Competitive Tendering of Railway Services in Sweden Extent and Effects 1989-1999

Abstract

In 1988 the vertical separation of the Swedish State Railways into one train operator (SJ) and one infrastructure holder (Banverket) was implemented. Together with the transfer of responsibility for the regional non-profitable passenger railway services to regional transport authorities, this reform paved the way for the introduction of competitive tendering for these services. Initially, only one new firm entered, but through subsequent tenders this figure has increased to four. Since 1992 it has also been possible for the state’s negotiator to procure the non-profitable interregional services by means of tendering. For several years no actual entry occurred on this part of the market, partly due to more demanding conditions compared to other tenders. However, following the outcome of the latest tenders, new entry is set to take place in January 2000. Consequently, what started as a very slow walk towards more competition in the railway sector has taken us to a point where SJ is facing actual competition on almost all parts of the market. In addition to discussing the new entrants, the different types of tenders are compared in some detail in the paper. Some empirical data on the number of bidders, cost reductions, innovations and travelling changes related to tenders is presented and interpreted. The development of the behaviour of SJ and its competitors is also discussed, as well as the further impact upon transport policy.