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

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

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

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

The dimensionality of performance frameworks and performance measurement for bus rapid transit systems

Fundamental to all good business practices in the delivery of public transport is knowledge of how well the enterprise is performing, especially relative to other enterprises undertaking similar activities, as well as self performance over time. A commitment to performance management and benchmarking should transcend all institutional settings, be they subject to competitive tendering or negotiated contracting, and in the presence or absence of specific incentives and sanctions. This paper focuses on the development of a framework within which performance metrics can be defined and introduced in the context of meeting strategic, tactical and operational objectives in the public transport sector. We discuss the important matters of definition of performance, data requirements, standards, the hierarchy of integrated partial and global measures of performance and frameworks to compare enterprises, and to explain why there are differences, and what actions might contribute to closing the gap between relatively poor and better overall performance. The relationship between inputs, outputs and outcomes is central to the performance rubric, as well as an understanding of the processes that underlie the mappings between these three dimensions. An important aim of the paper is to ensure that the data collection activity planned for a global study of the performance of Bus Rapid Transit (BRT) systems is guided by an integrated and comprehensive framework for performance management, measurement, feedback, and improvement.

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

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