Doprava a spoje elektronický časopis Fakulty prevádzky a ekonomiky dopravy a spojov Žilinskej univerzity v Žiline, ISSN

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1 EXPERIENCES WITH APPLICATION OF PUBLIC PROCUREMENT IN BUS TRANSPORT IN THE UNITED KINGDOM Miloš Poliak 1, Linda Forrest 2 and Štefánia Semanová 3 Introduction A new Regulation (EC) No 1370/2007 on public passenger transport services by rail and by road came into force on the 3 rd of December, The aim of this regulation is to determine a procedure by which competent authorities (public sector buyers) may act in area of public passenger transport to ensure services of public interest. The aim of this procedure is to monitor achievement of greater volume of services, improve safety and increase quality of services at the lowest possible costs. The regulation sets out conditions which the public sector buyers must meet while ensuring of transport serviceability supported from public funds. In addition to the general rules and compulsory content of public service contracts, this regulation also modifies process of awarding those contracts. Before the introduction of Regulation (EC) No 1370/2007 in 2009, most public sector buyers in Slovak Republic (SR) had signed contracts valid for up to ten years. This means that the regulation will be applied to public procurement throughout SR from Due to previously mentioned facts, the objective of this paper is to describe experiences of application of Regulation (EC) No 1370/2007 in the United Kingdom, with reference to practical experiences of a particular bus carrier in Scotland. Framework requirements of Regulation (EC) No 1370/2007 According to Regulation (EC) No 1370/2007 it is possible to ensure transport serviceability by bus and by rail from the positions of competent authorities in the three following ways [2]: providing services in the public interest themselves 1 doc. Ing. Miloš Poliak, PhD., Žilinská univerzita v Žiline, Fakulta prevádzky a ekonomiky dopravy a spojov, Katedra cestnej a mestskej dopravy, Univerzitná 1, Žilina, Slovenská republika, 2 Linda Forrest, MA (Hons), Žilinská univerzita v Žiline, Fakulta prevádzky a ekonomiky dopravy a spojov, Žilina, Slovenská republika, pobyt na základe programu Leonardo da Vinci 3 Ing. Štefánia Semanová, Žilinská univerzita v Žiline, Fakulta prevádzky a ekonomiky dopravy a spojov, Katedra cestnej a mestskej dopravy, Univerzitná 1, Žilina, Slovenská republika, 354

2 direct award of public service contract to legally distinct entity (without competition) over which the competent authority carries out control similar to that exercised over its own departments (internal service provider) award of public service contract to the third party either by direct award to particular public sector operator or by public tender that allows participation of all public sector operators (fair, transparent and non-discriminatory competition) Direct award of public service contract is only possible when the average annual value of the services provided is estimated to be less than or services in relation with public interest are provided in the range of less than km per year. The limit of increases up to per year and the limit of km increases up to km in the case of direct award of public service contract to small or medium-sized enterprise that does not operate more than 23 vehicles. In the case of the operator s failure to provide agreed services or imminent risk of such a situation, the competent authority may take emergency action that consists of a direct award to ensure realization of services in public interest. Application of Regulation (EC) No 1370/2007 in the conditions of the United Kingdom The introduction of EU Regulation 1370/2007 in 2007 had little impact on the management of bus transport as competition was already present between bus providers due to deregulation of bus services by the UK government in 1986 [6]. While overall responsibility of road transport in Scotland lies with the government organisation Transport Scotland, most bus operational decisions are made through partnership working between: Bus Operators, usually privately owned companies operating bus routes on a commercial basis Local Transport Authorities, which can provide subsidies for services not provided on a commercial basis 355

3 The Traffic Commissioner for Scottish traffic area, the licensing authority responsible for applying the regulatory regime. When a company starts operating a new commercial bus service for public use, they must register this service with the Traffic Commissioner for Scottish traffic. The Traffic Commissioner is responsible for licensing services and ensuring legal standards are maintained [9]. Particularly in rural areas, there are often routes which are socially important but not commercially viable. When this occurs, local authorities may choose to subsidise a route in order to ensure that it runs. For all routes subsidised by local authorities, a competitive tendering process must take place before a contract is awarded to a company. The only subsidies exempt from this rule are small subsidies worth less than 12,000 per year. A company cannot receive more than 70,000 per year in subsides from small contracts with the same authority [3]. The process of tendering public sector contracts involves a number of stages: 1. Companies must first meet pre-qualification requirements of having adequate skills, experience and references. 2. Companies which meet pre-qualification requirements will be invited to tender and be provided with further details of the project and conditions. They can then choose to submit a bid for tender which includes details on how they would achieve the objectives of the tender. 3. The public sector buyer will then evaluate and refine tenders, a process during which they may ask for more information on different bids. 4. The public sector buyer then announces the company to which they shall award the contract. This is followed by a 10 day standstill during which other bidders may ask for feedback on their bid. 5. The contract is put in place by both the public sector buyer and the private sector seller. 6. The contract is managed by both public sector buyer and private sector seller. The buyer will monitor performance of seller through regular review and testing 7. After the contract expires, it may be advertised again [4] 356

4 Tenders are evaluated based on cost and quality. The tender which achieves the highest quality at the lowest cost is usually accepted and the route and associated subsidy awarded to a particular organisation [10]. A report on the results of a tendering process for an Edinburgh-based bus service is available to download from: Additional funding for bus companies is mainly available from the EU, Scottish Government and their associated organisations. These grants and subsidies exist for a number of reasons and can be awarded by different bodies. Local Transport Authorities often play an important role in supporting or awarding funding applications as they are perceived to be well equipped to recognise and understand local needs. Examples of funding available to bus companies in Scotland include: Bus Service Operators Grant. Operated by Transport Scotland, awarded to commercial and community bus services based on mileage covered by company. Aims to keep costs down for passengers. Bus Route Development Grant. Provides financial support to a particular project for up to three years, after which, it is expected to be self-supporting. Scotland-wide concessionary travel scheme. Scottish Government funded, reimburses operators for free travel of people over 60 years old. [8] Experiences with application of Regulation (EC) No 1370/2007 in a particular bus company Lothian Buses Edinburgh Lothian Buses, Based in Edinburgh, Scotland, is a public limited company. This means the shares in the company are owned entirely by local authorities while the company is managed and run by a board of directors [5]. It competes with privately owned companies, such as its main competitor, First Bus East Central Scotland. Through close partnership working with Edinburgh City Council on traffic management and transport policy, Lothian Buses provides high quality, reliable services and has been recipient of many UK-wide bus awards, including Best City Operator 2011 [8,10]. Thus, Lothian Buses is an example of a publically owned bus company operating successfully in the deregulated market. 357

5 This paper has been developed under support of project: MŠ SR VEGA č. 1/0144/11 POLIAK, M.: Vplyv zmeny kvality poskytovaných služieb verejnej hromadnej osobnej dopravy na zvyšovanie jej konkurencieschopnosti vo vzťahu k individuálnemu motorizmu Literature [1] POLIAK, M.: Možné prístupy k uzatváraniu zmlúv o dopravných službách vo verejnom záujme; 12. odborný seminár Aktuálne problémy v podnikaní v cestnej doprave CEDOP 2011; ; Terchová; ISBN ; s [2] POLIAK, M. KONEČNÝ, V.: Trh hromadnej osobnej dopravy a jej financovanie, vydala ŽU v Žiline v EDIS vydavateľstve ŽU; 1. vydanie, 176 strán; Žilina; ISBN [3] Business Link, 2012a, Subsides and Grants for Bus Operators, Online RCES [4] Business Link, 2012b, Tendering for a Public Sector Contract in the Construction Sector, Online RCES [5] Lothian Buses, 2012, Meet the Management Team, Online [6] Morton, 2011, Impact of European Union Competition Policy on Public Transport Policy and Provision in the UK, European Services Strategy Unit, Online [7] Scottish Executive, 2006, Moving into the Future: An Action Plan for Buses in Scotland, Edinburgh [8] Scottish Government, 2008, Buses for Scotland, Progress Through Partnership: A Guide for Local Authorities, Regional Transport Partnerships and Bus Operators, Edinburgh 358

6 [9] Transport Scotland, 2012, Buses, online [10] UK Bus Awards, 2011, Awards for Industry and People 2011, online d=580&itemid=236 Referee: Doc. Ing. Vladimír Konečný, PhD., University of Žilina, Enter to publishing: 30 th October

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