| Professor
David A Hensher - Institute of Transport Studies, The University
of Sydney, Sydney Australia
John Stanley - Executive Director, Bus Association
of Victoria, Melbourne Australia
Institutional reform of the bus sector is a topical discussion
item in a number of countries at present. A specific focus is
on ensuring a value for money
(VM) regime to identify the benefits to society associated with
each dollar of subsidy support from government. This paper argues
that a Performance-Based Contracting (PBC) regime offers the best
prospects of achieving a system-wide value for money outcome.
It proposes a reward system for bus operators that combines payment
for delivering a minimum level of service (MSL), that meets government
community service obligations, plus an incentive regime that rewards
operators for patronage increases (above MSL patronage levels).
The patronage incentive is based on expected user and external
benefits deriving from service improvements and patronage increases.
Cost benchmarking at relevant best practice levels is proposed
to ensure remuneration is based on efficient cost levels. The
paper argues that a PBC approach is consistent with maximising
social surplus from public transport provision across a geographic
area, for any given budget constraint and regulatory imposed minimum
service levels. The main alternative, Competitive Tendering, is
argued to be less attractive than PBC’s in terms of securing
the maximum social surplus to the community, given the total amount
of subsidy support available.
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