In recent years, the public transport market has begun to see a shift and general reorganisation in the way its market is structured. As the industry continues to grow and develop with the times, the changing market scheme is a natural side-effect. From finding funding in new places to changing standards for contractual arrangements, cities must learn to adapt and keep up with the constant demand for public transport.
Depending on the region and its socioeconomic and political culture, funding for public transport might be found in different places. Transport authorities and city planners are always looking for the most efficient and reliable forms of funding to keep public transport systems running, based on their local context.
For instance, Transport for London (TfL) is funded from five main sources:
- Fares, which represent the largest single source of income
- Other revenue, including advertising, property rental and the Congestion Charge
- Grant funding from the Department for Transport (DfT) and Greater London Authority (GLA)
- The Crossrail high frequency, high capacity railway (under construction for London and the South East)
- Borrowing and cash movements
To get a bigger picture of how this all comes together, a 2015-2016 report shows that TfL had a budget of £11.5 billion (€13.7bn), 40% of which came from ticketing, the rest from government backing (23%), borrowing (20%), other income (9%), and Crossrail funding (8%).
Elsewhere in the UK, a new governance model introduced by the West Midlands Combined Authority (WMCA), supported by a transformational Devolution Deal with government, came into being in June 2016. The Transport for West Midlands (TfWM) arm of the WMCA now replaces the West Midlands ITA and Centro/PTE entities previously charged with public transport. This handing down of transport competencies and money from central government (Whitehall) gives local authorities the powers to make decisions and spend money for the benefit of their region, as they see fit.
Trends in contracting over the recent years
Contracts for franchises or concession between authorities and public transport operators are becoming more advanced and comprehensive, and certainly more complex too. At the same time, an ongoing development is the shift from competition on price - to quality - to cooperation and entrepreneurship.
The first contracts applied in public transport around 25 years ago were relatively simple. When tendering in Europe and Australia, for instance, the focus was mostly on price – partly because the main reason for introducing competitive tendering was to reduce subsidies granted to public transport.
Over the years, subsequent contracts have generally focused more on quality and performance targets (hence also referred to as ‘quality incentive contracts’). In the Netherlands, for example, while price remains part of the tender evaluation criteria, it is weighted less (<50%) than quality.
For network concessions that are tendered, the current tendency is towards exploring ways to foster cooperation and partnerships, make more use of the know-how of transport operators, and encourage their entrepreneurship.
The concept of partnerships is crucial. The performance and appeal of a network depends largely on the relationship(s) of trust and quality established between the delegating authority and its service provider(s).
Jean-Pierre Farandou, President, Keolis
This is a shortened version of an article published in Public Transport Trends 2017, UITP’s flagship publication released every two years. Read the full interview – and many more – in Public Transport Trends 2017!