Competitive Tendering for Bus Services: The Improved Adelaide Model

In 1994 the Government of South Australia initiated a process to contract out scheduled bus servicesin metropolitan Adelaide. The services, which currently involve use of about 760 buses that carry 47million passengers per year in a service area of 880 square kilometres, had been operated by aGovernment organisation. Services were contracted out primarily on an areas basis, with ten area andfour route contracts. By 1996 two contracts had been awarded to a private operator and three to theGovernment operator following two rounds of competitive tendering. Remaining services wereprovided by the Government operator through negotiated contracts.A review of the bus contracting system was undertaken in 1998, and features of the system modified,including a reduction in the number of contracts to six area and one route contract. All seven contractswere subsequently competitively tendered and won by private operators: the new contractscommenced in April 2000. The refinements to the Adelaide M odel secured greater interest fromindustry and keener pricing, which resulted in substantial cost savings.In developing the revised model, particular attention was paid to supplier market considerations. Thisincluded the division of responsibilities for service planning between the tendering authority andoperators, and incentive structures to align operator objectives with Government goals in relation toservice level, service quality and patronage. A number of other aspects of the former model were alsorevised. The paper also summarises the impacts of the overall competitive tendering process on costs,services and patronage. It draws out lessons learned that may be applicable to other authoritiescontemplating competitive tendering of public transport services.