Demand and service impacts of competition for the market - Australian urban bus case studies

In the urban bus sector, the international literature on the effects of competition for the market (through competitive tendering) has focused mainly on the resulting efficiency gains and public sector cost savings. Relatively little attention has been paid to the effects of the competitive environment on the quantity, quality and customer focus of the services provided and on the resultant patronage impacts. This paper contributes to addressing this knowledge gap, focussing on assessment of the service and demand-side effects of introducing competitive tendering for bus services in two Australian metropolitan areas - Adelaide and Perth. In both areas, a government monopoly operator was replaced (in the late 1990s) by competitively-tendered gross cost (area) contracts with operator incentives to enhance service quality and increase patronage. The following aspects of experience with these contracts are addressed: Contract design aspects, focussing on performance standards and operator incentives, and their effectiveness in influencing the quantity, quality and customer focus of the services provided, leading to increases in patronage. Roles and responsibilities of the public authorities and operators relating to these aspects. Views of operators and authorities on the effectiveness of the contract incentives in 'driving' service enhancements and patronage increases. (C) 2016 Elsevier Ltd. All rights reserved.