Review finds key trends for governments to consider when designing public transport service contracts

By Shannon Jenkins

Thursday February 18, 2021


A review of public transport service contracts in Australia and New Zealand has highlighted a number of key trends that decision makers will need to keep in mind when designing, negotiating and implementing service contracts.

The report, released on Thursday by the International Association of Public Transport in Australia/New Zealand (UITPANZ) and international law firm Allens, notes that while Australia and NZ leverage a variety of models of public transport service delivery, there has been a distinct trend towards opting for a franchising model in recent years.

The paper aims to inform future policy development in the transport sector by providing governments and industry participants with a comprehensive review of the range of public transport service contract models currently in use in Australia and NZ.

Drawing on information about bus, rail and ferry contracts across eight jurisdictions, it also provides resources for those directly engaged in contract development and design.

The report has highlighted a number of trends and developments that are likely to impact public transport service contracts in the future.

“Changing attitudes and preferences in relation to risk transfer, an increasing focus on contractual relief for unanticipated events (such as the current pandemic), and a continued focus on major project delivery and management of disruption are all issues of particular significance in the current environment,” the report said.

Other significant trends and developments include:

  • Redefining public transport — As consumer preferences and expectations change, public transport systems and service contracts will need to adapt.
  • Pursuing innovation and new technology — The ability for service contracts to take advantage of, retain scope for, and require service providers to pursue innovation and adopt technological advances is key.
  • Managing disruption to the network — Governments have been investing in major new transport infrastructure, and this will likely continue. This has resulted in transport authorities having to focus more attention on managing the disruption to existing transport services that these new projects bring.
  • Responding to congestion — Efforts to reduce congestion and overcrowding may be addressed by incentivising transport users through a complementary pricing system with inbuilt flexibility around time and mode of travel. A recent Infrastructure Victoria report looked at a range of network pricing options across roads, public transport and parking, designed to encourage changes in consumer behaviour.
  • Promoting sustainability — While public transport is already promoted as a more sustainable transport option, efforts to foster a sustainable environment by encouraging increased use of public transport, as well as making transport infrastructure and services greener, will have flow-on effects for public transport service contracts.
  • Leveraging and protecting data — The proliferation of data collection and utilisation is likely to have a profound impact on a number of industries, including public transport.
  • Responding to COVID-19 — The pandemic has had, and will continue to have, a significant impact on the public transport sector.

The paper argued that each of these trends will continue to have an impact on public transport service contracts and the sector more broadly.

“Governments and industry participants alike will need to be mindful of continuing developments in the sector as they consider how service contracts can be designed, negotiated and implemented in a way that achieves the multiple policy objectives of governments under a commercial and contractual model that remains attractive and sustainable for transport operators,” it said.

However, there is no single best practice model for public transport service contracts as every city and region has its own unique set of objectives and local conditions, according to Allens partner Paul Kenny.

“The optimal way forward is for each jurisdiction to approach the key design variables that make up the contracts in a way that best suits their goals and priorities,” he said.

Read more: Nudging public towards flexible work could help solve Melbourne’s transport issues, according to Infrastructure Victoria

The report is a “must-read” for policy officers, contract managers and legal advisors in the public transport industry, according to UITPANZ executive director Michelle Batsas.

“2020 was a challenging year for the public transport sector, but we must ensure public transport continues to be the backbone of how people travel around our cities if we want a future of clean air and less congestion on our roads,” she said.

“Public transport service contracts are the foundation for how governments and service providers work together to maintain high levels of performance and customer satisfaction, which are critical when it comes to getting passengers back on public transport post-pandemic.”

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