Performance Based Contracts

Abstract

The 90s saw a noticeable growth in the use of competitive tendering as a way of selecting bus operators to deliver a range of services that had previously been supplied by governments, mainly driven by pressures to reduce the budget cost impact of service provision. The focus was typically on minimising costs to government (under the label of cost efficiency), rather than on delivering specific service quality outcomes. Negotiated performance-based contracts (PBCs) have emerged in recent years as an alternative to competitive tendering (CT) in its various guises (including tendered PBCs) as a framework within which the broader economics and social outcomes have moved to centre stage under the labels of value for money and maximising the benefits of government subsidy to society as a whole. This paper, a report from the 8th International Conference on Competition and Ownership of Land Passenger Transport held in Rio de Janeiro in September 2003, details the relative merits of negotiated and tendered PBCs, highlighting the context within which each type of PBC is best positioned to service the broader gaols of public transport policy.