London bus public transportation


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London bus public transportation

  1. 1. Project on London Bussuccess storyPrepared by: Neeraj MandloiSupervised by: Dr. Martin LodgeCourse: 15th Chevening Gurukul Program 2012
  2. 2. London Bus : A Success Story… A study of the evolution of The London Bus tendering system and role of various Governmental organs with a special focus on the unique features of the current system of tenderingLeading to overall improvement in various performance parameters. 2
  3. 3. London Buses: Some Facts- I 2.5 Billion 500 Million Kilometers of total travel 500 Million Kilometers of total travelPassenger trips per year for these passengers for these passengers Total Number of Buses Approx. 7000 Passengers per Day Over 6 Million per day Operating Routes 748 ( and growing) 3
  4. 4. London Buses: Some Facts-II Like Most Public Transport systems,it is not a commercially viable activity YEAR Annual Government Subsidy 2000 £ 41 million 2004 £560 Million 2011 £690 Million £414 milion (40% reduction 2018 Planned) 4
  5. 5. A Chequred path towards creation of outstanding organs 1970 The London Public transport Board was 1933 reorganized into a London’s Public transport new organization was brought together forthe first time under London called London Public Transport Board Transport (LT). (LPTB). 5
  6. 6. A Chequred path towards creation of outstanding organs 1986 All the bus services outside London were deregulated, 1984 meaning any licensed operator could, on his ownThe London Regional transport act was passed which set up initiative, run any route at a subsidiary companies to run schedule of his choice.buses. This subsidiary company However, the Bus system was called London Buses within London remained Limited (LBL). reregulated. 6
  7. 7. A Chequred path towards creation of outstanding organs 1999 Greater London Authority Act (GLA Act) was 1992 passed which led to the LBL was still operating about replacement of London 60% of routes through its 13 subsidiary companies where Transport (LT) with theeach was a profit center in itself now popular Transportwhile the private operators were for London (TfL) authority running about 40% of routes in 2000. 7
  8. 8. Transport For London (TFL)Transport for London (TfL) ismandated toa) Plan,b) Procurec) Managethe public transport system inLondon. The GLA act provides forpromoting fair and sustainedcompetition for the same. 8
  9. 9. Transport For London (TFL)TfL has a specialized arm called London Bus Limited (LBL) to look after the bus transport in general and the following aspects in particular;Plan RoutesSpecify service levelsMonitor service qualityDevelop and maintain bus stop infrastructureConceive , execute and run the tendering system 9
  10. 10. A balance of Beaurocrats, Civil Society and People’s representativesLondon Assembly: Elected reps.Greater London Authority: Mayor (Chair pereson) and 25 elected London Assembly RepsTravel for London (TFL): Mayor (Chair person) and professionals and experts headed by Commissioner.London Travel Watch (LTW): A civil Society funded and supported by London assembly but independent. 10
  11. 11. London Buses: Evolution of Privatization 1985-1995Gross cost contracts. This meant that the authority was taking the entire risk and private operators were given payments for the tendered amount to run bus services as per the service level agreements.Positives:A good first step.Built Confidence.Built Capacities.Negatives:No incentive to perform better.Lack of modern IT systems.Accounting of revenue. 11
  12. 12. London Buses: Evolution of Privatization 1995-2000Net cost contracts. The net subsidy regime requires operators to estimate the difference between operating costs and revenues and bid accordingly. This was not subject to competition and the entire ticket revenue was retained by LBL.Positives:Incentive to improve revenueShift of partial risk on operatorFurther capacity buildingNegatives:Not tendered but negotiatedFor LBL subsidies, it was block grant. 12
  13. 13. London Buses: Evolution of Privatization 2000 onwardsFinally, in 2000, TfL, armed with the new mandate under the act, went for the most innovative and successful Quality Incentive Contracts (QIC).In the present reference, it is important to define tendering as: The allocation [by government agency] of a protected or exclusive right to exploit or carry out an activity” such that “consumers or the public gain an advantage . (Baldwin and Cave, 1999) 13
  14. 14. QUALITY INCENTIVE CONTRACTS: UNIQUE FEATURES-I Contracts provide incentives to operators to improve quality. Routes, although tendered individually, are clubbed in clusters to help operators develop bases and strengths in preferred localities. The initial period of contract if five years with an incentive extension of two years. Each year, about 20% of routes are tendered so at any given time, TfL has all variations of lengths of contracts running and provides a unique and continuous nature of activity by introduction of new contracts every year. 14
  15. 15. QUALITY INCENTIVE CONTRACTS: UNIQUE FEATURES-II There is an elaborate system of prequalification of potential Tenders are evaluated first on viability and non workable rates are rejected thereby eliminating any possibility of compulsive undercutting by the contractor. Primary financial evaluation is on the basis of mileage operated and overall service parameters offered. 15
  16. 16. QUALITY INCENTIVE CONTRACTS: UNIQUE FEATURES-III Service parameters mainly include frequency and timings. Safety is usually not an evaluation criteria because it is non negotiable and has a zero tolerance policy. LBSL complies with the EU procurement directives for transparency and fair competition which are the world standard in public procurement. 16
  17. 17. QUALITY INCENTIVE CONTRACTS: UNIQUE FEATURES-IVPayment procedure and deductionsLBSL operates a 4 week accounting cycle. 75% of thecontracted amount is paid by LBSL at the end of 4 th weekwithout any questions asked as long as the operator isrunning buses.The remaining calculation of incentives or deductions isdone within next 4 weeks based on the data and recordsand the balance payment is made within that time frame. 17
  18. 18. QUALITY INCENTIVE CONTRACTS: UNIQUE FEATURES-VClear demarcation of responsibilitiesA clear division of responsibilities between LBSL and theprivate operator is another feature, which has beeninstrumental in cementing a lasting relationship.An outstanding example of single window serviceLBSL has also taken the task to coordinate with anygovernment or public authority regarding anything to dowith London Buses, thereby protecting the privateoperators to individually pursue their cases with otherpublic authorities. 18
  19. 19. QUALITY INCENTIVE CONTRACTS: UNIQUE FEATURES-VIMatter of Faith in Partnership:The overall concept of putting faith on the private operator and treatinghim as a partner rather than a contractor who has to deliver and thegovernment only has to monitor.Examples:Clear shouldering of responsibilities of coordination with publicauthoritiesTfL supports and maintains an entire transport operationalcommand unit, which is a dedicated team of metropolitan Policeforce to deal with any enforcement or crime/accident relatedissues.TfL supports and maintains an efficient ambulance and medicalassistance service systemThe trust is also evident in the deductions clause of contract. 19
  20. 20. QUALITY INCENTIVES-I Quality Incentives:The Quality Incentive provisions of the Contracts havetwo parts of financial incentive to the private operator.The first part remains his main bid amount whichcovers primary performance monitoring systems. Theseare;Mileage operated.Reliability (Adherence to agreed schedule). 20
  21. 21. QUALITY INCENTIVES-IIThe second part of the incentive payment is based on the extra performancedelivered by the private operator over and above the minimum performancenorms. These are;Driving Quality :This program is build on Mystery Traveller surveys deployed by LBSL andbased on the objectively monitored criteria, the driving quality is assessed on anumerical scale.Vehicle Quality Monitoring:This program is based on pre announced as well as surprise inspection ofvehicles and takes into account the corrective and preventive maintenanceprocedures adapted by the operators.Customer Satisfaction:The three London Buses customer satisfaction surveys (CSS) done annuallygive marks to the operators and the incentive is linked to the performance. 21
  22. 22. QUALITY INCENTIVES-IIICurrently, the private operators generate 70% to 80% of their revenues through the routine performance and 20% to 30% through incentive payments. 22
  23. 23. Conclusions and Lessons for IndiaFROM: 23
  24. 24. Lessons for India 24
  25. 25. London Bus : A Success Story… Lessons for India-IIt is vital for the authority to maintainworkable rates for tenders and reject anybids that seem to be unviable right at thebeginning. 25
  26. 26. London Bus : A Success Story… Lessons for India-II The service to be supplied must be specified, at least in part, in advance. Less precise specification leads to difficult implementation issues giving rise to complaints and disputes. Ideally, revenue risks should be shared between the authority and the operators. It must be possible to monitor the performance of the operators at reasonable cost. 26
  27. 27. London Bus : A Success Story… Lessons for India-III A continuing program of letting tenders, as in London’s method of basically tendering approx. 20% of the network each year seems sound. Smaller tenders are to be preferred to bigger tenders except when there is the possibility of packaging tenders into joint bids. Capacity building needs to be done on both sides, the public authority as well as private operators. This does not happen overnight 27
  28. 28. London Bus : A Success Story… Lessons for India-IV As in any democratic system, there shall be turf war between people’s representatives and technocrats/experts regarding decision making processes. More so in case of public transport because the decisions affect citizens directly and involve big sums of money. London has shown a way to create systems and organisations to handle this in a mature manner. 28
  29. 29. London Bus : A Success Story… Thank You 29