The Government first announced that it was to implement the new rail refinancing framework and buy over SMRT’s rail assets. Yesterday, they went a level higher and announced that they were going to purchase all bus operating assets and infrastructure (minus the roads of course, because, well…you know why), and contract out the bus services
Why Is This Happening?
This announcement comes at a time not too long after recent fare hikes and a long standing dissatisfaction with the reliability levels of public transport.
This new contract-based model is meant to generate greater competition within the public transport industry, which should hypothetically lead to higher service standards and all the other bright and beautiful things that are clearly not happening right now.
Cynicism aside, the Land Transport Authority (LTA) has studied the implementation of this model in other places such as London and Australia and has observed improvements to the bus systems as a whole. One other obvious upside is the scalability in terms of number of buses that can provide different services e.g. short distance vs long distance trips.
How Does The Bus Contracting Model Work?
The new contracting model works on a package basis, with each package consisting of a set of routes. There are 12 packages in total, with each package consisting of a contract for 300-500 buses.
As a start, between 2014-2015, 3 packages will be tendered out and these 3 packages will consist of approximately 20% of all the routes. The starting tender will be open to both the incumbents as well as new local and foreign operators. The remaining 9 packages will be run by the incumbent operators on negotiated contracts for a duration of about 5 years. Once the contracts expire, more services will be slowly tendered out.
What SHOULD Happen?
By now, some of you may be thinking what I was thinking as well, which is this – if the Government is purchasing all these assets, whose money are they using to purchase it? And so bus operators no longer have to bear overhead costs?
And if that’s the case, then shouldn’t fares go down? The previous announcement regarding the new rail refinancing framework already sounded dodgy to begin with (see “New rail financing framework may lead to smaller fare increases, say analysts”).
Smaller fare increases?
If operators no longer have to bear the cost for the assets and the infrastructure (let’s not forget that to a certain extent, we are now bearing that cost), and they are being contracted for work and the Government retains the fare revenue, then there are really very few reasons you should accept for not paying less for public transport.
The other aspect of this restructuring (which you will probably see a lot more than any mention of fares) is the ability to respond to changing ridership and commuting needs and improve bus service standards.
Sure. Don’t mind me, but I’ll believe it when it happens.