New Bus Service Framework for Budapest high quality for passengers, opportunity for market players László Sándor KERÉNYI

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1 New Bus Service Framework for Budapest high quality for passengers, opportunity for market players László Sándor KERÉNYI Head of Transport Strategy Department BKK Centre for Budapest Transport

2 Contents Budapest facts and figures Current status of the bus sector Challenges for better services The new model Lessons learnt 2

3 Budapest facts and figures Budapest / the Capital (since 1873): inhabitants car trips/day Modal Split: 60% personal / 40% public 3,56 million passengers/day on BKV Agglomeration (Pest County, 80 settlements): inhabitants car trips/day (66% of all trips!) 3

4 Budapest facts and figures Two level municipal system (since 1990): Municipality of the City of Budapest (the Mayor of Budapest) 23 municipalities (23 mayors) of 23 districts Transportation tasks of the Municipality of the City of Budapest: [National Law LXV A g] Public transportation Traffic management on the whole road network of Budapest (4500 km) Road and bridge maintenance tasks on roads and bridges owned by the City of Budapest, or used by public transport (1000 km) Transportation development projects Permitting and legal control 4

5 Budapest facts and figures Road network: Full length of the road network: 4500 km Length of the main road network: 1200 km 9 Danube road bridges (including M0 bridges) Over 1000 traffic signaled intersections Public transport network: Length of the public transport network: 1100 km Number of stops and stations: 4700 Rolling stock: app vehicles (176 million km run) Average occupancy of vehicles: 23,8% Average circulating speed of vehicles: 16,7 km/h 1,37 billion passengers/year, 5,1 billion passenger km/year 5

6 Budapest facts and figures New transport management model (since 2010): 6

7 Budapest facts and figures General tasks of BKK: Ordering services of public transport (network planning, commission, control, issuing and controlling tickets, regional coordination) Operation of roads, bridges and the traffic management system (development and coordination of reconstruction and construction works) Integrated administration and development of urban transportation (elaboration and updating of transport strategy, development and management of projects, professional coordination) Elaboration and operation of general transportation regulatory systems (parking, congestion charging, heavy weight traffic charging) 7

8 Current status of the bus sector Bus service facts and figures: Share: 40% 556 million passengers p.a. 177 million vehicle kms full geographical coverage 7/24 service 206 bus lines (daytime) 38 night bus lines Peak hours passenger load above 90% on 80% of the lines, average passenger load 24.0% OPEX HUF 40 billion (EUR 135 mn) per annum Rate of passenger numbers by vehicle types Total number of passengers 1.39 million per annum 22% 5% 5% 28% 40% Bus Tram Subway Trolleybus Suburban Railway 8

9 Current status of the bus sector First-door alighting to be extended gradually Operational and planned replacement of BKV s fixed-rail services Mid-term general goals: more fixed-rail services less bus services Automated fare collection to be rolled out (fully managed by BKK) GPS-based AVL system to be mounted on all surface vehicles (even private operators) Gradual shift to the competitive tendering model 9

10 Current status of the bus sector Bus fleet facts and figures: 1,353 buses 624 pcs articulated (18m-long) 698 pcs solo (12m-long) 31 pcs midi (8m-long) Average age of fleet: years BKV s subcontractors: 2 operators (1 private, 1 government controlled) own depots

11 Current status of the bus sector IK pcs IK pcs IK pcs Volvo 7700 A 150 pcs IK pcs IK pcs 11

12 Current status of the bus sector Bus fleet vs. services: Many break-downs and cancellations 75% high-floor 83% no A/C Mostly EURO-0, up to EURO-III Deteriorated outlook, passenger area 12

13 Current status of the bus sector Bus depots of BKV: 4 bus depots 1 trolley bus + bus depot buses per depot all owned by BKV on-site petrol stations on-site car wash Full Wi-Fi coverage (as part of the AVL system FUTÁR ) Not to be sold can be utilized by future private operators 13

14 Challenges for better services Main questions related to the new model: How to deal with current technical conditions of the fleet? How to involve private funding? How to improve services for passengers? How to generate competitive pressure for BKV? 14

15 The new model Main aims of the new bus model: Hundreds of low-floor, air-conditioned, EURO-5 or EEV buses to be put into operation until 2014 No CAPEX Competitive tendering Cheaper, more efficient, better Risk-sharing between BKK and the operators BKV s bus operations: competitor and benchmark 15

16 The new model Competitive framework: EU public procurement directives, HU public procurement law Two phases: Prequalification: open for application for years since 21/10/2011 Competitive tendering: actual call for tender for those operators who have successfully passed the prequalification First tender due: December 2011 Larger and smaller fleet contracts Contract term depending on age of fleet; with new buses planned term: 8 years Planned contract sizes between 50 and 300 buses 16

17 The new model Service level agreements: Punctuality Cleanliness Passenger comfort (heating, A/C) Strict control regime: Incentives and penalties bonus-malus (stick / carrot) Ever increasing service level control BKK-managed AVL system to track each vehicle Target: high quality services 17

18 The new model Gross cost contracts: Km-based service fee Service fee to be reviewed per annum Fare revenue to be collected by BKK Contract term: Based on turnover of CAPEX and 1370/2007/EC Average planned contract term 7-8 years Option to extension Risk-sharing, spreading of costs: Minimal standards to be set Application of greatest possible freedom for operators Target: acceptable service fee 18

19 The new model Costs: Factors on possible price increase Potentials to decrease costs Higher amortization BKV s buses are amortized to zero now Higher maintenance costs Higher qualified maintenance staff and more expensive More diesel used by new buses New technology, A/C increases fuel consumption Risks Diesel price increase, use of BKV depot, trade unions Experience of operators Experience with cheaper buses, existing processes, workflows More efficient processes Maintenance, roistering, ever increasing cost optimization Risk coverage Overhead costs spread across other activities 19

20 The new model Roll-out of the new service framework: Phase 0 Tenders urgent Public procurement preparation Service provision 150 pcs 450 pcs 750 pcs 900 pcs Phase 0: replacement of BKV s subcontractor contracts (until 1/5/2012) Tenders: gradual and continuous increase of number of contracts and operators Target: more than half of the fleet size are new buses on the new tender regime 20

21 The new model The first tender: under time pressure Phase 0 (under time pressure) BKK-BKV consortium to procure Short-term contract(s) (1-2 years) Small fleet size (25-50) Acceptance of high-floor/low-entry buses Compromises on technical expectations Subcontracted to BKV Direct contract award Service to start on 1/5/2012 Buses to be distributed across the Budapest bus network (mixed with BKV buses) Later phases service framework Tenders from 1/5/2012 BKK to procure Long-term contracts Smaller and larger fleet sizes ( ) Only new buses High quality expectations Service contract with operators Competitive tendering Redistribution of buses on the network 21

22 The new model The first tender: urgent need to act quickly BKV s Public Service Contract and BKV subcontracts expire on 30/4/2012 Before 1/5/2012 BKK had no authority to conclude procurement and award contracts BKV has no extra 110 buses for replacement New contract needed to provide capacity Time pressure leads to phase 0 contradictions with the new service framework 22

23 The new model November December January February March April Activities Week BKK internal decisions Prequalification BKK to draft tender documents Submission of applications Evaluation of applications Negotiations with applicants RFP Decision by BKK/BKV Room for appeal Contract Award Preparation for Service Provision 23

24 The new model Service contracts Part 1 to 6 Number of Contracted Parts Winner Pricing method Details of the buses buses performance useful bus VT-Transman Useful bus km with 25 km/year Kft. penalties + 20 % optional Used Low floor With airconditioning useful bus Used VT-Transman Useful bus km with 25 km/year Kft. penalties Low floor + 20 % optional With airconditioning VT-Transman Kft useful bus km/year % optional Useful bus km with penalties Used Partially low floor With airconditioning 6. VT-Transman Kft useful bus km/year % optional Useful bus km with penalties High floor Without air-conditioning 24

25 The new model Service contracts Part 7 and 8: Part 7: 25 new solo buses + 200% optional Part 8: 25 new articulated buses + 200% optional Specifications: Low floor, with ramp Minimum EEV engine Additional points for the alternative propulsion (CNG, hybrid, electric etc.) Air-conditioning Built-in CCTV security system Built-in passenger counter system 25

26 Lessons learnt Main lessons after the first tenders: No real bonus/malus: only penalties can apply due to the Hungarian procurement procedures new regulation? BKV is not allowed to bid on these procurements New prequalification tender without BKV Only Hungarian bidders minimum fleet size to bid for new market is around 200 No Hungarian buses??? No change: Integrated bus fleet control remains in the responsibility of BKK (FUTÁR system will be integrated on all vehicles) Continuous quality control to be performed 26

27 Thank you for your kind attention! László Sándor Kerényi Head of Transport Strategy Department 27

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