Call to ‘franchise’ PT services flawed: BIC


The Bus Industry Confederation (BIC) has questioned Infrastructure Australia’s (IA) contention that ‘franchising’ government-owned rail and bus networks in Australia’s largest cities to private operators is the only option to boost ‘efficiency’.

In a report released on May 26, titled ‘Improving Public Transport – Customer Focused Franchising’, IA argues that "the national government has a direct interest in more efficient transport service delivery and this direct interest represents a strong case for the federal government to incentivise the states and territories to embark upon reform under the ‘customer focused transport model’".

Under this recommended model, governments would sell operational responsibilities for the delivery of the services - not infrastructure and other assets – through "time-limited exclusive franchises".

The report refers to private bus operations and specifically non-franchised Melbourne bus operators, and the 2017 Victorian Government’s announcement that it would phase out exclusive bus contracts over the next decade.

BIC executive director Michael Apps says that while he "couldn’t agree more" about the need for more efficient transport service delivery, saying that franchising is the only way to deliver more efficient services is a "very heroic assumption".

He adds: "The authors of the report let themselves down by conveniently ignoring the large body of evidence that does not support their case" – including the failure of a similar policy in Victoria several years ago.

"Perhaps IA should have considered benchmarking relative PT network efficiency and the agencies that run them to see where efficiencies might be garnered," Apps suggests.

Additionally, Apps argues IA’s reference to franchising private – as well as government – bus operations raises some "interesting questions" about ownership of depots, vehicles and other assets that are in private hands.

"The report infers the same benefits (savings for the taxpayer, higher-quality services at better value for customers) will apply in franchising government-owned PT operations and private operations. I am not so sure about that; it is a completely different exercise," he says.

"The report does not mention regional PT operations specifically but it does build on IA’s core recommendation from the Australian Infrastructure Plan that all public transport should be subject to a default exposure to contestable supply through franchising."

While IA makes it sounds simple, Apps disagrees.

BIC’s view on procurement of bus services is that state and territory governments should determine how they decide to procure bus services, whether it is a competitive tender or negotiated contract; and that new additions to the public transport network or operations previously not tendered can be subject to a one-off tender or negotiated to set a cost base.

Apps points out that savings generated by tendering – or franchising – public monopolies are not repeated in subsequent tenders, a position "supported by much research that has been ignored by IA".

"There is also good evidence that savings are reduced if the public monopoly has gone through a corporatisation process."

What’s more, a "one-size-fits-all" procurement approach for all states and territories and PT operations is not realistic, says Apps, especially in relation to city and regional services, school bus services and government and privately-owned operations.

"If key performance indicators are met in delivering public transport services, contracts/franchises should be renegotiated as a first option, or mandated," he says.

Apps concludes the worst outcome would be "blind acceptance" of the IA report by state and territory governments.

"In my view, the concept being floated by IA that state and territory governments franchise public transport operations on a regular basis to receive funding is flawed.

"If periodic tendering is the requirement and, therefore, the motivation for states and territory governments to get federal government money, despite the performance of the operation, are we really going to get improved services levels for customers and value for money for taxpayers?

"This approach has the scope to deliver exactly the opposite to what it plans to achieve. Put simply, this is a possible disaster in the making driven more by ideology than good public transport investment, planning and service delivery."

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