Public Bus Service Contracting: A Critical Review and Future Research Opportunities

Abstract

This paper reviews the studies on public bus service contracting over the past three decades. With a bibliometric approach, the impactful clusters of studies and research focus are identified and visualized separately. Key papers on measuring bus service quality, assessing the efficiency impacts of contract features, comparing competitive tendering with negotiation are discussed. Studies on incentive issues and alternative contract awarding mechanisms are reviewed separately in a structured manner, allowing us to extract the representative modeling frameworks and summarize the major policy implications. The survey paper would be a quick and self-contained reference to both scholars and policymakers who are interested in either modeling or evaluating bus service contracting. It is found that (i) the empirical results are mixed in terms of the impacts of incentives. Given the varying conditions of transit markets from different jurisdictions, policymakers should be cautious about the potential and the adverse impacts of incentive schemes; (ii) many research opportunities revolve around incentive contract design where the classical principal-agent framework and the optimization theory could play an important role from different perspectives; (iii) the competence and integrity of the transit authority matters in the choice of competitive tendering and negotiation. Irrespective of the awarding mechanisms, however, building trusting partnerships between the transit authority and operators is always beneficial; (iv) very few studies have investigated how contract features and managerial practices can affect bus service quality. A large variety of methods, including the discrete choice and the leader-follower framework, can be used to model the evolution of service quality perceived by riders. This can in turn promote the development of the scare but growing literature on assessing the impacts of contract awarding mechanisms on riders’ satisfaction.