Second UK transport operator wins bid to run bus services in Singapore

Second UK transport operator wins bid to run bus services in Singapore

Go-Ahead Group is currently the largest bus operator in London. It put in the lowest bid of S$497.7 million for the five-year contract to run the Loyang bus package.

LTA CEO and Go-Ahead Group exec

SINGAPORE: London's largest bus operator Go-Ahead Group has won the bid to operate bus services in Pasir Ris and Punggol, announced the Land Transport Authority (LTA) on Monday (Nov 23).

The Loyang bus package is the second contract put up for bidding in the Government's new bus contracting model. Go-Ahead Group is the second bid winner from the UK, after London-based Tower Transit won the bid for the first bus package in May.

Go-Ahead will operate the new Loyang bus depot from December. The company will run 25 services from Changi Airport and Changi Village bus terminals as well as the Pasir Ris and Punggol bus interchanges. The services will terminate at Ang Mo Kio, Bedok, Sengkang, Tampines and Yishun bus interchanges as well as New Bridge Road and Upper East Coast bus terminals. These services will be rolled out in two tranches from the third quarter of next year.

Go-Ahead bus service map

Map showing the bus routes which Go-Ahead will operate. (Image: LTA)

Go-Ahead will receive about S$497.7 million from LTA over the five-year contract period. Australia's Busways Group submitted the highest bid of S$631.4 million, while local operators SBS Transit and SMRT Buses submitted bids of S$545.9 million and S$598.1 million respectively.

"In this current tender, we have actually seen the bidders learning, in terms of lessons from the last, and actually come forward with much higher quality bids, which gives us something to think about," said Mr Chew Men Leong, chief executive of LTA.

"At the same time, actually having the quality and pricing of the bids quite closely matched. So in the end, we are able to select the best package in terms of quality and price, which finally went to Go-Ahead," he added.

Go-Ahead currently runs 24 per cent of London's bus routes with about 2,300 buses and about 7,000 staff.

In a news release on Monday, LTA said Go-Ahead was awarded the contract as it had the highest score for both quality and price.

"Go-Ahead demonstrated a thorough understanding of ground conditions and strong ability in developing strategies to manage specific scenarios for each bus route," LTA said. "At the same time, Go-Ahead also emphasised in its proposal a stringent bus maintenance regime for bus assets and infrastructure."

Mr David Brown, group chief executive of the Go-Ahead Group, added: "There are a lot of similarities between operating buses in London which, like Singapore, is a growing, vibrant city. So we're looking forward to bringing a lot of the practices ... in London into Singapore, and creating a fusion between what's really good in Singapore and what's really good in London.

"We started this process in early 2014 when we first met the LTA in London. And obviously in the first bid you don't understand the risks, understand the pricing. And as we've been here longer and learnt more, we've understood what those risks are and how to price better."

Go-Ahead said it will have 900 employees and operations, and it is expected to generate revenues of around S$500 million. It is also looking beyond the industry to meet manpower needs.

"In London, we've gone to people who do retail. Retail is about customer service," said Mr Brown. "So actually it's a retail environment that we work in and that's what we have to recruit for."

Mr Brown also distanced his company from comparisons with Tower Transit.

He said: "Everybody is trying to find the best practice, whether it's the best practice in terms of the quality of the operation, or best practice in terms of the cost of the operation. So there are very good operators in Singapore at the moment.

"We've gone into an open tender and we've happened to have won it, we've happened to have won it on a quality basis and a price basis. So in terms of comparisons with Tower Transit, there's no need, we're all in the global world of providing public transport."

The tender for the Loyang bus package was launched on Apr 15 and closed on Aug 14. Depending on Go-Ahead's performance, LTA said the contract can be extended by two years.

GOVERNMENT'S BELIEF IN FOREIGN COMPETITORS

Awarding the contract to Go-Ahead also means local public bus operators - SBS Transit and SMRT - were unsuccessful for a second time. Analysts said this signals the Government's belief that foreign competitors can introduce new management and operations practices to Singapore.

Said Professor Lee Der Horng from the Department of Civil and Environmental Engineering at the National University of Singapore: "To our local incumbents, SBS and SMRT particularly, I think that this result is really ... another bigger alarm, because we have seen (that) in the first Bulim package, SMRT put in the lowest bid, but they did not get it.

"However, today it is actually the reverse. Go-Ahead put in the lowest bid, but they actually got it, which means our foreign operators, bidders, in terms of technical capability, they have better something to offer as compared to our local incumbents.

"They must have something different in terms of their technical offerings, the way they run the service, the way they provide the overall maintenance and also to achieve the Government's rules and regulations and to achieve the standards specified by the Government. If the local operators still want to remain relevant, I think it is time for them to do something very different or to inject some very drastic change to their operating practices."

Added UniSIM senior lecturer Professor Walter Theseira: "(This is) another signal that the Government is serious about using bus contracting to spur innovation through using foreign companies who may be able to introduce new management and operations practices to Singapore.

"However, unlike the first round, the winner this time was the lowest bidder. So a balance of price and promised performance will clearly be important."

SBS Transit currently runs all 22 existing routes which are under the Loyang package.

When contacted, the operator said it is naturally disappointed at not being awarded the tender. It added that it will work with the LTA, the National Transport Workers' Union and Go-Ahead for a smooth transition.

The local operators can still bid for the third bus package.

SBS Transit and SMRT will continue to run another nine bus packages as negotiated contracts for about five years. These comprise the remaining 80 per cent of existing buses.

After these negotiated contracts expire, more bus services will be gradually tendered out.

Source: CNA/kk/xq/ek

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