The evolution of bus contracts in London. Alex Moffat Transport for London August 2014
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1 The evolution of bus contracts in London Alex Moffat Transport for London August
2 Contents Key Facts Organisation of London Bus System Evolution of London s Bus Contracting System Supplier Market and Subsidy
3 Key Facts Bus Operations London s Buses operate 24 hours per day, 7 days per week 700 routes 19,000 bus stops, 30 bus stations 21 bus operating companies (7 groups, 2 independent) 8,600 buses 25,000 drivers 3
4 Mode share of trips by London residents Bus usage in London Buses account for around half of all public transport use by London residents. 60% 54.4% 50% 40% 30% 27.6% 20% 18.0% 10% 0% National Rail Underground/DLR Bus/tram 4
5 TfL travel facts each day in London 6.5 million journeys are made on London s buses 3.4 million on the Underground (Metro) 2.9 million on other rail 6.2 million on foot 0.6 million by bicycle 10.2 million car / motorcycle trips
6 Organisation of London s Bus System Mayor Transport for London Bus Operators
7 The London bus system: organisation The Mayor Chair of TfL Board Transport Strategy Sets Fares Level
8 The London bus system: organisation Transport for London s role Specifying the routes - capacity, routing, vehicles Contracting Monitoring Ticketing and technology Stops, stands, stations Passenger information
9 The London bus system: organisation Bus operators role: Compete for contracts Operate the bus service Employ staff (drivers, controllers, engineers) Own and maintain vehicles and garages.
10 Evolution of the Bus Contracting System
11 Tendering Programme Approximately 20% of routes tendered each year. Each route individually tendered. Route contracts offered for five years. Possible two-year extension dependent on good performance. Tender evaluation based on most economically advantageous.
12 Introduction of contracting & private operation Pre-1985 All services directly provided by public sector 1985 First routes tendered 1989 Publicly owned operator prepared for privatisation % of the network tendered 1994 Privatisation of publicly owned companies
13 Contract Types - 1 Gross Cost (contracts commencing ) Fares revenue retained by TfL. Full operating cost paid to operator. Cost deductions made for kilometres not operated for reasons within bus operator s control (staff, vehicles) Successful in increasing operated kilometres and bringing new market entrants (lower risk). However, no financial incentive to operate reliably.
14 Contract Types - 1 Impact of Gross Cost Contracts on operated kilometres Percentage operated /5 85/6 86/7 87/8 88/9 89/90 90/1 91/2 92/3 93/4 94/5 95/6 96/7 97/8 98/9 99/00 00/ Year
15 Contract Types -2 Net Cost (contracts commencing ) Fares revenue retained by bus operators Operators paid the difference between operating cost and the route fares revenue. Cost deductions made for kilometres not operated for reasons within bus operator s control (staff, vehicles) Revenue growth was retained by the operator as incentive to improve quality.
16 Net Cost Contracts in practice Passenger numbers grew by around 2%-3% each year due to underlying economic growth Reliability deteriorated and performance targets were not being met Contracts and revenue generation were more complex and discouraged new market entrants Underlying revenue growth not available for reinvestment in the network.
17 Contract Types - 3 Quality Incentive Contracts ( present) Fares revenue retained by TfL. Full operating cost paid to operator. Cost deductions made for kilometres not operated for reasons within bus operator s control (staff, vehicles) A minimum performance standard (MPS) for reliability is set out by TfL for each route Graduated payment scale based on reliability achieved for each routes against the MPS
18 Contract Types - 3 Quality Incentive Contracts ( present) Performance above minimum standard = bonus payments (1.5% contract price steps) Performance below minimum standard = deductions (1% steps) Operators are able to earn 15% of contract price in bonus payments Operators can be deducted up to 10% of contract price for poor performance
19 Quality Incentive Contracts 19
20 / / / / / / / / / / / / / /12 Excess Wait Time (mins) Reliability compared to Contract type T endering C ommenc es (G ros s C os t C ontrac ts ) Net C os t C ontrac ts Quality Inc entive C ontrac ts
21 / / / / / / / / / / / / / / / / / / /22 Bus Kilometres Operated per Year (millions) Passenger Kilometres per Year (millions) Bus kilometres and Passenger demand London bus network: service volume and usage , with forecasts to F orecas t at Q2 of 2013/ Bus-km operated (millions) Passenger-km (millions) Note: new series for passenger-km from 2006/07 21
22 What else do bus passengers want?
23 The next Contract Type 4? Driving and Vehicles standards Award bonuses for good driving and vehicle standards? Or, contract extensions based on driver, vehicles, safety? Or, reliability bonus only payable if pre-set driver and vehicle standards are met?
24 Supplier Market and Subsidy
25 The Market and Competition London United Other 12 companies Cowie RATP (London United) Others Deutsche Bahn (Arriva) MTL Metroline British Bus Ned Railways (Abellio) London General Stagecoach Stagecoach Go-Ahead Metrobus Capital Citybus CentreWest Thamesway London Buslines Comfort DelGro Metroline Go-Ahead Group Transit Systems 25
26 London s Buses reducing subsidy Millions of passengers Total bus subsidy reduced by 40% over the last five years Achieved through: Increasing demand for services. Regular re-tendering of services to secure the best deals Regular reviews of the network to ensure it meets passenger need. Bus passenger journeys and bus subsidy Passenger journeys Bus subsidy (real terms) 700m 600m 500m 400m 300m
27 Transforming London s bus service Real-time information Accessible vehicles High frequency services Reliable services Well trained drivers Better traffic management Safe and secure Affordable fares Lower emissions Simple information Improved comfort
28 1999/ / / / / / / / / / / / / /13 Customer Satisfaction Score Customer Satisfaction Overall evaluation
29 29
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