COMPONENT 4 Feasibility studies THEPTA Tendering and awarding bus transport services in Thessaloniki Almada, March 12 th - 13 th 2012
Presentation Outline Study Objectives Issues to address Overview of tasks completed so far Study Area Analysis Methodology Specific Study Tools Bibliographic material used Policy Objectives Scenario Formulation New PTA Characteristics Cost Factors Good Practices applied On going activities Next Steps
Study Objectives to identify sound alternative options for tendering and awarding PT bus services in the area under the responsibility of THEPTA (Regional Unity of Thessaloniki) based on local conditions, existing knowledge and good practices To evaluate them through Scenario and SWOT analysis and select the best one according to the prevailing (external) conditions to identify possible interactions with the other PTA functions to set up a sound and applicable approach for carrying out similar feasibility studies
Issues to address [1/2] Given the current and expected conditions in the area, the following issues need to be addressed Legislative and/or institutional changes/reforms Allocation of roles and tasks between the Public Transport Authority (THEPTA) or its successor - and the operator(s) Ownership of assets (buses, depots, other equipment, etc.) - (currently THEPTA does not possess any assets) Quality aspects Preparation of tender documents Type of contract(s) Risk allocation between the contractual parties Service design (constructive functional)
Issues to address [2/2] Awarding criteria-which is the best way to award the contract? Contract monitoring and control Setting the barrier level for new entrants (qualifications, financial, size, etc.) Setting the number of lots Dealing with subcontracting Changing the existing scene with respect to the involvement of Municipal Authorities Deciding on contract duration and time escalation of call for tenders
ACTIONS IMPLEMENTED SO FAR Checklist ACTIVITY Analysis of the local context Definition of study methodology Definition of specific study tools Data collection / Bibliographic material Analysis of data / Bibliographic material Design of the new service/pta Costs/benefits analysis Involvement of local stakeholders Draft study report DONE YES NO
STUDY AREA ANALYSIS Analysis of the local context Demographic & Land characteristics Thessaloniki 2 nd largest city in Greece Population of THEPTA jurisdiction area: 1,104,460 inhabitants Extended over an area of 3.683km² Population of agglomeration of Thessaloniki: 820,000 inhabitants (2011 census) Existing mobility facts 2.4 million person trips daily with all modes including pedestrian trips Over 500.000 trips daily by PT Car ownership: approximately 450 vehicles per 1.000 residents Modal split: Car 55%, Public Transport: 20% (2010) 140.000 vehicles during peak hour use the city network The mean speed per vehicle is 14 km/hour
STUDY AREA ANALYSIS Analysis of the local context Future transport modes in Thessaloniki Underground Metro system under construction since 2006, estimated date of finalization 2017 (perhaps later) Tram system under consultation Urban maritime transport under consultation
STUDY AREA ANALYSIS Analysis of the local context Responsibilities spread over many central and local government authorities Ministry of Interior Ministry of Infrastructure, Transport and Networks Ministry of Environment, Energy and Climate Change Regional Authorities Local Authorities Transportation Planning Organization of Planning and Environmental Protection of Thessaloniki Thessaloniki Public Transport Authority (THEPTA)
STUDY AREA ANALYSIS Analysis of the local context Transport Operations Offered by Organization of Urban Transportation of Thessaloniki (OASTH) Founded in 1957, OASTH is a Legal Entity governed by Private Law Exclusive right to provide PT services under direct awards through consecutive concession agreements (1957,1979,2001 with two modifications in 2008 & 2010) ratified by Greek Parliament Offers 79 bus lines covering an area up to 50 km distance from the city centre Fleet size is made of 622 diesel buses Total network length exceeding 970 km 5,800 daily trips Annual production (2011): ~42,000,000 vehicle-kilometers Annual system capacity: 422,000,000 passengers Annual patronage: 177,000,000 passengers an average occupancy of 42%
STUDY AREA ANALYSIS Analysis of the local context Organization of Urban Transportation of Thessaloniki (OASTH) Cost categorization according to the contractual agreement: Administration costs (offices and depots rents) Personnel Cost Fixed Costs General Costs Variable Costs Return on asset value and business profit on patronage/production Depreciations The total revenues are the following: Fare box revenues Other incomes The compensatory payment is calculated as the difference between the costs and the revenues as descripted above.
Analysis of the local context Current Risk Allocation between contractual partners The contract lies between gross and net profit contract Operator bears partially only operational internal cost risk (it cannot be higher than cost of previous year plus inflation for the same services) unless a prior agreement by the Ministry following a recommendation by THEPTA exists No risk borne by operator for Depot rental cost (property of shareholders) Operator has a secured return on assets and a return based on patronage/production In case production in terms of offered veh-kms reduces the return is also reduced The State (Central Government) bears all other risks i.e. revenue, operational external costs, investment, etc.
Analysis of the local context Incentives to Operator Operator benefits from increased productivity as compared to the previous year. Similarly, benefits from excess revenues as compared to set targets Excess return on revenues/production is allocated to the Operator, to the employees and to the State on a 40/40/20 ratio Service design (tactical planning) is the responsibility of THEPTA though the main network planning is based merely on evolution of past network planned by OASTH Operator can make suggestions for changes but consent from THEPTA is required Operator often ignores THEPTA in critical issues and seeks negotiation with the Ministry, i.e. the other contractual partner
METHODOLOGY Methodology applied is based on Contracting in urban public transport First stage, policy goals identification at a strategic level without considering constrains Second stage, local circumstances analysis and policy goals examination taking into account local circumstances. Third stage, analysis of the risk allocation (cost and revenue risk) which determines a different kind of contract (management, gross-cost and net-cost contract). Fourth stage, allocation of responsibilities between authority and operator (functional, intermediate or constructive) Fifth stage, control of performances, check the realization of the obligations of the operator Last stage, decision on the allocation of the risk and the final task of awarding the contract
Specific Study Tools Scenario Analysis Stakeholder consultation SWOT Analysis
Bibliographic material used EU Regulation 1370/2007, (PSOR) Use of good practice guides Study of Good Practice in Contracts for Public Passenger Transport EU (Buchanan) Better Public Transport for Europe through Competitive Tendering: A Good Practice Guide (ICLEI) Contracting in urban public transport (INNO-V, et al) UITP, Setting your own Organising Authority
Bibliographic material used (continued) Other material MARETOPE, Final Report, Guidelines Various PSO contracts between PTA s and Operators Public Service Contracts, Incentives & Monitoring (SPUTNIC project) Public Transport Tendering in the Netherlands Economies of scale and scope in local public transportation Competitive Tendering and Optimal Size in the Regional Bus Transportation Industry: An Example from Italy. Annals of Public and Cooperative Economics Summary report of the project Privatisation of Public Services and the Impact on Quality, Employment and Productivity (PIQUE)
Policy Objectives, based on local circumstances Increase of PT share by 30% without Metro by 2020 Achieve integration as much as possible Introduce smart and integrated system of electronic payment Improve intermodal and PT terminals Increase PT supply both by fixed track systems (Metro and Tram) and by bus and other modes (sea transport and cycling) Achieve a better fare box revenue / total cost ratio for Public Transport Achieve a long term PT share twice the current one (PTX2) Create additional jobs in the PT market
Tendering and awarding Scenario Formulation Decision making process tree based on the pros and cons of alternatives provided for the various tendering and awarding elements Role of THEPTA (and consequently of operator(s)) Type of contract / No of contracts (lots) Incentives / bonus-malus Risk allocation Contract size Contract length
Scenario Formulation Role of THEPTA [1/2] Alternative possibilities R-1. As is, i.e. not a competent Organising authority contracting remains with the Ministry of Transport R-2, Increased responsibilities and competences (all 7 EPTA functions) with required and skilled personnel estimated extra cost per year +1.5 mio, R-3 Full Metropolitan authority with additional responsibility on parking policy and tariffs, land use planning, under the Regional Unity of Thessaloniki
Scenario Formulation Role of THEPTA [2/2] Likelihood distribution of different THEPTA evolution scenarios THEPTA Role Organising Full Metropolitan Authority Authority with As is Scenario (All 7 EPTA additional functions) responsibilities R-1 50% R-2 35% R-3 15% probabilities drawn based on knowledge of priorities of national and local government
Scenario Formulation Type of Contract/No of Contracts Alternative options for Thessaloniki area depend on the fact that the State will acquire all OASTH s assets by the expiration date of the current contract. Easiest way seems to be a short term management contract by one or more operators who will use the state assets OASTH s employees jobs will be secured The following options were identified: C-1.1, Management Contract, no risks for operator, prerequisite R-2 for type of Authority C-2.1, Gross profit Contract, risks allocated between partners, incentives to operator(s) prerequisite R-2 C-3.1, Net Profit contract, risks to operator(s) with incentives, prerequisite R-2 C-1.2 More than 1 Management contracts according to route type C-2.2 and C-2.3, Contracts as above but with subcontracting possibility for extra-urban or other special routes
Scenario Formulation Incentives to Operators Depend on contract type Several variations are possible in each contract type In case of net contract, investment incentives should be expected (renewal of fleet, new depots, e.t.c.) this option increases dependency on operator Incentives to be linked to performance and quality indicators (KPI s) relevant decisions already made for the Athens PT services Bonus-Malus to be included in contract but within certain margins (± 5%) No specific scenarios have been formulated yet; they will come up from the consultation process
Risk Allocation Expected actions in the near future Severe increase of fares (+50%) Intensification of passenger checks and establishment of independent inspection bodies to reduce fare evasion Introduction of smart ticketing system Risk allocation depends on contract type existing knowledge fully applies RA-1 ----- C-1 (Management) RA-2 ----- C-2 (Gross Cost) Ra-3 ----- C-3 (Net Cost)
Contract Length Depends on: Asset Ownership Contract type Number of Lots Market conditions (real competition) Fixed track infrastructure completion (Metro and tram) Most likely options include: In case of Management, short term contract (3-5 years) with extension option In case of Gross Profit Contract, it will depend on asset ownership, most likely 10 years term with up to 5 years extension option In case of net cost, 10 years, but option for renegotiation of services will be necessary to take into account metro (and tram) system developments
Scenario Formulation Entry Barriers To be defined according to EU and national legislation and according to Consultation No decision made yet Important issue: the strategy to be followed by local authorities
NEW PTA CHARACTERISTICS and/or NEW SERVICE TO BE DESIGNED Risk allocation Analysis The operator bears no risk (Management Contract) The operator bears the cost risk (Gross Cost Contract) The operator bears cost and revenue risk (Net Cost Contract) Pros 1.Low level of risk for the operator, more bids 2. The Greek State holds the buses after the termination of the existing contractual agreement and can use them in a management contract 1.Reduces risk for the operator thereby encouraging more bids for the contract 2.In case of more than one operator reduces the need and expertise to allocate the revenues between the operators 3. Apply route contracting greater flexibility 1.No need to invest in setting an authority with extended responsibilities 2.Urge the operator to increase patronage with the use of financial incentives Cons 1.Need an investment in setting an authority with extended responsibilities 2.The authority needs a great deal of experience in managing the network (planning, monitoring, etc.) 1.Fares are usually set by the Authority thereby reducing the scope for operators to significantly increase patronage and revenue 2. In absence of electronic fare collection system - difficulty to monitor and allocate the revenues between the operators 1.Increase the risk for the operator thereby reduces the bids 2.The operator must have the experience to influence the services and the network
NEW PTA CHARACTERISTICS and/or NEW SERVICE TO BE DESIGNED Allocation of responsibilities between authority and operator The decision depends on the specific local situation. The following points can be used as guidelines for the decision: Knowledge and expertise of potential operators Knowledge and expertise within the public transport authority or related public bodies Willingness to invest in the creation of the required knowledge Complexity of implementation and the need to use incentives Expected need for monitoring of the operator Budget for authority personnel
NEW PTA CHARACTERISTICS and/or NEW SERVICE TO BE DESIGNED Service Requirements Allocation The operator is free to design the public transport services (Functional) Authority sets the minimum standards and the supporting guidelines to the operator (Intermediate) Authority designs the public transport services (Constructive) Pros 1. No need of high expertise within the public transport authority no need of additional investment 1. The authority can quantify the policy goals into service requirements and thresholds 2. Moderate expertise need of the transport authority no need of high investment 1. The authority may apply competitive tender per route or bundles of routes especially when diseconomies of scale exist 2.The authority has the surveillance of the network 3. The authority can translate the policy goals into service design Cons 1. Need for monitoring of the operator 2. Need of skilled operators 3. The authority does not have the surveillance of the network 1. Need for monitoring of the operator and having access to reliable data partially (or fully) collected by the operator 1.Need a well-established experienced authority 2.Need to find resources to finance the new expanded authority
Cost Factors Cost for acquirung all OASTH assets by the contract expiration date (depots are not included) Cost for renting depos (OASTH s or others) to house buses Cost for the necessary upgrade of THEPTA (estimated to 3.0 mio ) and for operation (+1.5 mio annually) Cost for modernizing bus fleet and possibly establishing CNG installations) Cost for creating infrastructure and in particular PT and intermodal terminals These costs will be indentified for each scenario These factors will be included in the final SWOT analysis.
Involvement of Stakeholders / Decision Makers Consultation will be made with the following stakeholders: Ministry of Development, Competitiveness, Infrastructure, Transport and Networks Ministry of Macedonia and Thrace Regional Unity of Thessaloniki Athens Urban Transport Organization (OASA) and Organization of Urban Transportation of Thessaloniki (OASTH) KTEL (Interurban transport Operator) Consultation will take place after the selection of the most dominant scenarios. Consultation outcomes are to be utilised in the SWOT analysis
GOOD PRACTICES APPLIED GP2 SRM the Agency for Mobility and Local Public Transport (IT) SRM s experience is valuable since Bologna is comparable size city to Thessaloniki, SRM is a newly established Authority, the contract refers to the bus network (Risk allocation, monitoring, contract length, compensation calculation, etc.) GP23 Integrated Fare SPT Glasgow (UK) THEPTA investigates the establishment of an integrated ticketing and smart card fare collection system. Aims to a better fare box revenue allocation among the operators in the near future and integrate this to the contractual process
Good Practices Applied GP34 A common tender to realize surveys on service quality and customer satisfaction referring to Local Public Transport (IT) Crucial part of setting a contract is to include the appropriate procedure to monitor the implementation of the transport services. The good practices of Emilia Romagna Region are valuable to set an integrated monitoring system including all the necessary elements GP35 A system to monitor and control the performed service of the PT Operator (IT) An important part of the monitoring procedure is to apply prices or penalties corresponding to the service described in the service contract. This implies that the authority has a very good knowledge of the services and access to data. The experience of Province of Forlì-Cesena is used given that it operates a system like that since 2004.
OUTPUTS PRODUCED SO FAR PLEASE DETAIL HERE THE FIRST TANGIBLE OUTPUTS REALIZED SO FAR (i.e. n. meetings with local stakeholders/decision makers, n. of surveys collected/simulation models developed, n. of reports produced, etc.)
Problems to be faced and Solutions Identified Lack of strategy from the Central Government point of view regarding the future situation of PT in Thessaloniki Weak PTA in terms of certain competences Dominant position of OASTH in the PT market (private oligopoly) Unknown completion time horizon of Metro system and tram system which affect the PT map of Thessaloniki Undetermined expiration date of contract between OASTH and Greek State Diverse interests and goals of local political players (Regional Unity of Thessaloniki, Municipality of Thessaloniki, Ministry of Macedonia- Thrace) Economic Recession effects
Ongoing Activities Finalisatipn of Scenario and SWOT Analysis Design of consultation process
Next Steps Communicate the results of the Feasibility study to onvolved stakeholders Ministry of Development, Competitiveness, Infrastructure, Transport and Networks Ministry of Macedonia and Thrace OASTH Attiko Metro S.A. Organization of Urban Transportation of Thessaloniki (OASTH) KTEL (Interurban transport Operator) Organize Workshops including all the above key role players Press releases
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