Melbourne’s Public Transport Franchising: Lessons for PPPs

Abstract

The paper reviews the recent franchising of public transport services in Melbourne, Australia, to assess the extent to which the objectives of the franchising were achieved. The major franchisee has failed only a short time into the franchise period. Some financial benefits from franchising have been realised, largely at the expense of franchisee shareholders. These savings are not sustainable. Some aspects of service delivery have improved. Overall, however, franchising has fallen well short of government expectations. The paper asks what can be learnt from this experience to improve future public/private partnerships in public transport. It is critical of the franchising process, in terms of unrealistic expectations and an insufficiently critical acceptance of competitive tendering to deliver outcomes. Changes in the nature of the relationship between the regulator and service provider are proposed, to incorporate a stronger planning focus, closer partnership basis and a greater reliance on negotiated contracts, along lines used in some infrastructure PPPs.