guidelines for contractual arrangements for brt systems

Rosário Macário

Marisa J. G. Pedro

CESUR/DECIVIL, Instituto Superior Técnico, Universidade de Lisboa, Portugal

Guidelines for contractual

arrangements for BRT

systems

Washington, 13th January 2015, BRT-ALC General Assembly

CESUR/DECivil, Instituto Superior Técnico 1

Introduction

• Public transport (service and infrastructure) is defined and

structured in a wide variety of contractual practices depending on the

country and city.

• Numerous factors influence this variety, the most relevant are:

– The constitutional setting (principles and legal architecture)

– The way national and local authorities divide regulatory powers upon

public transport

– The way public transport funding and financed is organised

– The ownership and structure transport of transport operators

– The nature of the relationship between authorities and operators

– The market access regime (free market regimes, authority provision)

– Infrastructure management model, etc

– Competence of the authorities

– Quality of information (market, operations, etc)


Research Goal

• Import to BRT design and implementation of a wide experience

on contract design for public transport services and

provision of infrastructures that is available in other modes

and services

• Provide guidelines for contract design (including incentives)

and monitoring for application to BRT systems

• Scope: relations between authorities and operators of services

and infrastructures (not labour related contracts)


The Research • This study is supported by:

– an analysis of a set of public transport service contracts selected covering most

practices on Public Service Obligations across world.

– an analysis of a set of contracts for provision of transport infrastructure

– Analysis of a set of BRT contracts

• Includes contracts set up under various regulatory regimes:

– market initiative regimes (e.g. deregulated free-entry regimes)

– authority initiative regimes (with or without competitive tendering)

• Includes contracts for different scopes of infrastructure development and provision

(DBOT, etc)

• Includes contracts with various forms of risk allocation:

– cost risk and revenue risk, with gross-cost, net-cost and super-incentive contracts

• Include various kinds of awarding procedures:

– direct award, competitive tendering procedures


The Case Studies Database Case

Study Country

Contract

Type

Modes

concerned

Award

procedure

Regime

for PSO Year

Contract

Length (…)

Risk

Sharing

Risk

allocated

COST Risks by

Operator (…)

REVENUE

S by

Operator

REVENUE

S by

Authority

Types of

other

incentives

(…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…)

Brussels Belgium Net cost

contract

Bus,

Subway,

Tram

Direct award

to public

operator

without

competitive

tendering

Contract 2001 5 years

(…)

YES COST and

REVENUES

Operator carries

the risk on

operational

costs

(personnel,

energy,

maintenance,…)

(…)

Operator

carries risk

on

passenger

revenues

n/a Financial

incentives

for the

operator

Frankfurt Germany Gross

cost

contract

Bus Award

procedure

with

competitive

tendering to

operate non

commercial

routes

Contract 2004 6 years

(…)

YES COST and

REVENUES

The contract

price can not be

renegotiated. If

the payment

turns out not to

be sufficient, it is

the operators

risk

(…)

Operator

carries

responsibilit

y for fare

revenues

Authority

carries

responsibilit

y for

passenger

revenues

Environme

ntal

incentives

for the

operator

Dublin Ireland Gross

cost

contract

Tram Award

procedure

with

competitive

tendering

with

negotiation

Contract 2002 5+5 years

(…)

YES COST Operator carries

the risk on

operational

costs

(personnel,

energy,

maintenance,…)

(…)

n/a Authority

carries

responsibilit

y for

passenger

revenues

Passenger

incentives

for the

operator

(…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…) (…)

58 cases

34 filled


Basic Contract Typology


EC, 2008

Risk continuum


EC, 2008

Some Findings…


42%

32%

7% 19%

Contract type

Gross cost contractNet cost contractManagement contractOthers

13%

10%

6%

55%

16%

Award procedure

Direct award to public operator

Direct award to public operator withcompetitive tendering procedureDirect award to public operator withoutcompetitive tenderingAward procedure with competitivetendering

29%

61%

3%

7% Modes concerned

All Network Bus Tram Subway


Some Findings…

10

8

6

Frequent Contract length

(average of years)

Gross cost contract

Net cost contract

Management contract

Gross costcontract

Net costcontract

Bus contracts 47% 26%

The bus contracts


Field Management contracts Gross cost contracts Net cost contracts

Bearer of risk

The authority bears both the production cost risk and revenue risk

The operator bears the production cost risk; the authority retains the revenues risk

The operator bears both risks – the cost risk and the revenue risk

Remuneration

Authority remunerates the operator for know-how and technical assistance, usually both a fixed amount and a variable component

Contribution based on the kilometres operated, index often updated in relation to changes in costs (diesel, gas, salaries, sales price of vehicles, etc).

Operator remunerated by keeping the ticket revenues; compensation is paid by the authority (a fixed sum).

Ticket sales Revenues related to operation belong to the authority / operator

Operator collects revenues on behalf of the public transport authority

Revenues related to operation belong to the operator

Incentive schemes

Financial incentives can relate to productivity and quality

Quality or revenue incentives will encourage the operator to focus not only on the production / costs but also revenue / passenger satisfaction

Quality incentives frequently make use of stated minimum demands or results on customer surveys

Ancillary activities

Revenues are collected by the operator on behalf of the public transport authority

Operator retains ancillary revenues

Summary of practices


Field Management contracts Gross cost contracts Net cost contracts

Monitoring

Authority generally monitors the operator regarding policy and budget

Authority monitors the operator regarding service performance through qualitative and quantitative assessments

Definition of the services

Decided by the public transport authority Often shared responsibility, however with significant operator influence

Quality Authority: strategic responsibility to define the level of quality

Operator: managerial and operational responsibility

Tariffs and fares

All related issues under the responsibility of the public transport authority

Policy defined by authority, autonomy for the operator for commercial fares such as discounts, fare sections

Information and promotion

All related issues usually a shared responsibility

Personnel and employment conditions

All related issues usually a shared responsibility but may also be wholly an operator responsibility

• PROVISION of INFRASTRUCTURE


A Classification of Infrastructure Delivery Models (I)

Source: (Miller, 2000).

The two axes are

Delivery Method (horizontal): from

segmented (each stage with a

separate contract) to combined (all

stages in a single contract)

Client Finance Method (vertical)

[Client = State]: from direct (all

financing to come from State

budgets) to indirect (all financing

done by other parties, repaid with

user charges or with State budget

contributions)

Existing experience

The most traditional forms are in Q4, with

direct financing by the State and

separation of the various stages

In Q1 the State still assures (most of)

financing needs directly, but “buys” from

the private sector the construction and

operation of the infrastructure (possibly

with maintenance in the package)

In Q2 the Private Sector assures (most of)

financing needs, keeping within its

responsibility good performance of

several stages of the lifecycle

Source: (Miller, 2000).

MA

TR

IX o

f R

ES

PO

NS

IBIL

ITIE

S IN

PR

OV

ISIO

N O

F IN

FR

AS

TR

UC

TU

RE

Public – Private Partnership

Works and Service

Contracts (conventional

procurement)

Management and maintenance

contracts

Operation and

Management

Concessions

Build – Operate –

Transfer

Concessions Privati-

zation

Type

Design,

Bid,

Build

Design, Build Management

contracts

Performance-

based

contracts

Lease or

Franchise or

Affermage

Brownfield

BOT/DBFO/BOO

Greenfield

Design

Private

by fee

contract Private by fee

contract

Private by

concession

contract

Private

Build

Private

by fee

contract

Operation

and

Maintenance

Public Public Private by fee

contract

Private by

Performance-

based contract

(PBC)

Private by

concession

contract

Finance Public Public Public Public

Own Public Public Public Public Public

Public after

contract

(BOT/DBFO) or

Private (BOO)

Private

Sector

Revenue

Options

Tolls (concession models)

Availability Payments* (PFI model)

Government guarantees and support

Other support (e.g. insurance)

City size

City characteristics

Financial Position Possible Packages

Severe

environmental

problems

Capital intensive

public transport

Yes No High/low Low Strong Weak

Very

large/large

√ √ √ Public sector self-financing

√ √ √ Public/private partnership, full

commercialization

√ √ √ Public sector with subsidies

√ √ √

Public sector with additional

User/beneficiaries charges,

Public/private partnerships,

Full commercialization

Small/mediu

m

√ √ √ Public sector self-financing

√ √ √

Self-financing & additional

User/beneficiaries charges to serve

Self-financing, private finance

√ √ √ Public sector with subsidies

√ √ √

Public sector with additional

User/beneficiaries charges

Public/private partnerships,

full commercialization

NEXT STEPS

• Analysis of BRT contracts

• Finalization of the database

• Transfer the experience in contractual arrangements

for the provision of infrastructures to BRT system

• Finalize guidelines


Thank you !

[email protected]


guidelines for contractual arrangements for brt systems

Documents

public operator

contract design

public transport services

set of contracts

competitive tendering

set of brt contracts

operator revenues

revenues operator