Training on strategic, technical, financial and legal aspects of bus procurement. London, December 2017.

1. UITP
BUS PROCUREMENT
Eric Trel
London, 4-6 December 2017

2. CONTENTS
Modules
1. Bus market & procurement strategy
2. Business model & financing
3. Tender procedure & documents
4. Tender evaluation & contracting
UITP2

3. CONTENTS
Modules
1. Bus market & procurement strategy
2. Business model & financing
3. Tender procedure & documents
4. Tender evaluation & contracting
UITP2

4. CONTENTS
Modules
1. Bus market & procurement strategy
2. Business model & financing
3. Tender procedure & documents
4. Tender evaluation & contracting
UITP2

5. WHAT DOES THE MARKET OFFER?
UITP5

6. TRENDS
Cleaner buses
• Low emission diesel, hybrid,
electric
UITP6
BRT Istanbul
Low-floor, articulated buses
• High capacity
• Accessible to wheelchairs,
people with prams, luggage
Intelligent Transport Systems
• Smart ticketing
• Passenger information
• Operation management
• Traffic management
Transit Oriented Development
• Steer demand and supply

7. ENVIRONMENT
UITP7
Carbon footprint
• Depends on energy source.
• Is electricity generated by
windmills or coal power
plant?
Shenzhen, China, 8am, Feb 2017
Clean air
• EU aims at zero local emission.
• Netherlands: all buses in urban
and regional public transport
will be electric by 2025.
• Shenzhen replaced his entire
fleet by 6000 battery buses.

8. FUEL CONSUMPTION
UITP8
SORT = Standardised On-
Road Test Cycles for
measuring Fuel
Consumption
Afternoon: presentation by
Prof. Dr. Ralph Pütz
SORT is also used in
evaluation criteria
(module 4)

9. BATTERY BUS SYSTEMS
UITP9
Second generation
• Depot charging
combined with
‘opportunity charging’ at
terminals during the day
• Battery technology
progresses
Opportunity charging
Shenzhen, China
First generation (> 2006)
• Charging at night in the
depot
• Batteries are heavy and
expensive

10. BATTERY BUS SYSTEMS
UITP10
The battery bus is a game changer …
• Higher investment costs in fleet and infrastructure
• Lower cost of operation and maintenance
• Battery renewal (or upgrade) after X years
• Potentially a longer life time
• Need to adjust workshops and train mechanics
• Charging infrastructure requires permits and may
require land acquisition
… and transition will take years

11. ON-BOARD SYSTEMS
Systems
• Operation management
• Smart ticketing
• Passenger information
• Traffic signalling priority
• Communication (data, voice)
• Climate control
UITP11
Installation
• Cables: by bus supplier
• Systems: by systems
supplier, preferably in the
bus suppliers factory
• Both parties need to
cooperate

12. PRIZE & EMISSIONS
UITP12
High
Low/No
Low High
LOCAL
EMISSIONS
PURCHASE PRIZE
HybridsHybrids
Diesel
Battery
Gas
Trolley

13. PRIZE & QUALITY
UITP13
High
Low
Low High
QUALITY
ASIA
CEE
WEST
PURCHASE PRIZE

14. TOMORROW
UITP14
• Buses with hybrid propulsion in London
by Jeremy Marshall & Linda Crabtree
• Buses with gas propulsion in Paris
by François Vauxion & Philippe Jouette
• Electric buses in Nottingham
by Steve Cornes
• Life cycle and total cost of ownership
by Matthew Greener

15. BUS CONCEPT: CHOICES TO MAKE
UITP15
Configuration
Length: 12m, 18m articulated, 24m bi-articulated
Vehicle height: single or double deck
Floor height: low floor, low entry, or high floor
Entries: number of doors and door width
Arrangement: seats, buggies, wheelchair, luggage
Propulsion Diesel, gas, hybrid, electric (battery, trolley)
On-board systems Ticketing, information, fleet & traffic control
Economic lifetime 10, 12 or 15 years
Custom Off-the-shelve or customised
Marketing Comfort and looks

16. PROCUREMENT STRATEGY
1. Scope: what is included in the delivery?
2. Priorities: quality or price?
3. Market: where to find the suppliers?
4. Procurement model: how to procure? tender?
5. Preparation
6. Time schedule
UITP16

17. SCOPE OF BUS PROCUREMENT
What is to be included in the delivery:
• Buses
• On-board systems?
• Warranty 1-2 year?
• Maintenance?
• Training of drivers, mechanics?
UITP17
Considerations:
• In general, it’s advisable to include on-board systems in
the purchase or have them installed in the bus
manufactory.
• In general, most failures occur in the first 1-2 years.
• Spare part availability should be guaranteed for the
vehicle’s lifetime. No need to buy them in advance.

18. PRIORITIES AND TENDER
UITP18
Priorities:
• Available budget
• Reliability or innovation?
• Standard or customised?
Tendering options:
• Best price for specified delivery
• Best value for available budget
• Best price for specified minimum + options
• Most Economically Advantageous Tender (MEAT)
Reason for procurement:
• Replacement
• Extension of the services
• New system (e.g. Riyadh)

19. MARKET
Where to find suppliers:
• Diesel and hybrid buses: world-wide
• Electric buses: mainly China, also Europe and USA
• High-floor and low-entry: world-wide
Low-floor: mainly Europe and USA
• Systems: world-wide
• Visit exhibitions
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Considerations:
• Regional markets
• Distribution of spare parts
• Bus supplier’s maintenance facilities (if needed)
• Systems already in use
• Innovation

20. PROCUREMENT MODEL
UITP20
1. Business model: who owns, procures and finances
the fleet? (module 2)
2. In case of public procurement: competitive
tendering (module 3)
3. Procurement packages:
• On-board systems:
• Option A: separate tenders + mutual obligation
to cooperate
• Option B: include specifications in bus tender
(e.g. in case of systems already in use)
• Diesel and battery buses: consider different tenders

21. PREPARATION
UITP21
LegalLegal CommercialCommercial
TechnicalTechnical
Required expertise (buyer) Consultations
• Politicians
• Consumers
• Drivers
• Mechanics
• Management
• Suppliers
Specification
• What to specify
• How to specify
(module 3)

22. TIME SCHEDULE
Include in the time
schedule:
• Procurement strategy
and scope
• Preparation of tender
documents
• Consultations!
• Tender procedure
• Award approval
• Contracting
• Delivery schedule
• Acceptance tests
UITP22
And, if applicable:
• Infrastructure and
permits for gas
stations, charging, …
• Prototype testing and
adjustments
• Homologation

23. TIME SCHEDULE
Example Months
UITP23
• Procurement strategy, scope, preparation of
tender documents and consultations 6-12
• Tender procedure and award approval 6-8
• Contracting 1-2
• Delivery schedule incl. acceptance tests 7-10
• Total 20-32
Advice:
• Make a realistic time schedule, start in time
• Manage expectations of politicians
• Build in reserve time for the unexpected
(and keep it to yourself)

24. EXERCISE 1
In groups, presentation on flip-over
UITP24
Case
• City of 500,000 inhabitants
• Public operator with 300 city buses
• To be replaced: 100 buses
• Discussion: diesel or hybrid?
• To be decided by the city council
Questions
1. How do you prepare for discussion making
2. Whom do you consult?
3. What information do you need?

25. UITP
MODULE 2
BUSINESS MODEL &
FINANCING

26. WHO DOES WHAT?
Parties:
• Transport Authority
• Operator
(in-house or private)
• Bus Supplier
• Bank
UITP26
Roles:
• Fleet ownership
• Financing
• Operation
• Maintenance
Keep in mind:
• Roles in bus procurement are strongly related to
how the bus services are contracted.

27. OVERVIEW BUSINESS MODELS
Transport
Authority
In-house
operator
Private
operator
Bus
supplier
Bank
11
Owner
Financing
Operation
Maintenance
22
Owner/Lessor
Financing
Operation
Maintenance
33
Owner Financing
Operation
Maintenance
44
Owner/Lessor FinancingOperation
Maintenance
55
Operation
Maintenance
Owner/Lessor Financing

28. BUSINESS MODEL 1
Transport
Authority
In-house
operator
Private
operator
Bus
supplier
Bank
11
Owner
Financing
Operation
Maintenance
PUBLIC OWNERSHIP
• Common model in case of an in-house operator.
• Examples: France, Germany, Switzerland
• Procurement: bound to procurement legislation
• Financing: interest lower than commercial credit
• Variation: the fleet may be at the balance sheet of
the operator.
UITP28

29. BUSINESS MODEL 2
Transport
Authority
In-house
operator
Private
operator
Bus
supplier
Bank
22
Owner
Financing
Operation
Maintenance
PUBLIC LEASE
• The authority owns the fleet and operation is
carried out by a private operator.
• Operator has a ‘management contract’.
• Example: France, …
• Procurement: bound to procurement legislation.
• Financing: interest lower than commercial credit.
• Fleet owner carries out annual inspections.
UITP29

30. BUSINESS MODEL 3
Transport
Authority
In-house
operator
Private
operator
Bus
supplier
Bank
33
Owner Financing
Operation
Maintenance
PRIVATE OWNERSHIP
• The operator owns, operates and maintains the
fleet. For a private operator, this is most common
and ‘natural’ model. He knows what to buy.
• Examples: UK, Netherlands, Scandinavia
• Procurement: operator negotiates with suppliers.
• Financing: the operator takes a commercial loan.
• Works best if concession period = fleet life time.
UITP30

31. BUSINESS MODEL 4
Transport
Authority
In-house
operator
Private
operator
Bus
supplier
Bank
44
Owner/Lessor FinancingOperation
Maintenance
PRIVATE LEASE:
• Variation on model 3.
• The bus supplier leases the fleet to the operator.
• Procurement: operator negotiates with suppliers.
• Financing: the bus supplier takes a commercial
loan (or uses his own capital).
UITP31

32. BUSINESS MODEL 5
Transport
Authority
In-house
operator
Private
operator
Bus
supplier
Bank
55
Operation
Maintenance
Owner/Lessor Financing
FULL OPERATIONAL LEASE
• As in model 4:
• The bus supplier leases the fleet to the operator.
• Procurement: operator negotiates with suppliers.
• Financing: the bus supplier takes a commercial
loan (or uses his own capital).
• In addition, the bus supplier also maintains the
fleet.
UITP32

33. REGIONAL POLICIES
Options:
• Open market with competitive tendering (e.g. EU)
• Local preference: job generation included in
evaluation criteria
• Local share: x% of the value shall be produced in
own country (e.g. Buy America Act in USA)
• …
UITP33

34. PRICE AND RISK ALLOCATION
Risk allocation
• Principle: allocate each risk to the party that can
best manage the risk.
• Maximum risk avoidance can be costly.
• Risk = failure x chance of occurrence.
• Focus on realistic risks and economic
optimum.
Aspects that may drive up the price
• Extras
• Changes for the standard model
• Extended guarantees and associated penalties
• Longer warrantee period
UITP34

35. PRICE DETAILS
• Contract price
• Purchase of fleet and systems
• Warranty period
• If applicable: maintenance services, training
• VAT
• Public authorities (and public operators) may be
exempt from VAT. But VAT must be paid …
• Solution: set up an operating company or asset
holding company.
• Import duties
• May vary from 0 to 100%!
• Transport costs
• From factory to departure port to arrival port to
operator.
UITP35

36. EXERCISE 2
In groups, presentation on flip-over
UITP36
Case
• City of 500,000 inhabitants.
• Private operator with 300 diesel buses.
• Purchase: city wants 10 battery buses for a pilot.
Questions
1. What business model do you choose and why?
2. What are the main risks and how to mitigate?

37. UITP
MODULE 3
TENDER PROCEDURE &
DOCUMENTS

38. TENDERING
Module 3:
• Consultation
• Tender documents
• Tender procedure
• Specification
Module 4:
• Evaluation criteria
• Contracting
UITP38

39. CONSULTATION BY THE BUYER
UITP39
Consult stakeholders:
• Politicians
• Consumer organisations
Market consultation of suppliers
Consult operator staff:
• Drivers: driving characteristics,
labour conditions
• Mechanics: maintainability
• Commercial experts:
knowledge of the market
• Legal experts: procurement
• Management

40. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

41. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

42. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

43. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

44. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

45. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

46. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

47. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

48. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

49. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

50. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

51. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

52. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

53. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

54. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

55. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

56. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

57. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

58. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

59. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

60. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

61. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

62. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

63. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

64. UITP
MODULE 1
BUS MARKET &
PROCUREMENT STRATEGY

65. SOURCES
• UITP, Tender Structure Platform Recommendations, 2004, 2009, 2014
(for ANNEX)
• ANNEX 1: Glossary of terms
• ANNEX II: Vehicle Availability / Unavailability
• ANNEX III: Legal requirements and standards (Internet sources)
• ANNEX IV:Main business models for competitive tendering in
buses (schema)
• ANNEX V: Repetitive Failures
• ANNEX VI:Environmental LCC calculations (Version April 2014 VEI
Budapest approved)
• UITP, Functional specification handbook, 2006
• UITP Tender Structure for tendering of buses and related services.
• UITP, The mechanics of Organising Authorities. Competences
(responsibilities); Allocation and tasks; Service contracts, 2015
• UITP, SORT fuel consumption, 2004, 2009, 2014 (incl. hybrid buses)
• UITP, SORT addendums Double Deck, SORT GAS, 2015
• EU Directive Clean Road Vehicles 2009/33/EC, 2009
• APTA Standard Bus Procurement Guidelines RFP, 2010
UITP65

66. EXERCISE 4
In groups, presentation on flip-over
UITP66
Case
• You buy a private car (from your own money).
• Unfortunately, new regulations oblige you to tender.
Questions
1. What are the qualification criteria? (max. 3)
2. What are the evaluation criteria? (max. 5)