Sydney bus proprietors are dumbfounded at the shock announcement requiring operators to compete with each other to secure bus contracts
By David Goeldner | May 3, 2012
A bombshell has been dropped in Sydney, and the fallout will be significant following this week’s announcement by NSW Transport Minister Gladys Berejiklian that NSW bus operators will be required to compete with each other to secure route service contracts.
With no warning, the bus industry has been left dumbfounded at the biggest change for several decades to the way bus contracts will now be tendered in NSW.
BusNSW Executive Director Darryl Mellish wasted no time marshalling his members and seeking answers from Transport Minister Gladys Berejiklian.
An emergency meeting of bus operators was convened soon after the Minister’s surprise announcement.
Mellish says BusNSW member operators immediately raised serious concerns about Berejiklian’s decision to put eight major metropolitan bus contracts to public tender.
“The concerns relate to operators not being given an opportunity to be involved with the development of an operating performance regime that was envisaged under their existing contracts,” Mellish says.
“It was the operators’ understanding that such a regime, together with a service quality index, also included in current contracts would be the basis of negotiating new contracts.”
Mellish says the NSW Government has jumped straight to tendering without going through the process of establishing benchmarks and KPIs with the existing operators.
“It seems the Liberal-National Government who extended the contracts for 12 months have changed their position on performance based contracts which was their policy position expressed to BusNSW.
Mellish says members were surprised the Government had not included the State Transit Authority – the operator of inner Sydney’s government bus fleet – in the tendering announcement.
“There is strong evidence supporting the position that more services could be provided to the community if STA were franchised,” he says.
“It is fairly common around the industry that $3.00 per km could be saved if STA services were operated by the private sector.”
Mellish says the meeting sought clarification on a number of important issues, including gaining a better understanding on depot strategy and potential timeframes that may be involved.
“There have been two major press releases relating to tendering the eight regions and the meeting felt that there were serious errors and weaknesses in both, including the way arguments were put supporting tendering versus negotiation.”
But it appears BusNSW could be faced with an uphill battle to reverse the decision.
Former STA head, and now Transport and Tourism Forum Chief Executive John Lee has applauded the NSW Government’s ‘bold reform’, saying it would benefit both commuters and taxpayers.
He says the competitive tendering of bus services is recognised internationally as the most effective way to achieve value for money, which means a better deal for taxpayers.
“After too many years of doing the same thing for little result, the government’s reforms will bring Sydney in line with what works in the major cities of the world,” Lee says.
He adds competitive bus tendering already works well in Adelaide and Perth.
“It makes perfect sense to apply these principles and this contracting model to Sydney.
“The lessons learned from other jurisdictions are that competitive tendering delivers improved customer service, more innovation and better value for money.”
Lee criticised the bus industry, saying the existing system provided an effective automatic right of renewal for current operators.
“The reforms will modernise the contracting model and ultimately the service delivery outcomes for the public,” he says.
“Without these contracts being regularly tested in the marketplace, government and the public can never really know whether they are getting the best service at the lowest cost for what is a $1 billion annual investment by the state government.”
But Mellish says BusNSW would continue to support the position that performance based contracts deliver greater value for money than tendering.
“The evidence from the bus industry in an environment like Sydney where the key assets outside the STA are owned by private operators is that negotiation of performance based contracts delivers greater value for money than tendering,” he says.
“Where tendering provides an initial advantage is when a Government enterprise is taken over by a private operator.”
Mellish says comparing Sydney with Adelaide and Perth to argue the benefits of tendering is ‘spin’ that doesn’t stand up to scrutiny.
“Operators back themselves as being cost effective and were expecting Transport for NSW to meet with them if they had concerns about operator efficiency.”
The introduction of tendering for private bus operator regions in NSW will be staged over two tender rounds over three years, starting in July 2012.