The Missing Link in Contract Performance Assessment: The Integration of a Service Quality Index into a Competitive Tendering Regime

Abstract

Over the last two decades the bus industry in many countries has been involved in a process of economic deregulation, competitive regulation and privatisation. Among the different policy practices designed to increase competition, competitive tendering represents a widespread policy intervention. Although there is extensive acceptance of competitive tendering, the focus has been on cost efficiency and cost effectiveness designed to identify the mix of inputs used to produce a given level of output at the lowest cost, where output is produced services (eg vehicle kilometres) on the efficiency measure and consumed services (eg passenger kilometres) on the effectiveness measure. Regulators have been singularly unsuccessful in developing a robust specification of service quality levels, and have come into criticism that the focus of economic reform has concentrated too much on saving money at the expense of preservation and enhancement of service levels. The definition of service level has tended to ignore the quality of service, limiting the specification of a predetermined level of service to simple physical measures such as vehicle kilometres and passengers carried. In this paper we develop a method of filling in the missing link in the specification of contract performance - service effectiveness - which measures the effectiveness of a service in satisfying passengers.