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Kaunas - A new framework for public transport
KaunasA new framework for public transport
A practical example
Guido Bruggeman
Brussels 3 July 2009
Kaunas - A new framework for public transport Guido Bruggeman
2Content
City of Kaunas
Public transport in Kaunas
Difficult times in public transport
How a new framework was triggered
How the PSC was the starting point for a turn around
Best practice results in Kaunas
Quality improvement pays back
Lessons learnt : a practical framework
Kaunas - A new framework for public transport Guido Bruggeman
3Why Kaunas as an example ?
5 years ago public transport in Kaunas was nearly in a state of collapse
Nowadays public transport is well organised and modernised and passengers numbers growing
How did they manage this?
What were the key actions for success?
What were the conditions for success?
Kaunas– A new framework for public transport Guido Bruggeman
4
Public transport in Kaunas
Introduction
Kaunas - A new framework for public transport Guido Bruggeman
5Kaunas is situated in the centre of Lithuania
Lithuania has joined the EU in 2004
Kaunas - A new framework for public transport Guido Bruggeman
6City of Kaunas
2nd largest city of Lithuania
400.000 inhabitants
Important industrial centre
Transport node (road and
railways)
Kaunas - A new framework for public transport Guido Bruggeman
7Public Transport in Kaunas nowadays
Kaunas public transport (2008) Municipal companies Private
Transport mode Bus Trolley Microbus
Companies 1 1 43
Routes 31 16 26
Vehicles 207 165 323
Passengers (in mln) 39.6 58.8 11.0
Kaunas– A new framework for public transport Guido Bruggeman
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Public transport in Kaunas
A difficult starting point
Kaunas - A new framework for public transport Guido Bruggeman
91995 – 2004 : public transport in decline (1)
Public transport in decline Loss of overall market share public transport since ’95 due to:
– lack of investment– low quality of services– poorly regulated competition minibuses– growing car ownership– passenger number municipal bus company down from
45 mln in 1995 to 18 mln in 2003
Muncipal companies Overstaffing companies and low cost coverage (< 50%) Product/technical oriented and not client oriented Outdated bus fleet Low motivation employees No co-operation No integrated ticketing system
Policy No vision and strategy on public transport No increase of fares allowed since 1998 (single €0.2) No regulatory framework (“out of control” and lack of transparency)
Kaunas - A new framework for public transport Guido Bruggeman
101995 – 2004 : public transport in decline (2)
Uncontrolled expansion of microbuses (60 operators)
Poorly regulated and unfair competition
Unsafe (lack of standards and control)
Municipal companies faced with unprofitable routes due competition on the road
Over 900 microbuses caused environmental pollution and congestion in city centre
Mode 1995 2004 2008
Bus 40% 19% 36%
Trolleybus
60% 30% 54%
Microbus 51% 10%
Market share public transport
Kaunas - A new framework for public transport Guido Bruggeman
11Poor service by outdated bus fleet (2004)
Municipal Bus Company
Average age buses 16 years
Fleet availability 65%
Low comfort
High maintenance costs
Second hand buses (10 different types)
Environmentally unfriendly (emissions/noise)
Municipal Trolleybus Company
Average age buses 19 years
Fleet availability 75%
Without new rolling stock ordinary public transport service would further decline.
Kaunas– A new framework for public transport Guido Bruggeman
12
Arranging financingfor public transport
A starting point for a full turn around
Kaunas - A new framework for public transport Guido Bruggeman
13Arranging financing for fleet renewal
Obstacles for financing
Limited borrowing capacity at the City (debt limits)
Public transport companies not creditworthy
Poorly regulated minibuses and unfair competition
Declining ridership and revenues
Low fares
Unclear long term vision
Lack of procurement experience
Non sustainable business
The City of Kaunas asked EBRD (European Bank for Reconstruction and Development for assisstance
Priority was renewal of buses and trolleybuses
Kaunas - A new framework for public transport Guido Bruggeman
14Towards a new framework for public transportThe City and EBRD agreed on the following framework
Framework Implementation
Introduction of PSCs Clear division between rights and obligations Transparent financial framework
Finanancing Compensation payments instead of subsidies Sustainable financing through fixed payments under a PSC Increase of fares (+40%)
Regulation of the sector Setting up Public Transport Authority Tendering and award of Public Service Contracts
Corporatisation Sound business principles; acting as corporate entity Business Plans and Corporate Development Plan Reducing political interference
Commercialisation Customer oriented approach Marketing plan Clear focus on cost reduction and revenue increase Customer satisfaction surveys Outsourcing
Policy Adoption of integrated public transport policy (city council)
Integration Merger bus and trolleybus company? Integrated ticketing system? Co-ordination through Public Transport Authority
Implementation measures reflected in Public Service Contract and Loan Agreement
Loan City
Transport Company
Investment Grant+ subsidy payments
Bank Passengers
Revenue from fares
Kaunas - A new framework for public transport Guido Bruggeman
15Traditional financing structure
Financing under Public Service Contract
Municipalityof Kaunas
KaunasTransport Company
Bank Passengers
Revenue from faresLoan
Kaunas - A new framework for public transport Guido Bruggeman
16
Financing under Public Service Contract
Municipalityof Kaunas
KaunasTransport Company
Payments linked toPublic Service Contract
Bank Passengers
Revenue from fares
Loan
Kaunas - A new framework for public transport Guido Bruggeman
17
Financing under Public Service Contract
Direct Support Agreement
Municipalityof Kaunas
KaunasTransport Company
Public Service Contract and Payments
Bank Passengers
Revenue from fares
Loan
Kaunas - A new framework for public transport Guido Bruggeman
18
A PSC enables transport operators access to financing for investments
Kaunas - A new framework for public transport Guido Bruggeman
19Basic elements PSC Kaunas
Compensation Fixed price per kilometre (gross contract) Annual indexation for labour, fuel and materials Bonus and penalties based on performance and customer satisfaction No exposure to tariff changes Duration 5 years with option for 5 years extensionLevel and price of service Defined by the City (routes and frequency) Quality standards with defined targets Tariffs set by the CityMonitoring Objective criteria (e.g. cancelled trips) Customer satisfaction surveys Complaints registrationObligations operator Deliver services in accordance with the PSC Business PlanObligations City Respecting the PSC Discourages “political interference” Promotion of public transport
Kaunas– A new framework for public transport Guido Bruggeman
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Best practice results of a new framework for Kaunas
Many actions were driven by the PSC
Kaunas - A new framework for public transport Guido Bruggeman
21New rolling stock for Kaunas
Direct loans to bus and trolleybus companies : €10 and €15 million
NO municipal guarantee - Maturity 10 years
Procurement of 55 new diesel buses and 42 new trolleybuses
Improvement of workshops and maintenance equipment
Huge boost in perceived quality by passengers (and drivers)
Kaunas - A new framework for public transport Guido Bruggeman
22Business Plan and Marketing Plan
Business Plans were prepared for
both municipal companies with help
of Swedish consultant.
Including financial model for 10
years
TABLE OF CONTENTS0Statement of Commitment1.1 Highlights1.2 Objectives1.3 Mission1.4 Keys to Success2Company Summary2.1 Company Ownership2.2Start-up Summary2.3Company Locations and Facilities3 The future market of Public Transportation in Kaunas3.1The Market3.2The market players3.3 Competitor comparison3.4 The SWOT Analysis4The Services to be provided by UAB Kauno Autobusai4.1The present services4.2 Future Services4.2.1Distribution Strategy4.2.2Pricing Strategy4.2.3Marketing Strategy5The future structure of operations and organization5.1 Personnel5.2 Organisational Strategy5.3 Organisational Structure5.4Management Team5.5 Personnel Plan6External implications, restrictions and regulations6.1Environmental impact6.2IS and IT6.3External competition7The financial assumptions, efforts and effects7.1 General and Important Assumptions7.1.1 Macro assumptions7.1.2 Financial assumptions7.2 Revenue forecasts7.3 The Service Fee calculation7.3 Cost Forecasts7.4 Key Financial and Operational Indicators8 The Addendums8.1 Investment Plan8.2 Projected Profit and Loss8.3 Projected Cash Flow8.4 Projected Balance Sheet8.5 Financial and operational indicators and ratios8.6 Service Fee Formula Calculations and forecasted Service Fee amounts8.7 Graphs
STRATEGIC BUSINESS PLAN UAB KAUNO AUTOBUSAI, KAUNAS, LITHUANIA 2004 – 2013
Kaunas - A new framework for public transport Guido Bruggeman
23Basis calculation for Public Service Contract
A PSC forces transport companies to make a long term financial planning
Kaunas– A new framework for public transport Guido Bruggeman
24Customer statisfaction surveys
Annual customer satisfaction surveys
Carried out by independent company
Monitoring under PSC
Great source of marketing information
Discussion on company performance
Kaunas– A new framework for public transport Guido Bruggeman
25Creation of a Public Transport Department
A proposal for a specific transport department was developed
It was established in early 2007 (with logo sign).
The office co-ordinates public transport in Kaunas
www.transportas.kaunas.lt
Kaunas– A new framework for public transport Guido Bruggeman
26A popular website for communication with clients
One internet site for all public transport in Kaunas
Kaunas– A new framework for public transport Guido Bruggeman
27Question of the month
Which transport mode to you like the most?
Kaunas - A new framework for public transport Guido Bruggeman
28Introduction of unified ticketing system
Partly financed trough EU Structural Funds (75%)
Electronic ticketing system with chipcards
Marketing campaign at introduction
System started with passes, paper passes terminated 1 August 2009
Single tickets as of 1 January 2010
System was also introduced in Vilnius and Klaipeda (combined used foreseen)
Kaunas - A new framework for public transport Guido Bruggeman
29Passenger information
Introduction of passenger information
Route map of buses at stops (and leaflet)
Time tables at 367 stops (with new shelters)
Real-time passenger information at stops
Financed with help of EU funds
Kaunas - A new framework for public transport Guido Bruggeman
30Route network in Kaunas
Kaunas - A new framework for public transport Guido Bruggeman
31Outsourcing : an example - ticket inspection
A tender was organised for ticket inspection
The selection criteria was price per one bus/trolleybus inspection
140 in-house ticket inspectors were replaced by 28 employees of a private company
The inspection plans are prepared on weekly basis with exactly indicated stops and
number of inspections to be carried out.
Company is paid on the basis of number of actually delivered inspections
Malus/bonus system
8% increase in fare revenue collection
Increase in passenger control service culture
Kaunas - A new framework for public transport Guido Bruggeman
32Passenger numbers:
+122%+ 34%- 62%
Decline of ridership stopped and trend reversed
20% more passengers over 5 years (2008 : 110 million passengers)
12% more passengers between 2007-2008
282 public transport trips per inhabitant annually
Kaunas - A new framework for public transport Guido Bruggeman
33CIVITAS award
Best Environmental Practice in Baltic Cities Award” for “Modernisation of the
Public Transport Network in Kaunas City” (Union of Baltic Cities -2005)
CIVITAS Award (2005)
CIVITAS Award for a demonstration city - KaunasThe city of Kaunas has been working toward an ambitious sustainable transport policy that has been able to turn around the local urban environment. The effort is all the more remarkable if one considers the difficult post soviet conditions in which Kaunas was no longer than 10 years ago. Noteworthy accomplishments of the local strategic plan include the thorough modernisation of the public transport fleet, the introduction of electric vehicles, the development of a bicycle network, the involvement of citizens in service improvement and the promotion of public-private partnership for service provision.
A key success factor in Kaunas is the strong and continuously won political support, comprehensive evaluation and monitoring campaigns that have always backed policy implementation, and the increasing exposure of the city to European policies, programmes and experiences.
Kaunas - A new framework for public transport Guido Bruggeman
34
Political support (and a “champion” taking the lead)
Public Service Contracts that enable companies to operate professionally and deliver “value for money” to the society
Compensation instead of (“open end”) subsidies !
Sound regulatory framework at EU member state level, supporting sustainable development of public transport
Public transport strategy both as a political commitment and a framework for developments
Building blocks for a framework
Lessons learnt from the Kaunas case
Kaunas - A new framework for public transport Guido Bruggeman
35
Monitoring as a tool for performance evaluation and steering on results
Corporatisation PT companies with sound Business Plan and acting as corporate entity
Commercialisation (not necessarily privatisation) with strong focus on the Client
EU funds and projects to support ambitious turn-around programmes
Best international practice to learn from
Pillars for a framework (2)
Lessons learnt from the Kaunas case
Public Service Contracts – An overview Guido Bruggeman
36
Thank you for your attention !
Guido Bruggeman
Independent Urban Transport Consultant
Prinsengracht 464 hs1017 KG AmsterdamThe Netherlands
Phone: +31 20 624 64 82
Email: [email protected]
Public Service Contracts – An overview Guido Bruggeman
37
Appendix
Basic principles
Public Service Contract
Public Service Contracts – An overview Guido Bruggeman
38What is a PSC?
A Public Service Contract is signed between a
Transport Authority and a Transport Operator and defines:
rights and obligations of both parties (who is responsible for what?)
quantity and quality of services delivered under the contract
compensations payments to the operator for delivering of services under the contract
as well as
use and ownership of assets (infrastructure and rolling stock)
monitoring
management (execution) of the agreement (PSC)
Note: a common used alternative for ‘rights and obligations’ is ‘roles and tasks’.
Public Service Contracts – An overview Guido Bruggeman
39Why to have a PSC in place?
clear definition of public transport services to be delivered
clear defintion of compenpensation payments to be made to the operator
clear distintinction of tasks and responsiblities (‘who is doing what?’)
continuation of payments (long term fixed contract) to operator
fixing budgets for public transport
to ensure ‘value for money’
transparancy
minimise political interference in daily operations and management
access to financing (of investments) for Operator
Regardless national and EU legislationandRegardless of the operator is “in house operator” or a private operator,
a PSC should be always in place !
Public Service Contracts – An overview Guido Bruggeman
40
Contents of
A Public Service Contract
Public Service Contracts – An overview Guido Bruggeman
41Rights and obligations under a PSC
Transport Authority Transport OperatorRights • to define the quantity of services
• to define the quality of services• to set tariffs• to monitor services delivered
• to receive compensation payments for services delivered
• to submit proposals for improvement of services (in terms of demand and efficiency)
Obligations • to pay compensation to the transport operator for servcies delivered
• to provide and maintain infrastructure:˗ stops˗ bus lanes˗ priority traffic lights• to co-ordinate passenger
information and marketing• to implement policies and make
investments• not to interfere in daily operations of
the operators
• to deliver public transport services (quantity)• to comply with quality standards• to adhere to the tariff and ticketing system• to provide information about:
˗ passenger numbers˗ services delivered (quantity)˗ services delivered (quality)˗ complaints˗ turn-over (tickets-sold)˗ financials
An example of rights and obligations under a PSC:
There are many ways to devide rights and obligations among parties
A clear description of rights, obligations and taks of both parties is key to a PSC
Public Service Contracts – An overview Guido Bruggeman
42Basic elements of a PSC
Preamble
I.SCOPE
II.RIGHTS AND OBLIGATIONS OF THE TRANSPORT OPERATOR
III.OBLIGATIONS OF THE AUTHORITY
IV.EXECUTION OF AGREEMENT
APPENDICES
The main contract is in principle fixed for duration of the contract.Appendices are updated on a regular basis.
Public Service Contracts – An overview Guido Bruggeman
43Preamble PSC
PREAMBLE This Agreement for the provision of Public Transport Services is intended to foster improvement and further development of passenger transport in [name City] and the surrounding communities. It is designed to enhance service delivery and financial performance, and ensure value for money for the City and its citizens. The contracting Parties intend that this Agreement shall contribute to public transport in [name City] and the surrounding communities offering an attractive alternative to individual motorized traffic, and promote tourism, environmental protection, energy savings, traffic safety, and the quality of life.
A preamble is a nice way make statement about the intension of the PSC
Public Service Contracts – An overview Guido Bruggeman
44I. SCOPE OF AGREEMENT
• Scope
• Activities of the Company
• Subcontracting
• Financial Responsibilities
• Overall Transport Planning
Public Service Contracts – An overview Guido Bruggeman
45II. RIGHTS AND OBLIGATIONS OF THE TRANSPORT OPERATOR
• Public Transport Services
• Vehicles
• Safety
• Service Quality
• Tariffs
• Tickets Sales
• Information
• Marketing Activities
• Control of Passengers
• Customer complaints
Public Service Contracts – An overview Guido Bruggeman
46III. RIGHTS AND OBLIGATIONS OF THE TRANSPORT AUTHORITY
• Payments for Transport Services
• Control of Legal and Contractual Obligations
• Transport Infrastructure and Traffic Control Measures
• Customer Complaints
Public Service Contracts – An overview Guido Bruggeman
47IV. EXECUTION OF AGREEMENT
• Duration
• Management of the Agreement
• Information
• Control and Audit
• Invoicing and Payments
• Amendments to the Agreement
• Force Majeure
• Arbitration
• Termination
Public Service Contracts – An overview Guido Bruggeman
48Appendices PSC
Appendices
1.Public Transport Reference Service Plan (Template)
2.Public Transport Operational Plan (in force) - routes, intervals, operation times
3.Tariffs Public Transport
4.Measures and objectives to improve speed and punctuality (traffic flow quality)
5.Vehicle standard requirements
6.Service Quality Standards (direct performance)
7.Customer Satisfaction Index (survey)
8.Incentives and penalties
9.Calculation of compensation payments to be paid by the City to the Company
10.Price Indexation Formula
11.Assets made available to the Transport Operator
Public Service Contracts – An overview Guido Bruggeman
49Direct performance measures : example
Service indicator Penalty Paying/Receiver Reporting
Cancelled trips 200 EUR/Trip Company/City Company
Cancelled trips not reported to the City 500 EUR/Trip Company/City City(random inspections)
Deviations from the requirement for clean buses (interior and exterior)
200 EUR/bus and day Company/City City(random inspections)
98% of passengers traveling with valid ticket
50% of the lost revenues
Company City(random inspections)
Delays >3 minutes from departure provided the bus has arrived in time at terminus.
100 EUR/Trip Company/City City(random inspections)
Absence of line and/or destination sign on the front of the bus
100 EUR per bus per day
Company/City City(random inspections)
Absence of timetables and route maps on bus and trolleybus stops
100 EUR/ bus stop and day
City/Company City(random inspections)
Penalties for direct performance (examples)
Public Service Contracts – An overview Guido Bruggeman
50Customer satisfaction Index : example
Customer Satisfaction Contracted quality from 2008
Contracted quality from 2010
• Realiability 7.0 7.5
• Safety 7.0 7.5
• Information 7.0 7.5
• Conduct of driver (driving) 7.0 7.5
• Customer approach 7.0 7.5
• Cleanliness 7.0 7.5
• Complaints handling 7.0 7.5
Customer Satisfaction Survey
For each Quality Index Category of the Customer Satisfaction Index, the following incentives and/or penalties will apply: In case the value of a quality index category in higher than the contracted value of Appendix 5, the City will pay an incentive to the Company in the amount of EUR 25,000 for each 0.1 point difference;
In case the value of a quality index category is lower than the contracted value of Appendix 5, the Company will pay a penalty to the City in the amount of EUR 25,000 for each 0.1 point difference.