide transport ser- Adelaide practice (Australia) and conclude that there is little to gain
vices as a result of some form of competition. Some examples of in terms of cost efciency and quality improvement by going to a
franchising contracts are light and urban rail services in London and fourth round of tendering bus services. Hensher and Stanley (2010)
Manchester, buses contracts in Nairobi and Singapore and the also argue that a move to negotiated performance-based contracts
metro service in Kuala Lumpur and Bangkok (OECD/ITF, 2008). can not only reduce transactions costs (associated with tendering)
Finally, licencing refers to a non-exclusive right to operate as the but also offers the opportunity to work closely with efcient in-
buses service in Mexico and Rio de Janeiro (OECD/ITF, 2008). cumbents to grow trust and build patronage. In Bogota , a
competitive tendering regime was implemented for the bus
3.1. Tendering and awarding network serving the city centre and Estache and Go  mez-Lobo
(2005) reported increases in average speeds by 50%, reductions in
The organisation of local and regional public transport provision travel times by 32% and large safety improvements, while fare in-
has been changed during the last two decades. Public transport creases were minimal (6%). Further research on benets of
service procedures are often divided into (i) Direct awarding, tendering procedures can be found in Alexandersson and Pyddoke
without tendering, to a public operator when the authority may (2003), Hensher and Wallis (2005), Sharaby and Shiftan (2008) and
decide to provide public passenger transport services itself and; (ii) Wolanski (2009).
Awarding based on a competitive tendering, open to all operators. Furthermore local public transport provision is tendered in
Following the submission of tenders and any pre-selection, the almost all of the case studies analysed (see Appendix A), whereas in
procedure may involve negotiations in order to determine how best the remaining cases public owned company operates the service
to meet specic requirements. At the end, the path to follow will without tendering (5%). Almost all cases of the database have the
depend on the surrounding political, nancial and legal conditions. possibility to award public services contracts either on a negotia-
Several countries have adopted the competitive tendering tion basis or through a competitive tendering procedure. Only
regime. In Europe, the tendering authorities diverge from national Gifhorn and Leeds are exceptions. In Leeds, for instance, there is no
bodies (as the Strategic Rail Authority in United Kingdom) to small formal process for award: there is a quality/voluntary agreement
regional counties (as in Sweden). They operate under various EC between authority and operator under free market principles. Be-
Directives, particular relating to public procurement and national sides awarding mechanisms based upon competition, there are too
legislation depending on the policy and strategic governments numerous cases of direct award to public operators (28%). Inns-
goals. bruck, Brussels, Prague and Budapest are some examples. In those
Literature has reported an improvement of quality of service and countries, relationships between transport authorities and opera-
substantial cost savings in the rst round of competitive tendering tors have evolved, and it has become growingly common to
procedures and less substantial cost savings in the following encounter clear contracting agreements and monitoring schemes
rounds. When services are opened to competitive tendering, cost evaluating performances delivered in exchange for public support
savings achieved are substantial higher, increasing technical ef- in such relationships.
ciency by improving the productivity of labour and capital. Despite
the private transport operators took great expression in public 4. Contract design and typologies
transport delivery, the regional transport authorities were
increased in importance in some developed countries and the 4.1. Type of contract
public passenger transport were becoming typically publicly
owned. However, the cost escalations lead to a pressure to consider Despite public transport contracts can be characterised through
alternatives for public monopoly. As a result, reforms in order to a common structure, there is a wide variety for urban mobility
implement competition, reduce costs and expand service have systems, usually, divided as follow (Mac
ario, 2006):
been undertaken in several countries. Is why there is a growing
trend to use contractual arrangements in competition tendering.  Management Contract (MC): the authority retains ownership
Private sector returns to have prominence in public transport and control of all depots and vehicles, receives all revenues and
operation in several countries. pays for all capital and recurrent expenditures. It takes both the
During the past two decades, European cities such as London, risk on the operating costs and on the commercial revenues and
Copenhagen, Stockholm, and Helsinki have experienced cost sav- pays the operator an annual remuneration.
ings exceeding 20%, while realizing similar gains in productivity  Gross Cost Contract (GCC): the authority relinquishes control of
(Gulibon, 2006). Wallis and Hensher (2007) concluded that the vehicles/rolling stock and other infrastructure and requires
competitive tendering often reduced the services cost by 10%e50%, the operator to operate. The operator takes the risk on the
depending on the efciency of the previous monopoly operator. operating costs and the public transport authority takes the risk
The authors noted an increase trend on cost, sometimes due to on the commercial revenues.
unsustainably low initial tender prices and/or to a shortage of  Net Cost Contract (NCC): the authority also relinquishes control
bidders. White and Tough (1995) compared the results of tendering of the vehicles/rolling stock and other infrastructure. However,
gross-cost versus net-cost contracts in Britain (outside London), the operator takes the risk both on the operating costs and on
and showed that net-cost contracts lead both to a signicantly the commercial revenues. The operator is remunerated with the
lower number of bidders and to higher prices. Alexandersson and revenues and sometimes by a complementary compensation
Folster (1998) presented initial effects of tendering in Sweden, payment xed by the public transport authority.
including signicant cost-reducing effects, despite they believe the  Net Cost Contract with Investment (NCCI): the authority con-
demand decrease was not a result of the introduction of tendering, tracts with an outside organization to provide the majority of
but was probably related to the country's deep recession. Plus, the xed and moveable assets and, simultaneously, to provide
Scandinavia practices have been improving public transport over services to specied quality-of-service standards. The operator
the last 20 years, indicating that tendering may contribute to cost must, consequently, provide the required inventory of xed and
effectiveness and increased cost coverage (Anderson et al., 2009). moveable assets. The operator will also retain all revenues and
The cost efciency through tendering processes was also identied will absorb either all, or a contractually agreed portion of, trafc/
outside Europe. Wallis, Bray, and Webster (2010) analysis the revenue risks as well as the risks associated with construction.
98 rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca

Each type of contract has its own advantages and drawbacks 700 contracts for single bus routes, awarded in the all London area:
(Table 2), none are perfect in all aspects. each route has its own contract (Van de Velde et al., 2008a). On the
Among the cases studies analysed, gross cost contracts appear to other hand, one single contract was awarded for public transport
be the most common contract form for procured public transport management of the whole area of Amsterdam. Authorities must
(44%). Only 34% of the case studies analysed are net cost contracts, balance the competitive advantages between a number of small
with the operator taking most risks for both revenue and costs; 10% contracts and a single or multiple large-area contracts, often easier
are management contracts. to manage (Colin Buchanan et al., 2001a).
In Europe, many contracts are somewhere between gross-cost Contract duration for public transport services may also differ
contracts and net-cost contracts. There are gross-cost contracts considerably according to the characteristics of the amortization
with additional passenger incentives (e.g. Elmshorn, Dublin, periods of the investment need. Contracts with short periods will
Halmstad) and net-cost contracts with shared distribution of add exibility to an Authority management strategy and it will
additional fare revenues (e.g. Manchester). A pure net cost contract allow dispensing more quickly services under-performing. On
without additional passenger incentives is the urban bus system in contrary, short contracts encourage operators to concentrate on
Sundsvall, with specic claims for 2% passenger increase (Van de short-term planning objectives, instead long-term improvement of
Velde, Beck, van Elburg, & Terschren, 2008a). Budapest, Rome, service provision as the introduction of new routes or vehicle
Sondrio/Lombardy, Trieste, Haarlem and Porto are other examples replacement planning (Anderson et al., 2009). If the operator is
of net cost contracts in urban transport networks. Experience in expected to invest heavily in rolling stock or other equipment, then
Latin America shows that net costs is easier to implement as the a long period (10 years) might be appropriate. In Europe the
risk is carried by operators, but has difculties in long terms as duration of public service contracts is normally regulated and must
there is an incentive of not having enough vehicles for the peak not exceed 10 years for bus and coach services, and 15 years for
hours and running vehicles empty outside the peak period (Van de passenger transport services by rail or other track-based modes (EU
Velde et al., 2008a). In pure Gross Cost Contracts, the operator does Regulation 1370/2007). Nash and Wolan  ski (2010) support that the
not have an incentive to increase demand (Colin Buchanan et al., optimal contract duration is 25 years for rail infrastructure upgrade
2001a), thus, the nancial risk could be greater in such contracts. and operation, 10e15 years in rail infrastructure maintenance and
Gross cost contracting has been used successfully for procuring bus operation to give appropriate incentives regarding maintenance of
services in a number of cities. London uses gross cost contracts with the infrastructure and 8 years for buses contracts. Considering the
additional production incentives/penalties based on a Quality sample studied, the average length of gross cost and net cost con-
Incentive Contract. Innsbruck, Frankfurt, Gifhorn, Krakow, War- tracts are 13 years. The city of Krakow, for instance, awarded a
saw, North Brabant and Groningen are other examples of gross cost contract with two different contract durations with respect to the
contracts. Management contracts are widely used in France. For specicity of those services: 8 years of contract duration for buses
instance, Dijon awarded its management contract for the urban bus and 14 years of contract duration for tram services (Van de Velde
network of the city agglomeration via tendering (see also Lyon case et al., 2008a). In Dijon, the contract for the urban bus network
study explained by Van de Velde et al. (2008a, 2008b)). Further, was for the ve-year period. Santiago de Compostella bus contract
Santiago de Compostella has a delegated management contract was awarded for 15 years. The concession contract of the Porto
awarded based on a quality tendering process. subway gave the exclusivity of operation for 50 years, which could
be renewed for two successive periods of 10 years.

4.2. Size and length


4.3. Financial scheme
Public transport contracts also differ in size: depending on the
way the authority organise public transport, one can distinguish The right to operate urban public transport in larger cities has
between network contracts, sub-network contracts and route traditionally been a municipal purpose across Europe, despite their
contracts. Transport for London, for instance, has awarded about inuence is higher in road services than in railway (Van de Velde

Table 2
Contracts characteristics, advantages and disadvantages.

Management contracts Gross cost contracts Net cost contracts

Denition of the services Decided by the public transport Decided by the public transport Often shared responsibility, despite with
authority authority signicant operator inuence
Is considered under such states There is a desire to bring professional To reduce expensive customer surveys There is a desire to give an incentive to operator
management while retaining to allocate revenue between operators, increase ridership/revenue.
ownership of the assets where there are extensive off-bus Sharing of off-bus revenue is not seen as a
revenues. problem.
The authority wishes to x the absolute amount
of subsidy.
Advantages Contracts without incentives can be a It reduces the operator risk, thereby Direct incentive for operators to invest in
option to avoid uncalculated risks to encouraging more proposals for the further quality improvements to increase both
operators and thus to reduce the contract. number of passengers and passenger revenues
payments of those risks (and their prots).
Disadvantages Absence of competition often results in It incentivised operators to reduce costs The authority may have to pay more since the
poor service. at the expense of service quality. operator usually makes very conservative
Public monopoly operators are often Authorities began to build their estimates of revenue to reduce his nancial risk.
unable to secure adequate fare contracts incentives and penalties The authority's ability to make essential
increases, or to secure funds for depending on performance. changes to the network are restricted if they
investment in new vehicles. adversely affect the revenue of pre-existing net
cost contracts.

Source: Anderson et al. (2009), Beck (2012), Colin Buchanan et al. (2001b) and http://www.ppiaf.org/.
rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca 99

et al., 2008a). However, public transport can be nanced by public based on the monitoring of punctuality and customer's perception
sector (state/government) or private sector (private investors, of the service (Van de Velde et al., 2008a; Van de Velde,
banks and other lending institutions) or both (the public private Veeneman & Schipholt, 2008). Environmental incentives (e.g.
partnership structure). Further, it can exist two sources for Frankfurt) and additional passenger incentives (e.g. Wittenberg)
nancing the production costs in a contract: revenues and grants or also can be present in contract. Among the case studies analyse,
subsidies. Depending on the specic elements considered in the 53% have additional incentives related with quality of service,
contract, payments (between authority and operator) can be made environmental issues and operational performance success. In
through lump-sum or variable forms. Contract funding must be Haarlem, there are 4% additional passenger incentives and 2.6%
present to support contract nance. It can be sourced directly from quality incentives included in the contract. London uses nancial
users or indirectly through taxes and charges. For urban trans- incentives in their contracts: the operators are penalised for poor
portation, the main sources of funding consist of revenues from performance and rewarded for exceeding threshold targets for on-
various mobility activities. Operational revenues include urban time performance (Van de Velde et al., 2008a). Non-direct in-
transit fares, infrastructure charges, parking pricing, road pricing centives allow the authority to implement an incentive structure
(e.g. cordon tolls), taxes related to the amount of use (e.g. kilometre without bearing the costs of its management and control. In those
tax, fuel taxes, xed vehicle taxes) or rates (e.g. annual circulation cases, the authority transfers the control and costs to passengers,
tax) (Maca rio, 2006); while non-operational revenue concerns an who get the compensation when the operator does not achieve
agent's internal cross-nancing (e.g. advertising, renting infra- specic quality requirements. An example might be the reim-
structure space or the use of infrastructure for telecommunica- bursement of taxi costs in case of disturbances (e.g. strike days) or
tions). The cross-subsidy in the transport sector is common in most delay of more than 30 min; Oslo was a precursor of this practice.
countries. The money obtained from fuel duties or other types of Practical experiences have demonstrated that client satisfaction
taxation is often allocated to public transport. In France, for quickly increases while costs are usually lower than expected (Van
instance, a transport tax imposed locally is devoted to nancing de Velde et al., 2008a).
public transport in the same area. Despite the local level authorities
are liable to national or regional law; they are usually responsible 4.5. Risk allocation
for planning, funding and control of public transport in their own
area (PORTAL, 2003, pp. 1e73). Austria and Switzerland are some Three types of risks can occur (Colin Buchanan et al., 2001-a):
other examples. However, there are also some exceptions. In
Ireland there is not legislation in place to give local authorities I. Revenue risk, whenever demand is below expectation, ser-
duties and powers in this matter. In Wittenberg (Germany) there is vice quality is poor, etc. It can arise from public entities
the model competition for permissions to operate commercial subsidies or can arise from passenger revenues.
routes and the amount of funding was xed: operators could only II. Productive (or operating) risk, related to who carries the risk
compete on quality (Van de Velde et al., 2008b). In fact, German of possible operations costs variations: internal risks that can
legislation provides authorities with a certain level of freedom to be directly inuenced by the operator (vehicle maintenance)
structure their nancing structures according to their local needs or external risks that cannot be inuenced by the operator
(Beck, 2012). (adverse weather conditions) or that can be slightly inu-
enced by the operator (energy price).
4.4. Incentives and penalties III. Capital risk, relating to the purchase and replacement of
assets.
Incentive payments can be introduced through competitive
tendering or negotiation under a regime of performance based Full allocation of risks to one of the contracting parties means
contracts (PBC), which tend to be integrated into a system of sub- that either the operator or the authority carries all risks (revenues
sidy support, however, with some exceptions (see Brazil and San- and/or costs) resulted from the difference between the expected
tiago examples described by Hensher & Wallis, 2005). amount and the achieved amount. On the other hand, shared
In Europe the regulation EC 1370/2007 point out that compen- allocation of risks occurs when a specic percentage of risk is
sation means any benet granted directly or indirectly by the au- allocated to each party. An example is the management contract of
thority from public funds during the period of implementation of Santiago de Compostella, described by Van de Velde et al. (2008a,
the public service obligation. As a result, the contract introduces the 2008b). This is an intermediate contract between gross-cost and
operator obligations within public transport services as well as its net-cost contracts, where the authority and the operator share the
rights, as compensation and subsidies. If there are under- extra fare box revenue (50/50) and publicity revenue (70/30) for
performances, there should be penalty. Penalty can be applied to 10 years with the possibility of extension if the operator meets
actions and omissions of the operator; failure to run specied ser- specic requirements for improving demand (passenger-km) and
vices; failure to meet quality-of-service standards; failure to ach- quality.
ieve agreed targets for passenger numbers and so forth. It may Usually, the level of risk borne by the operator can be higher in
provide the operator with limited nonconformity grants, i.e., dene net cost contracts (where operator bears both the cost and revenue
some rules for minimum services: if only 2% of the services are risks), lower in management contracts (where authority bears both
cancelled or depart late, sanctions will not be applied (Colin cost and revenue risks) and gross-cost contracts fall somewhere
Buchanan et al., 2001a). Several other penalties may be incorpo- between. Among whole sample analysed, 69% of the contracts have
rated within the contract as vehicle safety standards. risk sharing; net cost and gross cost contracts are the ones where
Incentives also can be instruments to secure the quality of risk sharing are most present comparing with the management
service (as punctuality and cleanliness). Contracts may offer the contracts.
operator the possibility of a contract extension by the achieve-
ment of specied quality-of-service standards, assessed, for 4.6. Monitoring
instance, using on-board consumer surveys of passengers as the
Sweden case study (Colin Buchanan et al., 2001a). In Stockholm Regular monitoring of operations and dialogue between au-
the quality incentives can be up to 25% of the contract price, thorities and operators should be required in order to know
100 rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca

whether the contract is successful. It can be an informal process, regulation and procurement of urban bus services could be
which requires trust, or formal monitoring where should be explained and understood according and studying the main
included all issues described in contract as safety, performance, following measurements:
nance and quality of service (Colin Buchanan et al., 2001a). Several
instruments could be used to monitoring a contract (Van de Velde  Regulation: the legislation/rules and conditions on which the
et al., 2008a): (i) Self-controlling instruments as transparency operators can enter in the market for the provision of bus ser-
(publishing main quality gures as punctuality); (ii) Supervising of vice. In almost all Europe, the urban bus service is regulated, as
performance through monitoring data and; (iii) Monitoring via already mention, an exception is the UK (outside London) where
auditing as well as accounting and disclosure. the market is deregulated and the operators can offer what they
In Amsterdam, the monitoring controls diverse indicators as want.
number of timetable hours per route, punctuality, number of  Award procedure: The method used during the procurement in
realised planned connections, occupancy rate and passenger order to evaluate the proposals (tender offers) taking part and
satisfaction (Van de Velde et al., 2008a). In Stockholm, the internal award the relevant contract. It could be open, restricted, nego-
quality is measured through a specic external audit model. tiated procedure, competitive dialogue procedure (as PPPs), and
Transport for London (2008) monitoring the buses contracts taking negotiated procedure with a call for competition.
into account customer satisfaction surveys, measuring waiting  Contract/Agreement: The formal agreement between the au-
time, cleanliness, and information at bus stops. thority or regulator and the operator for the provision of the
service. Usually describes the service, any requirements about
5. Particular bus rapid transit systems (BRT) how it is to be operated, and the nancial scheme.
 Quality parameter: Service requirements stated in contract.
Bus Rapid Transit (BRT) systems have progressively appeared Typically it includes quantity of service, consistency of service,
as a pertinent solution in the transportation sector. From the vehicle quality, customer care, safe driving, etc. Service stan-
conventional BRT concept to BRT-Lite and bus of high level of dards and targets are usually dened, and the performance may
service (BHLS), the concept has been broadened and enriched by result in bonus or penalty.
successive experiences across world. In Europe, for instance,  Payments: Operator reimbursement for service provision. It
numerous cities have focused their attention on the development includes bonus or penalty, reimbursement for free/reduced rate
of heavy transport systems, as metro/subways and tramways, to passengers and share of any integrated payment system.
lead with the transportation and urban planning needs. BHLS
ensure the advantages of the tramway (speed, regularity, comfort), Moreover, Finn et al. (2009) developed three questions to un-
but its cost, capacity and exibility place it somewhere between derstand what the procurement practices of BRT are: What is the
the conventional buses and the tramway (Finn, Heddebaut, & model of the service provision (delegated management, public
Rabuel, 2009). Thus, BRT system has gradually become an monopoly, controlled competition or deregulation)? At which level
attractive public transport alternative in many countries due to its of Government is the authority (national, regional, local, other)?
cost-effective and exible implementation. Furthermore, in the What is the level of service (network, route)? In fact, there could
present economic fragility context, BRT offers new opportunities exist a high level of diversity of regulatory frameworks, Govern-
for both large and small-size urban areas to develop their trans- ment levels and units of procurement. A BRT system can be pro-
portation systems. vided at local level for one route or for whole city area. And, even in
BRT systems have also supported the evolution of several Public Monopolies (e.g. Ireland and Spain) it is possible for other
developing cities from unregulated private procedures to more operators to receive a licence to provide complementary services,
organized forms of public transport provision. Well dened con- usually on the periphery where the public company has not
tracts with adequate assignment of responsibilities, revenues and traditionally operated.
risks have also been developed is those countries (Hidalgo & Finn et al. (2009) also studied which entity had primary re-
Gutierrez, 2013). With respect to the revenue allocation, net cost sponsibility for planning and design of several infrastructure
(xed payment per vehicle-km) and gross cost (payments per elements, transport and customer-facing services: e.g. BHLS
passenger) are the most frequently used. Experience in Latin infrastructure, priority measures, the network, vehicle speci-
America shows that net costs is easier to implement as the risk is cations on routes, timetables, quality standards, customer care,
carried by operators, however it has some difculties in the tariffs and tickets' prices, passenger information and so on. They
medium-long terms of not having enough vehicles for peak hours. found the following observations: (i) The Responsibility for
A more balanced approach is a hybrid model with risk share among various functions differs from conventional buses services prac-
public agencies and private operators. tices only moderately among countries; (ii) There is no differ-
There are a wide set of different institutional arrangements ence in planning and design practice for BHLS compared to other
models for BRT implementation and operation (Table 3 presents bus services; and (iii) The exception is the UK (except London),
some examples) and a growing interest in developing these where bus services are deregulated and the City normally has a
agreements with the private sector. Thus, it is important under- very limited role. In some projects, there are possibilities for the
stand how the planning, procurement, contracts, quality pay- City and Operators to work together. Same conclusions were
ments, management and other dimensions of BRT are different done for nancing scheme: There is no difference in nancing
from how it is done for conventional bus services. Also realize in BHLS compared to other bus services. The BHLS are funded from
advance whether BRT can be implemented in the existing the same budget allocation as other bus services and the oper-
framework of the city or the proposals should be in line with the ators are not charged for using the infrastructure. In addition, the
ability of changing/adjust the existed framework to permit a new same authors concluded that the BHLS services are managed and
one. Finn et al. (2009) have tried to understand whether BRT/BHLS controlled in the same way as conventional buses, although
systems are different from conventional buses in terms of con- some specic operational procedures may be different. BHLS bus
tracts and organizational frameworks. They analysed 7 European services are procured or licenced in the same way, using the
countries and concluded there are neither process nor detail dif- same procedures. However, the performance and quality pa-
ferences in any of the relevant dimensions. Nevertheless, the rameters used are the same both for BHLS systems and
rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca 101

Table 3
Some examples of BRT systems in database.

Country Case study Risk sharing Modes concerned

Australia Adelaide: Gross cost contracts (route-based No information available regarding risk sharing. Bus
contracts) awarded in competitive tendering Bonus/penalty payments relating to operational
procedure. performance relative to benchmark standards.
Chile Santiago: Contract awarded in competitive No information available regarding risk sharing. Bus
tendering procedure.
France Dijon: Management contract awarded in The operator is submitted to the production Bus
competitive tendering with pre-selection and cost risk and revenue risk,
negotiation.
Lyon: Management contract awarded in The assets are provided by the authority. The Bus, Subway and Tram
competitive tendering with pre-selection and operator is submitted to separate incentives on
negotiation. production cost risk and revenue risk, with
nancial incentives.
Spain Barcelona: Framework contract that states the The operator is submitted to both cost and Bus and Subway
obligations of each part, awarded under direct revenue risk.
management system. The winning consortium
is a PPP.
Sweden Stockholm: Gross cost contract awarded in The operators carry the risk on operational costs Bus
competitive tendering. and are responsible for investments in busses
and other operational assets. The authorities
carry out investments in bus infrastructure and
are responsible for revenues.

conventional buses. Nevertheless further research on this subject treatment between operators to achieve a sustainable public
need to be done and the design of a global database is then a transport service.
necessary issue. Contracts are emergent feature of many regulatory settings.
Some contracts are awarded to operator in strict competitive
tendering procedures, leading to a less freedom. Others are done
6. Lessons learned through negotiation procedures, allowing more creativity. Others
are directly awarded to operators, without competitive threat.
Despite there is not an optimal contract; literature has sug- Finally, the way public transport is organised varies considerably
gested important key questions and guidelines to design an from country to country, and even from city to city. The common
appropriate contract in each situation. It is essential to understand concern is the way operators and authorities should deal with the
who the relevant agents are and what their roles are. Typically, service design both at the contracting design step and after award.
the government plays a strategic role, the regulator has a tactical The level of detail of the contract and the way of public transport
role and the operator has an operational role (Gordon, Mulley, nancing is organised are also other important issues take into
Stevens, & Daniels, 2013). But these categories may often be account.
combined: a single entity may contain both the government and A contract should be proper entry in the market, whether it is
regulator responsibilities. At the end, the specication of these thin or multi-operators or multi-mode situations, which often re-
roles and the assignment of responsibilities for each one are quires a particular form of contract to which incentives can be
important starting points at any contract design (Hensher & added for market growth (e.g. gross cost contracts). Once signed, it
Houghton, 2005). It is also relevant identifying how actors' in- is essential, and often forgotten, determine how the contract will be
terests and objectives can be aligned. This is often related to a supervised and monitored to ensure good performance along the
number of dimensions around appropriate incentives (as perfor- lifecycle.
mance payments), penalties and risk allocation. Indeed, the Overall, contracts must consider on different issues, depend-
operator and the authority normally have different objectives. ing on the market context. When operations are provided by a
Private operator will conduct its business in order to return prot public organization it is important separate policy/regulatory
dividends to shareholders. A large-size public operator will be issues from the operation of the service. In a fully deregulated
certainty more interested in its monopoly position than interested market, the authority might procure services that the private
in providing quality of services for customers; an authority sector is otherwise unwilling to provide. On the other hand, in a
concern (Gordon et al., 2013). These asymmetries require detailed competitive market, the authority has to dene integrated tick-
contract drafting, before signing. eting and fares policies and, at the same time, encourage
Successful contracts also depends on the degree to which the competition between operators. In markets where authority
mechanisms in the contract accurately reect stakeholder expec- wants to provide the network of services by subsidizing routes,
tations for passenger experience. Best practices suggests that better they might allocate monopoly operation rights for specic
contracts will have a close relationship between the objectives of services.
the contracting agency and the detailed workings of the perfor- Some authors state that authorities should stimulate compe-
mance incentive mechanism. This requires a contracting environ- tition between operators, by reducing market entry barriers
ment where there is trust and dialogue between parties. Further, (through public ownership), reasonable risk sharing and relatively
according Gordon et al. (2013), metro contracts appears to be more long contracts. It is also needed the monitorization of many as-
precise in its contract specications than other modal contracts. On pects as service quality and passenger satisfaction, as well as the
the other hand, bus contracts are less detailed. Hensher et al. (2008) management of incentive/penalties schemes to improve the ser-
pointed out the contract design and regulation should be focused vice. The incentive system should be relatively simple, and the
on (sustainable) consumer benets: there should exist equal relationship between quality and operators' incomes clear. In
102 rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca

conclusion, trust should be seen as a consequence of well- Further research needs to be done around these questions to
designed and well-articulated contracts in mature regulatory re- provide guidelines for public transport contractual arrangements.
gimes. As the system matures, the contractual requirements may Through case studies reported and building a worldwide database,
become more complex; the content of contracts will change, as it is possible to design guidelines for future contracts, BRT systems
will the nature of the obligations of both the regulator and the in particular. It is important to understand if these kind of systems
operator. These changes can be controlled through a re-design need a special agreements and standards than already done for
contract. conventional buses. If the size, length, incentives, penalties, risk
To summarize, the European public transport service is typically allocation, payments, etc., have the same specications as general
organised centrally, by the Ministry of Transport, Governments of public transport systems. Is why is important research on this
federal states, municipalities and local authorities (Hungary, subject, creating a standard template for case studies across world
Austria, The Netherlands, Sweden are some examples). Both direct such as the considerations described in Data Analysis Section.
negotiation and competitive tendering procedures are common Therefore, it is possible to have a general understanding on the
used in almost Europe (Austria, Czech Republic, Denmark, France, similarities and differences between transportation contracts and
Germany, Norway, The Netherlands, Poland, Portugal, Spain and within modes of transport. In turn, understand the similarities and
Sweden). General, contracts in countries as Belgium, Finland, differences within conventional buses and BRT systems. Initiatives
Hungary and Ireland, are normally direct awarded to operator. A as the one done by Finn, van de Velde and other experts are very
pure competitive tendering procedure is more used in Australia and important for knowledge in the subject, but there is still need for
New Zealand. Plus, United Kingdom and USA are examples of a further research, in particular for BRT systems. Several applications
clear legal obligation to award public service contracts following a have shown high performance and reproduction these systems in
full competitive tendering procedure. However, each country in- numerous cities. However, there are also outstanding issues that
troduces competitive procedures at different proportions. The need to be solved as well as institutional and nancial constraints.
United Kingdom (UK) privatised its rail operations over two years As a result, this lead to an opportunity to design and planning an
while The Netherlands, Germany and Sweden have a combination optimal contract for this type of systems in order to achieve a
of public and private involvement and of open and closed markets more efcient system in transportation sector. Consequently, this
(Colin Buchanan et al., 2001b). Additionally, depending on the paper provides an opportunity for further research and to develop a
operators' size, could exist more or less number of operators in the new article on guidelines for contractual arrangements for BRT
market. For instance, in London there are 39 different bus operators systems. The examination of specic characteristics of BRT that
compared to 5 private and 1 municipally owned in Helsinki. In the need to be considered when developing contractual arrangements
UK, where privatisation of the transport sector is almost complete, will be required. Plus, a review of the practice and experience of
nearly all services are provided by commercial operators on a contracting in BRT systems and the lessons learned that should be
commercial basis (PORTAL, 2003, pp. 1e73). In other locations, included in future contracts are also important to present in
competitive tender were more successfully achieved. In some parts following research.
of Norway, public services were provided by private operators At this stage of the research we can provide the following
under negotiated contracts. Australia also has a signicant private recommendations:
sector presence in bus service with Adelaide and Perth as example
(Hensher & Stanley, 2010). In addition, private operators, under  It is essential to understand who the relevant agents are and
negotiated contracts, have provided most public transport service what their roles are.
throughout many countries in South America and Africa (Cox,  Identifying how actors' interests and objectives can be aligned,
2004). Throughout all Latin America, most of the public transport and relate it with a number of dimensions around appropriate
bus services are also operated by private sector, including bus rapid incentives (as performance payments), penalties and risk
transit systems. allocation.
 The incentive system should be relative simple, and the rela-
tionship between quality and operators' incomes clear.
7. Conclusions  Trust should be seen as a consequence of well-designed and
well-articulated contracts in mature regulatory regimes.
Public transport is in a phase of continuous and accelerated  Contract durations tend to reduce, physical assets not included,
change throughout the world. The way public transport is but neglecting value of soft assets like market knowledge.
organised varies considerably from country to country, and even  Tenders represent 55% of assignments. However contestability
from city to city. Therefore, as Van de Velde (2008) pointed out, emerges mainly in relation to transaction costs.
several aspects come into mind: the way national and local au-
thorities divide regulatory powers upon public transport, how the
public transport is nancially organised, the operators' structure Acknowledgements
and their relationship with the authorities, the advantage of use
competitive mechanisms as part of a regulatory regime, and so on. The authors acknowledge the support of the Across Latitudes
The spreading of contracting replacing more direct or informal and Countries-Bus Rapid Transit (ALC-BRT) Centre of Excellence,
public intervention in the management of publicly owned opera- nanced by Volvo Research and Educational Foundations (VREF).
tors, the use of lump sum subsidization to replace open-ended ALC-BRT works as a consortium of Ponticia Universidad Cato  lica
regimes, the gradual implementation of competitive tendering de Chile, Massachusetts Institute of Technology, Universidade de
practices to replace direct award and the privatization of munic- Lisboa, The University of Sydney and EMBARQ e The WRI Centre for
ipal operators are general characteristics of those institutional Sustainable Transport, including its network of centres of sustain-
changes. able transport.
rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca 103

Appendix A. Database of public transport service contracts across world

Country Formal award procedure Comment Case study Contract period [years] Modes concerned

Austria Direct negotiation and Current contracts awarded Innsbruck: Gross cost contract N/A Bus and Tram
competitive tendering directly. The next contracts may direct awarded to public
be tendered. operator
Belgium Direct negotiation Brussels: Net cost contract 5 Bus, Subway and Tram
direct awarded to public
operator without competitive
tendering
Czech Republic Direct negotiation and The new round of contracts will Prague: Contract direct 3 Bus, Subway and Tram
competitive tendering be awarded in competition awarded to public operator
Denmark Direct negotiation and The new round of contracts will Copenhagen: Gross cost 8 Bus, Subway and Tram
competitive tendering be awarded in competition contract awarded in
competitive tendering
Finland Direct negotiation The new round of contracts will Helsinki: Contract awarded in 3 Bus
be awarded in competition. competitive tendering
France Direct negotiation and There is a legal obligation for Dijon: Management contract 5 Bus
competitive tendering direct contracting between awarded in competitive
authorities and operator. tendering with pre-selection
and negotiation
Lyon: Management contract 5 Bus, Subway and Tram
awarded in competitive
tendering with pre-selection
and negotiation
Georgia Competitive tendering Tbilisi: Contract awarded in 4 Bus
competitive tendering
Germany Direct and public negotiation Elmshorn: Gross cost contract 5 Bus
and competitive tendering awarded in competitive
tendering
Frankfurt: Gross cost contract 6 Bus
awarded in competitive
tendering
Gifhorn: Gross cost contract N/A Bus
awarded in negotiation
(operator-subcontractor)
Gifhorn: Competition for 8 Bus
market initiated authorisations
Munich suburbs: Gross cost 6 Bus
contract awarded in
competitive tendering
Wittenberg: Competition for 8 Bus
market initiated authorisations
Hungary Direct negotiation Budapest: Net cost contract 8 Bus, Subway and Tram
direct awarded to public
operator
Ireland Direct negotiation Dublin: Gross cost contract 10 Tram
awarded in competitive
tendering with negotiation
Italy Direct negotiation and Rome: 3 contracts with 3 7 Bus, Subway and Tram
competitive tendering operators - Net cost contract
and Gross cost contract with
incentives direct awarded and
partial tendering
Sondrio/Lombardy: Net cost 7 Bus
contract awarded in restricted
competitive tendering
Trieste: Net cost contract 10 Bus
awarded in competitive
tendering
The Netherlands Direct and public negotiation Trend going towards increased Amsterdam: Net cost contract 5 Bus, Subway and Tram
and competitive tendering tendering of regional trafc. direct awarded to public
operator in competitive
tendering
Haarlem: Net cost contract 3 Bus
awarded in competitive
tendering
Hague: Direct award and 5 (Bus); 9 (Tram) Bus and Tram
partial tendering
Rotterdam: Direct award and N/A Bus, Subway and Tram
partial tendering
Norway Direct negotiation and Grenland: Tendered network 5 Bus
competitive tendering contract with super-incentives
awarded in competitive
tendering
(continued on next page)
104 rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca

(continued )

Country Formal award procedure Comment Case study Contract period [years] Modes concerned

Hordaland: Performance N/A Bus and Tram


contracts (net cost contract)
awarded in competitive
tendering
Vestfold and Telemark: Gross N/A Bus and Tram
cost contract awarded in
competitive tendering
Poland Direct negotiation and Most regional authorities Krakow: Gross cost contract 8 Bus and Tram
competitive tendering award their contracts following direct awarded to public
competitive tendering operator without exclusivity
procedures. Warsaw: Gross cost contract 10 Bus
direct awarded to public
operator in competitive
tendering
Portugal Direct negotiation and One sub-urban line tendered in Porto: Net cost contract (and 50 Subway
competitive tendering rail market. gross cost with sub-contractor)
direct awarded to public
operator in competitive
tendering
Spain Direct negotiation and Barcelona: Framework 3 Bus and Subway
competitive tendering contract that states the
obligations of each part,
awarded under direct
management system. The
winning consortium is a PPP
Oviedo: Gross cost contract 25 Bus
awarded in competitive
tendering
Parla/Madrid: Net cost contract 40 Tram
awarded in competitive
tendering
Santiago Compostella: Net 15 Bus
cost contract awarded in
competitive tendering
Sweden Direct negotiation and Direct negotiation is legally Halmstad: Gross cost contract 8 Bus
competitive tendering allowed but almost contracts awarded in competitive
are currently tendered. tendering
Stockholm: Gross cost contract 10 Bus
awarded in competitive
tendering
Sundsvall: Net cost contract 10 Bus
awarded in competitive
tendering
United Kingdom Competitive tendering Leeds: No formal process for N/A Bus
award. Voluntary agreement
between authority and
operator under free market
principles
London 1: Gross cost contracts 8 Bus
for single bus routes (about 700
contracts) under a specic
competitive tendering and
contract management
London 2: Gross cost contract 10 Subway
awarded in competitive
tendering
Manchester: Net cost contract 10 Bus
awarded in competitive
tendering to operate non-
commercial routes within free
market
Canada Competitive tendering Competitive contracting has Ontario Region: competitive 48 Bus
been highly successful in 20 contracting to private operator
Ontario municipalities.
USA Competitive tendering Management contract awarded N/A Bus
in competitive tendering
procedure
Brazil Competitive tendering Porto Alegre: Framework N/A Bus
contract that states the
obligations of each part,
awarded under direct
management system. The
winning consortium is a PPP
~o Paulo: contract awarded in
Sa 8 Bus
competitive tendering
rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca 105

(continued )

Country Formal award procedure Comment Case study Contract period [years] Modes concerned

Chile Competitive tendering Since the early twentieth Santiago: Contract awarded in 1,5 Bus
century, the system in Santiago competitive tendering
has seen several distinctive procedure
periods regarding its policies
and management methods.
Australia Competitive tendering Adelaide: Gross cost contracts 5 Bus
(route-based contracts)
awarded in competitive
tendering procedure
Sydney: Framework contract e 35 Subway
PPP subject to several reforms. 7 Bus
Now the contracts are paid
under new performance based
contracts
New Zealand Competitive tendering Wellington: Gross cost 5/12 Bus
contracts awarded in
competitive tendering
procedure
 mez-Lobo (2005), Figueroa (2013), Finn (2008), Gulibon
Source: Carlquist (2000), Hagen and Longva (n.d.), CER (2011), Colin Buchanan et al. (2001b), Cox (2004), Estache & Go
(2006), Hensher & Stanley (2003), Hensher & Wallis (2005), Longva & Osland (2010), Sloth (2005), Van de Velde et al. (2008b), Veeneman, (2010) and Wallis et al. (2010).

References Hidalgo, D., & Gutie rrez, L. (2013). BRT and BHLS around the world: Explosive
growth, large positive impacts and many issues outstanding. Research in
Transportation Economics, 39(1), 8e13.
Alexandersson, G. H., & Folster, S. (1998). The effects of competition in Swedish local
Karlaftis, M. G. (2007). Privatisation, regulation and competition: A thirty-year
bus services. Journal of Transport Economics and Policy, 32(2), 203e219.
retrospective on transit efciency. In OECD/ITF. (2008). Privatisation and regu-
Alexandersson, G., & Pyddoke, R. (2003). Bus deregulation in Sweden revisited:
lation of urban transit systems (pp. 67e108). OECD Publishing. ISBN 978-92-821-
Experiences from 15 years of competitive tendering. In Paper presented at the
0199-5.
eighth conference on competition and ownership in land passenger transport, Rio
Longva, F., & Osland, O. (2010). Regulating the regulator: The impact of professional
de Janeiro, 14e18 Sept.
procuring bodies on local public transport policy and its effectiveness. Research
PROCEED Anderson, et al. (Eds.). (2009). Principles of successful high quality public
in Transportation Economics, 29(1), 118e123.
transport operation and development: Guidelines for European High Quality Public
Macario, R. (2006). Towards a reform of urban transit systems: Topics for action. In
Transport in small and medium sized cities (pp. 1e239).
OECD/ITF. (2008). Privatisation and regulation of urban transit systems (pp.
Beck, A. (2012). Competition for public transport services. Heidelberg: Physica-Verlag
109e144). OECD Publishing. ISBN 978-92-821-0199-5.
HD.
Nash, C., & Wolan  ski, M. (2010). Workshop report e Benchmarking the outcome of
Carlquist, E. (2000). Incentive Contracts in Norwegian Local Public Transport: The
competitive tendering. Research in Transportation Economics, 29(1), 6e10.
Hordaland Model (pp. 1e15).
OECD/ITF. (2008). Privatisation and regulation of urban transit systems. OECD Pub-
CER. (2011). Public service rail transport in the European Union: An overview. Belgium:
lishing. ISBN 978-92-821-0199-5.
Community of European Railway and Infrastructure Companies (CER).
PORTAL. (2003). Regulatory framework and legislation in public transport.
Colin, Buchanan, & Partners (Eds.). (2001a). Guide to contracts and contracting in
Sharaby, N., & Shiftan, Y. (2008). The economic benets from competition in bus
public transport (pp. 1e58).
public transport e The Israeli case. International Journal of Transport Economics,
Colin, Buchanan, & Partners (Eds.). (2001b). Study of good practice in contracts for
35, 391e413.
public passenger transport (pp. 1e30).
Sloth, J. (2005). Copenhagen bus experience. In Friedrich Ebert stiftung presentation,
Cox, W. (2004). Competitive tendering of public transport. In Urban road and public
Berlin, 31st May.
transit symposium. Montreal: Urban road and public transit symposium.
 mez-Lobo, A. (2005). Limits to competition in urban bus services in Transport for London (2008) London Underground PPP report 2007/2008.
Estache, A., & Go
(Accessed on 12 May 2011), Available at www.t.gov.uk/assets/downloads/ppp-
developing countries. Transport Reviews, 25(2), 139e158.
report-2007-2008.pdf In Daniels, R., C. Gordon, C. Mulley & N. Stevens (2011).
Figueroa, O. (2013). Four decades of changing transport policy in Santiago, Chile.
Optimal contracting and incentives for public transport in Sydney: what has
Research in Transportation Economics, 40(1), 87e95.
been learned from the Sydney Metro experience? Australasian Transport
Finn, B. (2008). Market role and regulation of extensive urban minibus services as
Research Forum 2011 Proceedings, (28-30 September), 1e19.
large bus service capacity is restored e Case studies from Ghana, Georgia and
Van de Velde, D. (2008). A new regulation for the European public transport.
Kazakhstan. Research in Transportation Economics, 22(1), 118e125.
Research in Transportation Economics, 22(1), 78e84.
Finn, B., Heddebaut, O., & Rabuel, S. (2009). Bus with a high level of service (BHLS):
Van de Velde, D., Beck, A., van Elburg, J., & Terschren, K.-H. (2008a). Contracting in
The European BRT concept. In TRB 89th annual meeting - Washington, D.C.
urban public transport (pp. 1e123).
Gordon, C., Mulley, C., Stevens, N., & Daniels, R. (2013). How optimal was the Sydney
Van de Velde, D., Beck, A., van Elburg, J., & Terschren, K.-H. (2008b). Contracting in
Metro contract?: Comparison with international best practice. Research in
urban public transport appendix: Contract tables (pp. 1e96).
Transportation Economics, 39(1), 239e246.
Van de Velde, D., Veeneman, W., & Schipholt, L. (2008). Competitive tendering in
Gulibon, G. R. (2006). Competitive Contracting of Bus Services: The International
The Netherlands: Central planning vs. functional specications. Transportation
Experience. Pittsburgh.
Research Part A: Policy and Practice, 42(9), 1152e1162.
Hagen, T., & Longva, F. (n.d.). 9 th Conference on competition and ownership in land
Veeneman, W. (2010). Changing public transport governance in Dutch metropoles:
transport competitive tendering contracts: Why is Norway lagging behind?: 1e11.
To tender or not to tender. Research in Transportation Economics, 29(1),
Hensher, D., Gwilliam, K., Burton, M., Smith, N., Van de Velde, D., & Fridstrom, L.
195e203.
(2008). The ideal contract roundtable. Research in Transportation Economics,
Wallis, I., Bray, D., & Webster, H. (2010). To competitively tender or to negotiate e
22(1), 188e194.
Weighing up the choices in a mature market. Research in Transportation
Hensher, D. A., & Houghton, E. (2005). Implementing performance-based quality
Economics, 29(1), 89e98.
contracts in the bus Sector: Growing patronage and transitional arrangements.
Wallis, I., & Hensher, D. A. (2007). Competitive tendering for urban bus services e
In D. A. Hensher (Ed.), Competition and ownership in land passenger transport
cost impacts: International experience and issues. In R. Maca rio, J. M. Viegas, &
(pp. 129e154). Oxford: Elsevier Science.
D. Hensher (Eds.), Competition and ownership in land passenger transport (pp.
Hensher, D. A., & Stanley, J. (2003). Performance-based quality contracts in bus
453e488). Oxford: Elsevier Science.
service provision. Transportation Research Part A: Policy and Practice, 37(6),
White, P., & Tough, S. (1995). Alternative tendering systems and deregulation in
519e538.
Britain. Journal of Transport Economics and Policy, 29(3), 275e289.
Hensher, D. A., & Stanley, J. (2010). Contracting regimes for bus services: What have
Wilson, N. H. M. (1991). Organizational options for public transportation in the US.
we learnt after 20 years? Research in Transportation Economics, 29(1), 140e144.
Transportation Planning and Technology, 15(2e4), 405e414.
Hensher, D. A., & Wallis, I. P. (2005). Competitive tendering as a contracting
Wolanski, M. (2009). How much do we save on competitive tendering? Quantita-
mechanism for subsidising transport - The bus experience. Journal of Transport
tive study of Polish cities' experience. In C. Nash, M. Wolanski, W. Veeneman, &
Economics and Policy, 39, 295e321 (September).
106 rio / Research in Transportation Economics 59 (2016) 94e106
M.J.G. Pedro, R. Maca

D. van de Velde (Eds.), Benchmarking the competitive tendering outcome e Pro- Regulations (EEC) Nos 1191/69 and 1107/70, published in the Ofcial Journal
ceedings of the eleventh international conference on competition and ownership in L315/1, 3 Dec 2007.
land passenger transport. Next Generation Infrastructures Foundation, Delft (pp.
233e248). Other sources

BRT e Accross Latitudes and Cultures, http://www.brt.cl/.


Acts of law Global BRT Data, http://www.brtdata.org/.
Institute for Transportation and Development Policy (ITDP), http://www.itdp.org.
(EC) No 1370/2007 Regulation e Public Service Obligation Regulation (EC) No 1370/ National BRT institute (US), http://www.nbrti.org/.
2007 of the European Parliament and of the Council of 23 Oct 2007 on public Public-Private Infrastructure Advisory Facility (PPIAF), http://www.ppiaf.org/.
passenger transport services by rail and by road and repealing Council UITP, International Association of Public Transport, http://www.europe.uitp.org/.