BREAKING NEWS: NSW A-G calls for shake-up of bus contracts

By: Graham Gardiner

The NSW Auditor-General Peter Achterstraat today called for improvements in the management of Sydney metropolitan bus services after identifying significant

The NSW Auditor-General Peter Achterstraat today called for improvements in the management of Sydney metropolitan bus services after identifying significant performance issues.

The NSW Audit Office’s Improving the Performance of Metropolitan Bus Services report found significant advances have been made as a result of the Unsworth review in 2004, with new bus contracts, a network improvement program, strategic corridors, and uniform bus fares and concessions.

But there remain major performance issues. Wide variations in service levels exist, with privately operated services less frequent and less accessible than publicly run services, he says.

"A survey last year showed that one in four bus users said they were left standing at the bus stop at least once a week, and one in three wanted to catch a bus at times when the services had stopped operating," says Achterstraat. "This performance is not good enough."

Achterstraat also found a wide disparity in the costs of operating metropolitan bus services, with some regions costing just over $4 per kilometre compared with almost $10 per kilometre in other regions.

"With bus contracts worth $5.6 billion over seven years, the public is entitled to value for money," he says.

"Contracts were directly negotiated with existing operators and not through an open competitive tender process. This may prove more costly to the public."

The report found that while new contracts provided for a performance management regime to hold operators accountable, this system is still being developed four years after the bus contracts came into effect and remains unproven as a basis for ensuring value for money from the contracts - each of which guarantees monopoly rights to the operators.

No penalties for operator performance failure have been applied, although the contract does allow for penalties, the office states.

It says this is particularly significant as: services are not always reliable; there are wide variations in service levels, with services in privately operated areas likely to be less frequent and less accessible; the new bus contracts were negotiated with existing operators, using a cost and profit benchmarking process, in the absence of a competitive tender.

"For the bus user this means that poor performance and poor service may go unnoticed. For the tax payer it means that bus services may be more costly than they need to be," the report states.

Achterstraat levels much of the blame with the NSW Department of Transport and Infrastructure (NSWTI).

The report points out NSWTI has no overarching business plan and has set few clear performance objectives in relation to bus services, making it difficult to establish a performance linkage with operator business plans and to gauge its success in driving performance improvements.

The proposed new performance assessment regime will be limited to using data already available and will not cover many areas of performance important to bus users, it adds.

"NSWTI relies on the bus operators self-reporting using their own existing systems to collect and report on operational and performance data. It has control measures in place, but this information carries a risk that need to be addressed," the report states.

To improve performance, the Audit Office recommends that, ahead of the next round of contracts, NSWTI further increases pressure to improve performance and drive costs down by:
  • Specifying a range of performance objectives for each contract region (eg cost per passenger kilometre, service quality and accessibility) with a clear focus on the needs of bus users
  • Comprehensively benchmarking performance to hold bus operators accountable, with penalties for poor performance
  • Strengthening controls on operator self-reporting to ensure that performance information is accurate
  • Conducting more frequent bus customer satisfaction and usage surveys, including the use of ‘mystery shoppers’.

In response to the report, NSWTI says it is working to develop a model for the renewal of bus contracts that are due to start expiring from December 2011. These contracts will specify levels of performance required of bus operators.

To assist in managing current bus operator performance as well as preparing for the contract renewal process, NSWTI is undertaking a bus contract benchmark exercise. Benchmarks include a mixture of cost and service quality KPIs, including total cost per service kilometre; boardings per service kilometre; early and late trips from departure; early and late trips at mid-point; complaints per 100,000 boardings; customer satisfaction; and average number of Heavy vehicle Inspection Scheme (HVIS) failures per bus per annum.

NSWTI has also convened a National Bus Performance Benchmarking Group to establish a system of measures for cross-jurisdictional comparison and to understand why differences might occur.

Additionally, it has engaged an independent auditor to audit the metropolitan bus service contracts. This audit will be expanded to include the auditing of bus operator self-reported performance data.

To read the report in full click here.

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