Channel NewsAsia

LTA to contract out public bus services in second half of 2014

Authority will control service provision and infrastructure to respond quicker to industry changes and promote greater competition and efficiency among operators.

SINGAPORE: The local bus industry will undergo an overhaul after the Government announced on Wednesday (May 21) it will go with a “government contracting model” starting from the second half of this year. Actual implementation will only take place in 2016.

The Land Transport Authority (LTA) said in a statement that the existing Bus Service Operating Licences (BSOL) for the two public bus operators – SMRT Buses and SBS Transit – will expire on Aug 31, 2016.

How the agency intends to restructure the industry: Bus operators will bid for the right to operate the services, based on the routes and service standards laid out by the LTA, which will pay the operators. Fare revenue will be retained by the Government, it added.

All bus infrastructure such as bus depots, as well as operating assets such as buses and existing fleet management system will be owned by the Government, too. This will lower the entry barriers and attract more bus operators, and ensure the transition from incumbent to any new operator will be smooth, the LTA said.

“Besides strengthening the Government’s ability to respond more expeditiously to changes in travel demand and service level expectations, bus contracting will also promote greater competition and efficiency among operators as they now have to compete for the right to run the services," the LTA said. 

"This in turn will lead over time to provision of better bus services in a cost-competitive manner, thereby benefitting commuters."

Commuters can expect to experience shorter intervals between buses during peak periods in the morning and evening once the government contracting model is in operation. The LTA said it expects the interval to be no more than 15 minutes for 100 per cent of all bus services during these periods, with intervals of no more than 10 minutes for half the routes.

By comparison, bus operators are expected to ensure bus intervals are no more than 20 minutes during peak periods under the existing Bus Service Enhancement Programme introduced in 2012.

Gradual changes to come

LTA has been experimenting with the government contracting model since last year via the City Direct Services and Peak Period Short Services. The agency said that competitive tendering for public bus services will be introduced in phases over several years to ensure a smooth transition for all in the industry.

The transport authority will bundle all bus services in Singapore into 12 packages, each comprising 300 to 500 buses. As a start, LTA will tender out three such packages, with the first tender scheduled to be in the second half of the year. Bid winners will start operating bus services from the second half of 2016, with the three packages constituting about 20 per cent of existing buses.

The contracts are for five years, with an additional extension of two years available pending good performance, the agency said.

Incumbents SMRT Buses and SBS Transit will continue to operate the remaining nine packages, but the LTA will negotiate with both parties to offer their services for another five years based on the contracting model once the BSOL expires. Once the new five-year deals expire in 2021, more of the bus packages will gradually be opened up to other operators, it said.

Bus fares will continue to be set and reviewed by the Public Transport Council (PTC) even as public bus services move to the new model.

The LTA said this during Channel NewsAsia's Talking Point programme.

It said fares have been affordable and that the changes, announced on Wednesday, will ensure that contractors offer services at the most competitive price.

Fares will be decided by the council, while the government will subsidise any shortfall between what is collected and the cost of delivering the services.

Looi Teik Soon, director of policy at the LTA, said: "We already have a fare review mechanism, there is a formula that takes care of it. Leave them to do their job, keep it separate.

"The contracting is merely to make sure that the operator, (or) whoever wins the contract to provide the service, is (providing services) at the most competitive cost -- the kind of value that we're getting out (from the) service that we want."

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