When public contracts work

TRANSIT takes note of this article from Melbourne, Australia that explains how the government has stripped a public transport operator for failing to meet the expectations of its contract.

We post this article as an example of how privatization of public transport should work – with the government firmly in control, competition for contracts, and with feedback from passengers being critical to the success or failure of a company.

New train, tram operators for Melbourne
Clay Lucas and Mex Cooper
June 25, 2009 – 11:13AM

Connex has been stripped of its contract to operate Melbourne’s train system, with Hong Kong-backed company Metro Trains Melbourne to take its place.

The city’s trams will also have a new operator with Keolis Downer EDI ousting the incumbent Yarra Trams as the government’s preferred tenderer.

The fresh contracts will begin in December, with the new operators offered an initial eight-year term, with an option to extend for a further seven years.

The decision to oust Connex is likely to be warmly greeted by train passengers who have become increasingly infuriated with late, overcrowded and cancelled services across the network.

May was the fifth month in a row that Melbourne trains did not meet punctuality targets with almost one in 10 failing to arrive at their destination on time.

Connex this year had $11 million wiped from its revenue by the Government after 2.8 per cent of all train services were cancelled in the first months of the year.

MTM is a joint venture between Hong Kong’s MTR Corporation Ltd, Australian companies John Holland Melbourne Rail Franchise Pty Ltd and United Group Rail Services Ltd. MTR also operates the London Overground rail service.

The new contract will include a customer service regime, offering incentives for MTM to improve customer service announcements, cleanliness, graffiti removal and increased personal safety on the rail network.

The contract will also include a 50 per cent increase in funding for rail maintenance.

Announcing the tender winners this morning, Premier John Brumby said MTM had a proven track record of operating metropolitan train networks, achieving 99 per cent reliability on Hong Kong’s mass transit system.

The new operator would bring “significant change” to Melbourne’s transport network, he told reporters.

Asked if the decision was a condemnation of Connex, Mr Brumby said it “wasn’t helpful to look back”, but he admitted there were elements of Connex’s performance that “obviously could have been improved”.

He said the final cost of the contracts had yet to be decided, although he believed the winning bids represented value for money.

The tender decision had been based on reliability, punctuality, cleanliness, safety and cost, he said.

Public Transport Minister Lynne Kosky, a regular target of commuter fury, said MTM would deliver improved reliability and fewer cancellations for Melbourne’s train passengers.

She said the change in operators would not affect current train and tram employees, who would be transferred to the new companies.

The government is yet to release the new names or livery for the city’s train and tram networks.

Keolis Downer EDI (KDR), a consortium made up French firm Keolis and Australian maintenance provider Downer EDI, will also be offered an eight-year term with an option for a further seven years to run Melbourne’s trams.

Mr Brumby said KDR’s bid showed it was committed to customer service, including a greater focus on staff training and providing more timely and accurate information to passengers.

“Our trams are an iconic symbol of our city and KDR has proven strategies to improve services, reduce cancellations and increase maintenance. KDR operates four tram networks in France,” he said.

TRANSIT Says:

It should be clear from this article that this is how public transport ought to operate. Companies compete for tendered contracts to operate the service. If the company successfully meets expectations they have the option of a contract extension. If the company does not meet expectations they may not have their contract extended – or may see it being terminated early.

We also have some other observations from the article:

  1. That there is a clear focus on customer service built into the tendering process and the contract.
  2. That customer feedback is vital to the success or failure of a company
  3. That the competition can include local and foreign companies.  Connex Melbourne is part of Veolia Transport, an international public transport operator, and according to this article, they even invited SMRT Corporation from Singapore to help them win back the contract.

TRANSIT can only hope that the Malaysian government will soon realize that there is an excellent model for public transport service staring them in the face.  It allows privatization, competition and quality, without all the nastiness and confusion and chaos of the current “entrepreneurial” public transport system.

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