Performance Based Contract in Public Transportation: The Melbourne Experience

This chapter describes how the franchising of public transport in Victor, Australia, provides a recent example of the need for realistic expectations in regular-provider relationships. The Victorian experience suggests that competitive tendering is no substitute for a hard-nosed assessment of what is possible in terms of service delivery and service costs. Franchising in Victoria, Mark II, will look different and rely more heavily on a performance-linked negotiated outcome with existing service providers who have survived the carnage from the first round of franchising. This paper argues that, once private sector transport service providers are in place, negotiated contracts may provide the best opportunity to move closer to a social optimum in service provisions than competitively tendered contracts. The threat of tendering is always available to encourage performance compliance, but the Victorian experience is that competitive tendering can encourage excessively optimistic forecasts that are, in essence, undeliverable. The recent compelling evidence by Flyvbjerg et al., (2003) that large infrastructure projects in all sectors investigated, predominantly transportation, exhibit substantial cost overruns provides further supporting evidence to the Victorian Franchising experience. Negotiated contract may provide more substantial service outcomes, with mechanisms such as benchmarking and open book accounting practices available to assure public accountability. In a geographical area where there are multiple operators, with their own exclusive operating areas, the paper argues for government and the set of operators to agree a service development framework that includes major commitments from each side and where the emphasis is on partnering in the pursuit of service objectives. If Victorian bus operators are successful in proposing this approach, THREDBO 9 may provide an opportunity to assess progress.


  • English

Media Info

  • Media Type: Print
  • Features: Figures; References;
  • Pagination: pp 155-176
  • Monograph Title: Competition and Ownership in Land Passenger Transport

Subject/Index Terms

Filing Info

  • Accession Number: 01003344
  • Record Type: Publication
  • ISBN: 0080445802
  • Files: TRIS
  • Created Date: Dec 23 2005 8:20AM