Trel, E. and D.M. van de Velde (2008), “Benchmarking municipal public transport operators in the Netherlands”, European Transport Conference, October 2008. This paper presents the results of a study conducted to benchmark the performances of the municipally-owned public transport operators of Amsterdam, Rotterdam and The Hague in the Netherlands. The study, commissioned by the Dutch Ministry of Transport, compares the performances of the operators in terms of quality and efficiency and their steps towards more ‘market conformity’.

1. BENCHMARKING MUNICIPAL PUBLIC TRANSPORT OPERATORS IN
THE NETHERLANDS
Eric Trel
inno-V, Amsterdam
Didier van de Velde
TU Delft, Fac. of Technology, Policy and Management, POLG
and inno-V, Amsterdam
1. INTRODUCTION
This paper presents a summary of the results of a study commissioned by the
Dutch Ministry of Transport (inno-V, 2007) and conducted to benchmark the
performances of the three municipal transport companies of Amsterdam
(GVB), The Hague (HTM) and Rotterdam (RET) in the Netherlands. The
study, which is summarized in this paper covers institutional steps,
organisational reforms and compares production costs. An indication of
remaining potentials for performance improvement is given. The operators
were compared among themselves but also with regional transport that is
already subject to competitive tendering. The comparison includes operating
costs, revenues and customer satisfaction. In addition developments towards
‘market conformity’ and institutional aspects were also studied.
The motive for this benchmarking exercise was the planned introduction of
competitive tendering in urban transport, as is already the case in regional
bus transport. However, after the completion of this benchmark study,
Parliament approved on 5 July 2007 a motion that requests the government to
abolish the tendering obligation for the major cities. While competitive
tendering will remain possible in the urban areas, it is now likely that a variety
of models will appear, the exact place of competitive tendering within these is
still unclear at this moment.
The benchmarking study was realised in close cooperation with the involved
passenger transport authorities and transport operators who delivered the
necessary data. It is the first time that such an extensive cost comparison
between municipal operators was made.
The study uses the concept of ‘market conformity’ which is defined here as:
“reaching a price and quality level similar to what could be reached if the
same services had been submitted to competitive tendering”. ‘Market
conformity’ is not a once-and-for-all benchmark. To be successful in a
competitive market, operators will over and over have to prove their efficiency.
Furthermore, in this relatively new market, price and product are still subject
to change and development. Who wins a concession today can lose one
tomorrow. From this point of view, ‘market conformity’ essentially means that
a company is able to adapt itself effectively and timely to market
developments. Therefore this study focuses on both performances and the
development of performances.

2. In a qualitative section, the study presents the institutional steps and
organisational reforms that operators and authorities have taken between
2000 and 2006 to realise an ‘at arm’s length’ relationships and to reach more
‘market conformity’. In a quantitative section, the study compares the
production costs per timetable-hour (operational costs, excluding
infrastructure management) of each transport operator at the level of single
transport modes (bus, tram or metro). Comparisons are also made with the
regional bus sector that has already been submitted to competitive tendering.
The main points of this study will be presented in this paper.
2. INSTITUTIONAL REFORMS IN THE URBAN PASSENGER TRANSPORT
In this section we present the main institutional steps and organisational
reforms that operators and authorities have taken between 2000 and 2006 to
realise ‘at arm’s length’ relationships and to reach more ‘market conformity’.
The municipalities transferred their former responsibility for public transport to
the City Regions in 1996. This was an essential step in the process of
creating ‘at arm’s length’ relationships in the urban public transport sector.
From then on, the City Regions gradually grew in their new role as public
transport authorities. The City Regions of Amsterdam, Rotterdam and Utrecht
even gained experience in competitive tendering by implementing it in the
sometimes extensive regional (suburban) areas for which they are
responsible.
The continuing discussion about the implementation of competitive tendering
in the urban areas led to continuing delays in the introduction of further
necessary reform measures. Not all City Regions agreed with the idea of
compulsory competitive tendering in the urban areas, some urban
municipalities, though formally not responsible, favoured direct award to the
municipal operator and the personnel of the municipal operators opposed
competitive tendering outright. Nevertheless, an amendment of the Passenger
Transport Act on 1 January 2007 finally fixed the calendar for the compulsory
introduction of competitive tendering in all areas, including the urban areas of
the City Regions of Amsterdam, Rotterdam, The Hague and Utrecht. This
then led to the corporatisation of the GVB and RET and to the privatisation
GVU to Connexxion on 1 January 2007. This created the necessary
conditions for further reforms steps such as an independent financial and
administrative position for the companies involved. The veto right that the
municipality of The Hague and Rotterdam still had pertaining to some
decisions that the City Region could take was finally abolished halfway 2007.
The challenge for GVB, HTM and RET was to reach a market conform price
level such as to be able, in due course, to compete with private operators.
With the privatisation of GVU, its market conformity became Connexxion’s
responsibility. The necessary measures to reach this are essentially related
the productivity of the driving staff and workshops and to the reduction of
overhead costs. This involves a substantial amendment of some working
practices. The three companies started taking steps in that direction, the
consequence of which is already visible in the recent multi-annual agreements
signed with the City Regions. However, it remains difficult to say whether

3. these agreements will prove sufficient to be able to compete successfully with
private competitors, as they too continue to improve their performances.
An additional complexity in these urban networks compared to the situation in
regional public transport is that the municipalities of Amsterdam, Den Haag
and Rotterdam play an essential role as owner of the transport operators, but
also of the rolling stock and rail infrastructure. This means that, if competitive
tendering is to be introduced in the rail sector, contracts between these
municipalities, the operators and possibly third parties (e.g. the City Region as
transport authority) will need to be introduced to arrange for the usage and
maintenance of tracks and rolling stock. This means that these municipalities
will have to develop their asset management skills, including the development
of a monitoring of the condition and life expectancy of the assets at the
beginning, during and at the end of the concessions.
3. QUANTITATIVE COMPARISON AND BEST PRACTICES
3.1 Method
A method based on relative best practices was developed to produce for each
city an indication of the remaining potential for performance improvement. The
extensive qualitative analysis was used as background for an in-depth
interpretation of the quantitative results such as to avoid simplistic conclusions
based on a ‘school marks’ approach.
The comparison of GVB, HTM and RET focuses on costs, revenues and
customer satisfaction. Two comparisons were made:
 Comparison of the performances of each company between 2001 and
2005 in order to appreciate developments;
 Comparison between the three companies and with regional transport in
order to calculate best practices.
The study compares the production costs per timetable-hour (operational
costs, excluding infrastructure management) of each transport operator at the
level of single transport modes (bus, tram or metro). The cost comparison was
based on the so-called URS which is a Dutch standard of the bookkeeping of
for transport companies. The financial figures for 2001 were corrected for
inflation. As the operation speed has a substantial influence on operational
costs, cost comparisons were based on the costs per timetable-hour. The
costs for ‘social security’ (security enforcement, control staff, patrols, etc.)
were included in the comparison as these cannot be fully separated from
operational costs. All results are presented in the form of index figures as
operators were reluctant to hand over sensitive business information in the
light of a possible future tendering of their concessions. This guarantees the
confidentiality of the source information.
A best practice was then determined for each transport mode (metro, tram,
bus) and each category of costs, i.e. the lowest cost per timetable-hour in the
year 2005. Together, these best practices combine the most efficient
elements of the investigated companies. This best practice is then meant as a

4. benchmark to learn from. Two versions of the best practice benchmark were
calculated:
 ‘Best 1’ shows the best practice among the three urban companies. Here
we chose the lowest cost per timetable-hour per cost category. The
capacity and kilometer costs of rolling stock were kept together in
determining the best practice as these costs are not independent and are
related to fleet age.
 ‘Best 2’ is based on ‘Best 1’ but goes one step further: here we based the
costs of drivers on the productivity level reached in regional transport
(submitted to competitive tendering). ‘Productivity’ is defined here as the
number of timetable-hours per driver per year.
The management and maintenance of the rail infrastructure amount to 25 à
40% of the total costs of metro and tram. Unfortunately, the financial
information and accountability of these expenses remains weak. Furthermore,
the relationship between costs and performance (in terms of availability and
reliability) is largely unknown. It was therefore not possible to compare
infrastructure costs between the companies studied.
3.2 Results
In accordance with the scope of the benchmark study, the comparisons made
here refer to:
 Metro: GVB and RET
 Tram: GVB, HTM and RET
 Bus: GVB and competitively tendered concessions of Waterland and
Zaanstreek
In this section, we will only present the results for the tram mode as an
example of the work conducted. We will omit here the presentation of the
similar comparison made for the metro. We will, however, include a
comparison for the bus in which the Amsterdam city bus services are
compared with two regional bus concessions that were subject to competitive
tendering. Also, this section will focus on cost comparisons, omitting the
analysis of customer satisfaction that is included in the wider benchmark
study. The extensive qualitative analysis is used as background for the
interpretation of the quantitative results such as to avoid too simplistic
conclusions based on a ‘school marks’ approach. The next section will
elaborate on the conditions needed to realise the best practices as calculated.
Tram: best practice
We compare the costs per timetable-hour of GVB, HTM and RET in 2005,
including social safety costs but excluding infrastructure. The figure below
shows the cost levels per company, the combination of their best practices
(Best 1) and in addition the combination of Best 1 with the additional
assumption of a driving staff productivity as realized in regional transport
(Best 2).

5. 0
20
40
60
80
100
120
GVB 2005 H TM 2005 RET 2005 best1 best2
Index(bestcompany=100)
etcetera
social security
sales costs
driving personel
kilometer
capacity
Figure 1: Tram: best practice costs per timetable-hour (price level 2005)
HTM and GVB reach in 2005 the lowest costs per hour. Taking HTM as
100%, the costs of GVB amount to the same level, the costs of RET are
around 105%, while those of Best 1 are around 90% and of Best 2 around
80%.
A few remarks are needed in order to interpret these results. Firstly, it should
be noted that the capital costs of rolling stock at GVB and RET have
increased between 2001 and 2005 due to the influx of new vehicles. While the
costs of drivers are highest at HTM in 2005, its productivity is at the same
level as that of GVB and RET. This is possibly due to the salary level at HTM.
Note that in 2006 a new collective labour agreement came into vigour. Finally,
the costs of social safety are substantially higher at GVB and RET than at
HTM. This is related to the chosen safety regime: GVB and RET operate with
dedicated controllers in each vehicle, whereas HTM operates with flying
squads. The former has a greater effect on social safety, whereas the latter is
more cost-effective.
Bus: comparison with concessions submitted to competitive tendering
As explained above, the HTM and RET bus networks remain outside the
scope of this study. We have compared the GVB bus network performances
with the regional bus concessions of Waterland and Zaanstreek, both located
in the territory of the Amsterdam City Region. As no cost data is available for
both these concessions, we use here the gross price (sum of the authority’s
financial contribution by the authority and of the passenger revenue) as a
proxy. This includes, implicitly, the operators’ profit. The next figure presents
the development of the gross price per timetable-hour where the gross price
per timetable-hour for GVB-bus is set at index 100.

6. 0
20
40
60
80
100
120
2004 2005 2006 2007 2008
Index:GVB2004=100
GVB bus
Waterland
Zaanstreek
Figure 2: Bus: index of the development of the gross price per timetable-hour
(price level 2005)
The first year of operation after tendering was 2006 for Waterland and 2005
for Zaanstreek, as can be seen in the graph. Three items have evolved after
the tendering of the regional bus concessions: the number of timetable-hour
rose, the authority’s contribution decreased and the passenger revenues rose.
For GVB-bus we observe a decrease in the authority’s contribution while the
other items remain more or less unchanged.
Note that this comparison is based on prices. The evolution of the true costs
may have followed a different path. It is, e.g., possible that the real costs of an
operator in the first years after tendering are higher than what can be
calculated from the amount in the bid, while these costs could be lower at the
end of the concession. However, we should note that cost decreases of 20 to
25% in contracting prices per timetable-hour are not unusual at the
international level (see, e.g., Copenhagen).
This comparison leads to the following observations:
 Competitive tendering of the regional bus concessions led to the
introduction of new buses and a substantial increase in service supply (30-
50%). The operators promised a revenue growth while the authority’s
contribution remained stable. Such developments could not or hardly be
observed for GVB-bus.
 Before tendering, the sum of the authority’s contribution and passenger
revenues per timetable-hour in Waterland and Zaanstreek was approx. 5%
resp. 25% lower than that for GVB-bus. After tendering this difference grew
to about 30-40%, despite the larger financial risk borne by the regional
concessions.
However, we also have to observe that the efficiency gains have not been that
large in all regional concessions submitted to competitive tendering in the
Netherlands. The official evaluation of the Passenger Transport Act observed
an average efficiency gain of 15-20% (Twijnstra & Gudde and MuConsult,
2005). Furthermore – though this cannot be proven – it is thinkable that
companies have engaged into so-called ‘strategic bidding’ (i.e. bidding under
the true production costs in order to gain market shares).

7. Despite the improvements made in the urban concession (GVB-bus), the
substantial effects of competitive tendering led to an increase in the efficiency
gap between municipal operators and regional bus operators. Passenger
satisfaction scores also point in this direction.
The difference in gross price per timetable-hour between GVB-bus and
competitively tendered regional bus concessions is mainly caused by a
difference in productivity of the driving staff, which is estimated to be about
20% higher in the regional traffic. To some extent this is due to structural
differences between urban and regional transport and between bus and rail,
but this explains only a small part of the observed difference in productivity.
Differences in collective wage agreements also play a role, but regional
operators also reduced their costs by making substantial cuts in their
overheads. Regional operators have also been able to reduce their costs by
making sharp agreements in vehicle procurement and maintenance. We can
observe that the introduction of competitive tendering in this sector has
indirectly induced more competition and lower prices at the level of suppliers
and maintenance companies.
3.3 Can a ‘best practice’ be realised?
The potential efficiency gains calculated within this research have to be
interpreted with caution. In terms of method, one has to take into account that
a combination of best practices based on cost components could lead to an
underestimation of minimal costs as the various cost components do not have
the same definition within each company. Furthermore there can be cases of
cross-subsidisation. This would lead to an underestimation of the costs for
one modality and to an overestimation of the costs for another. In addition to
this, the companies do not always use the same method to allocate social
safety costs to tram and metro. Despite this, we can still draw the conclusion
that a substantial reduction in costs should be feasible. The question,
however, is under which condition this can be realised.
A best practice is only a benchmark to which one can compare one’s own
performances. But is this level reachable for each operator, at what term and
which parties are needed to realise the necessary conditions for this to
happen? Here are a few examples:
 A company can take steps to improve its efficiency, such as higher
productivity and lower overhead. This could involve the amendment of
house-rules and other acquired rights, which could be painful although
necessary. Practice learns that a political and administrative support from
the side of the transport authority is essential to realise this, and that
pressure from potential competition also plays an important role.
 The collective wage agreements from the municipal operators differ from
one another and from that of the regional operators. One first step would be
the realisation of a common collective wage agreement for the whole of the
urban transport sector. In due course this could lead to a common
collective wage agreement for the whole sector.
 Some issues cannot be influenced by the operator, such as the social
safety regime imposed by the municipality, the traffic management features
of the city and the priority given to public transport in urban traffic. A

8. cooperative stance from both municipalities and City Regions will be
needed for steps to be taken in this direction.
 The localisation of rail-related garages and workshops can only be modified
in the long run, needs cooperation from the municipality and could imply
high costs. Changes are much easier and cheaper in the bus sector.
Benchmarking will only truly deliver if the companies involved start to learn
from each other and discover what can be realised and at what term. This
process of learning and improving requires transparency, perseverance and a
business-like relationship between transport authorities and operators that
strikes a balance between soft and hard measures.
For the time being, tensions can be observed as the relationships between
authorities and operators are still in development. This is, e.g., clearly visible
when for the first time a fine is imposed upon an operator. Yet, successful
foreign examples show that success depends upon cooperation and ‘trusted
partnership’ where transparency, business-like behaviour, recognition of each
other’s interests and a search for win-win solutions plays a central role. A lack
of transparency leaves space for distrust and will hamper business-like
behaviour and successful partnership. Transparency is therefore an important
condition for the further development of urban transport.
4. THE DEVELOPMENT OF THE URBAN TRANSPORT
GVB, HTM, RET and GVU have implemented several operational reforms
during the past years. This was first the separation between the role of
authority and the role of operator within the municipality and then the transfer
of the role of authority from the municipality to the City Region. Together with
these reforms, cost reductions of about 10-15% were realised, and these
were needed to realise some of the budget cuts imposed by the former
government. The remaining efficiency gains were spent into an expansion of
the networks (including the maintenance of the corresponding infrastructure)
and the extension of social safety measures. The new directly awarded
concession of GVB, HTM and RET, which started in 2006, are even based
upon further decreases in costs per timetable-hour.
These cost reductions correspond to a reduction in the contribution for
operational costs by the authorities. At the same time, however, the
authorities increased their contributions for costs related to social safety. As a
result, the total authority contributions remained more or less stable, and it is
important to note that the aim of the City Regions was not to reduce its
contribution to public transport, but to achieve as good a public transport
service as possible with the available budget received from central
government.
The companies do not follow the same pace of development. HTM was
already corporatized at the beginning of the process, while RET and GVB
were only corporatized recently and GVU was even privatised. The abolition
of the divisional (metro, tram and bus) structure at GVB and RET was an
important step and the companies have announced that they have taken more

9. steps in 2006 and 2007, the effect of which should become visible in the
coming years.
At the same time we could observe that the regional transport operators have
evolved more quickly under the pressure of competitive tendering. Their
performance was already better before tendering and this difference only
increased after the tendering, despite the improvements booked by the
municipal operators. The competitive tendering of the concessions Waterland
and Zaanstreek have, e.g., led to the introduction of new rolling stock, more
supply and more revenues. Such development could not be witnessed, or not
to the same extent in the urban networks. A difference is also noticeable in
the evolution of the passenger satisfaction scores. While this has risen
throughout the whole country during the past years, it is now slightly higher in
tendered than in non-tendered areas and higher than in the large cities. The
figure below presents, schematically, the difference in development of
performance between the large cities and regional transport.
Efficiency
and quality
2000 2006
Regional operators
Municipal operator
First rounds of
competitive
tendering in
regional transport
Competitive tendering
urban areas originally
planned for 1-1-2007
?
Figure 3: Evolution of performances of urban municipal operators vs. regional
operators (Schematic representation based on team analysis)
5. CONCLUSIONS
5.1 Summary of findings
The municipal companies have achieved cost reductions in the order of
magnitude of 10 to 15% over the period 2000-2006. These improvements
were partially needed to absorb the budget cuts imposed by government. For
the rest, the gains were reinvested into network expansions and improvement
of the social safety. These cost reductions took place against a background of
reduced government subsidies for public transport operations while public
spending for social safety in public transport increased at the same time. In
total, public spending remained more or less stable and the companies
delivered more service for the same amount of subsidy.

10. The clearer separation between the role of authority and operator, together
with the transfer of the role of authority from the municipalities to the City
Regions gave a significant impulse to the creation of a more business-like,
contractual setting.
Regional transport evolved quicker than municipal urban operators in terms of
efficiency and perceived quality. Due to this, the performance gap between
municipal operators and regional operators grew even wider between 2000
and 2006, despite the improvement booked by the municipal operators. The
main causes for this difference in dynamic are the following:
 The competitive tendering calendar for the urban network was not fixed
before the beginning of 2007. This influenced the speed with which the
urban operators took measures to become more market-conform.
 The regional operators, on the contrary, were already submitted to
competitive tendering for several years. This competition forced them to
develop skills to formulate winning bids and implement measures to realise
these bids and contractual clauses.
In other words: a company will become market-conform through competition
(here through competitive tendering), not before competition. Nevertheless,
municipal operators have indeed taken several steps towards market-
conformity. Meanwhile, the scenery has changed: a motion adopted in
Parliament led to the abolition of the obligation to use competitive tendering in
the major cities. This takes away the pressure to take further steps. Without
the compulsory usage of competition, a benchmark is the only instrument left
to monitor the achievements of these companies.
5.2 Recommendations
The municipal operators could learn from each other and from the regional
operators. Increasing the productivity of the driving staff will require
addressing very touchy issues. They will, besides this, also need to address
the problems caused by the size of their overhead, the efficiency of the
maintenance, the costs for social safety and the costs of new rolling stock.
Rail rolling stock and rail infrastructure will have to be made available to
transport operators if competitive tendering is to be introduced in the urban
rail sector. The authorities will have to develop their role of ‘asset manager’
and ‘leasing company’ to realise this. This will require the measurability of
rolling stock condition and availability and maintenance needs. Furthermore,
the City Regions will need developing their skills in this domain to compensate
for the current lack of information on the costs of management and
maintenance of rail infrastructure.
For a good follow-up, it would be advisable to repeat this benchmarking
exercise every second year and to pay special attention to the management
and maintenance of rail infrastructure and to the costs of social safety. In
addition, good public transport requires a 'trusted partnership' between
authority and operator: business-like, transparent and focussed on the results,
where parties manage to take account of each other’s interests. The
contractual form will play an important role as output and revenue contracts

11. will better fit with such partnership than input and cost contracts. With the
absence of competitive tendering, trusted partnership may be the alternative
way to the further development of the transport companies in the major cities.
In other words: a swing back from the Anglo-Saxon competitive business
model to the Rhineland model that is based on co-operation.
Bibliography
inno-V (2007), Benchmark GVB, HTM, RET en GVU, inno-V (in opdracht van
het ministerie van Verkeer en Waterstaat), Amsterdam.
Twijnstra & Gudde and MuConsult (2005), Evaluatie Wp2000, Eindrapport
functionele en doelmatigheidstoets, Ministerie van Verkeer en Waterstaat,
Den Haag.