Pros And Cons Of Outsourcing Bus Operations

Pros & Cons of Outsourcing Bus Operations Urban Mobility Conference Technical Session IV - PPP in Urban Bus Operations and Maintenance Strategies Sanjiv N. Sahai Managing Director & CEO, DIMTS Ltd

Structure of the Presentation ,[object Object],[object Object],[object Object],[object Object]

Trends in the Delhi Bus Market * Walk-only trips account for 35% of trips Modal Split - % of Person Trips (excluding walk trips) in Delhi* (Figures in Percent) Source: RITES Delhi Traffic and Forecast Study (2008) 2000-01 2007-08

Buses Vital for Reducing Car Use Source: Bus Rapid Transit Planning Guide, GTZ Transport Share - Cities

Buses in Delhi ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Characteristics of Bus Network in Delhi ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Bus Fleets Size in Delhi – By Operators

Public Sector Model - Advantages ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Issues with Public Sector Model ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: Halcrow Fox for DfID, May 2000 DFID Global Review of Bus Performance “ could not find any example where a pure public monopoly offers a superior alternative to the best designed competitive arrangement”

Productivity Gap Source: DTC Operational Statistics (June 2009) Parameters Particulars Nos. Buses Average Fleet 3,028 (Nos.) Average buses on road (Daily) 2,458 (Nos.) Fleet Utilization (%) 81.18% Trips Scheduled Trips (Daily) 22,447 Operated (Daily) 17,265 Trip Efficiency (%) 76.91% Kms Scheduled Kms (Daily – in Lakhs) 164.31 Actual Kms (Daily – in Lakhs) 125.85 Kms Efficiency (%) 76.59%

Private Stage Carriage Model - Advantages ,[object Object],[object Object]

Characteristics of Private Bus Operation Source: STA, Delhi (October 2007) Distribution of Blueline Fleet Size by Size of Operator Ownership Pattern

Characteristics of Private Bus Operation ,[object Object],[object Object],Fare Regulation 0-4 km 4-8 km 8-12 km >12 km Source: Transport Department, GNCTD

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Issues in Private Bus Operation

Regulatory Burden - Permit Conditions ,[object Object],[object Object],[object Object],[object Object]

Strategic Objectives ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Risk Allocation ,[object Object],[object Object],[object Object],[object Object],[object Object],the greater the extent of attempted risk transfer the fewer the likely bidders the greater the potential costs

Contract Types ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Cost Revenue Profit Funding Support Govt Operator Cost Revenue Profit Funding Support Govt Operator

Contract Types Production (Cost) risk borne by Authority Operator Revenue risk borne by Authority Operator Gross Cost Net Cost Management Contract (cost plus) Gross Cost with passenger volume/revenue incentive Net Cost with shared revenue risk

Net Cost – Full Revenue Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],If genuine revenue risk transfer required then should have freedom to set tariffs

Net Cost 2 – SRR and MRG ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Gross Cost – No revenue risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Government Contractual Obligations ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Bid Parameters ,[object Object],[object Object],[object Object],[object Object],[object Object],by bus type }

Guiding Principles for Gross Cost Contracts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Comparator Models ,[object Object],[object Object]

Net Cost Vs Gross Cost: Operator profit levels ,[object Object],[object Object],Source: Steer Davies Gleave (SDG), London (U.K.) Privatisation < Net Cost Tendering > Pre-tax operating margin

Approaches in Other Cities ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Scheme of Private Stage Carriage Corportisation ,[object Object]

Role of Integrated Mechanism – DIMTS ,[object Object],[object Object],[object Object],[object Object],[object Object]

Performance Management System ,[object Object],[object Object],[object Object],A performance incentive system will be implemented to reward or penalize the operator on the basis of the quality of service delivered.

Role of Technology in Performance Monitoring ,[object Object],[object Object],[object Object],There is a strong reliance upon modern location technology and intelligent transport systems to monitor operator performance.

Supported by Systematic Checking ,[object Object],[object Object],There is also a strong need to assess the other quality parameters, through daily routine checks and periodic surveys. Source: www.thestar.com

Performance Regime – Potential Bonus Payment for service exceeding minimum performance standards Payment for passenger volume growth Overall Performance Reward (incl. Punctuality) Volume Growth +15 % Max Achieving forecast growth Exceeding forecast growth +5 % +5 % ,[object Object],[object Object],[object Object],[object Object]

Performance Regime – Structure of Penalties Deduction for proportion of service operated by vehicles meeting set standards Deduction for service failing to meet minimum performance standards Payment for basic service output Cleanliness /Condition Basic Reliability Non-Operated Mileage 100 % Rs. 500* -10 % max Elements at Risk Proportional to kilometres not run or service standards below minimum specifications Deduction for service not operated due to factors within operator control 150 % * Per default - Provision of penalty on entire fleet on 10% sample checks.

Challenges ,[object Object],[object Object],[object Object],[object Object],[object Object]

Pros And Cons Of Outsourcing Bus Operations

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