Professor David Hensher, Director of ITLS, to give BRT Centre of Excellence webinar

24 May 2013

The Across Latitudes and Cultures BRT Centre of Excellence, in which ITLS is a partner, holds a monthly webinar series to share timely public transit research and encourage ongoing collaboration. The series is open to anyone and addresses issues relevant to researchers and practitioners. Professor Hensher will give the next webinar on Cost efficiency under negotiated performance-based contracts and benchmarking - are there gains through competitive tendering in the absence of an incumbent public monopolist? on Friday 24th May at 4pm (Sydney, Australia time (UTC+10)), a summary for the presentation is provided below.

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A lot is happening in bus contracting in Australia. Metropolitan Sydney has moved, unexpectedly, in late 2012 from negotiated performance based contracts (NPBCs) with some exceptions, to competitive tendering (CT); tendered contracts in Adelaide are showing serious signs of patronage decline and media criticism, and bus services in the central areas of Melbourne are going through a consolidation of contracts into one competitively tendered contract and away from the current NPBC. Perth remains committed to CT whilst Brisbane is staying at present with NPBCs. This paper uses data obtained from numerous official and unofficial sources to assess the extent to which a NPBC with actionable benchmarking can achieve as good as, or better, improvement in cost efficiency (without the potential risk of service loss attributable to repeated rounds of CT) when incumbents are not public operators. Using data that enables us to link CT bid prices of successful bids to NPBC outcomes if benchmarking is actioned, and normalising the data to enable meaningful comparisons, the evidence suggests that financial gains from CT (unless an incumbent public operator is present) are either negligible or absent; indeed the effect of such a procurement model is tending towards a neutral financial outcome. Stakeholders who promote the position that Government should choose to test the market for value for money through CT, especially where incumbent operators demonstrate benchmarked cost efficiency, given the primary responsibility to the taxpayer, appear to be inappropriately claiming noticeable benefits to society.