Bus Contracting Model (BCM)

Note:
* – Exceptions to LTA owning all bus assets and depots include:

• SMRT-owned buses and Woodlands Depot – leased to LTA via availability fees
  (SMRT Group Review 2017)
• SBS Transit’s fleet of close to 2,900 buses (in 2016) and Soon Lee Bus Depot – leased to LTA
• SBS Transit Bedok North Bus Depot, Braddell Bus Park, Bukit Batok Bus Depot, Hougang Bus Depot, Ang Mo Kio Bus Depot
  (which remains as SBS Transit property as of SBS Transit 2017 Annual Report)

What are the new roles of bus operators?

• Operate their allocated bus services in accordance with specified performance standards
• Operate and maintain the buses and their onboard equipment (e.g. integrated driver fare console (IDFC) and fleet management equipment) as leased from the Government
• Operate and maintain the Bus Interchanges and the new Bus Depot included in the Route Packages, including all equipment and systems provided therein
• Charge and collect the fares approved by the Public Transport Council, for travel on the Route Package Bus Services allocated, on behalf of the Government
• Provide bus service information at all bus stops and bus interchanges served by the Route Packages’ Services
• Provide customer management services, such as lost and found service, and a hotline for commuter feedback and enquiries.
• Continue to benefit from advertising revenue
• Operating assets will be leased from Government to Bus Operator as stated in the contract which Bus Operator has been awarded

Incentive Framework (Performance Standards for Operators)

Incentive Framework to encourage it to provide quality bus services to commuters and carry out good maintenance of the assets provided by the Government. If the Operator meets the standards, it will receive a performance payment of up to 10% of its annual service fee. On the other hand, if the Operator does not meet the standards, up to 10% of its annual service fee will be deducted. The five performance indicators are in the areas of:-

1. Bus service reliability, with indicators on Excess Wait Time (EWT) and On-Time Adherence taking reference from the Bus Service Reliability Framework
2. First and last bus punctuality to ensure that commuters can board the first and last bus of the day
3. Maintenance of the buses provided by LTA
4. Maintenance of the Bus Interchanges and Bus Depot awarded under the Route Packages
5. Maintenance of the Bus Ticketing System

What are the advantages of this system?

• Strengthens the Government’s ability to respond more quickly to changes in travel demand and service level expectations
• Bus operators to focus more on operating the bus services and meeting service standards
• Lowering entry barriers, introducing more market competition leading to the provision of better bus services in a cost-competitive manner that will benefit commuters.

So how will commuters benefit?

• A more responsive system that adapts to ridership patterns and commuter needs
• Greater competition and efficiency within the bus industry
• More reliable bus services with improved service levels
• Less waiting time between buses

The contract model is currently in use in London and various Australian cities; their transport systems which LTA is modelling from. The Government is now able to directly subsidize bus operations to maintain better service levels, even if such levels of service are unprofitable.

In September 2016, bus services in Singapore were announced by the Land Transport Authority to be bundled into fourteen bus packages with about 300-500 buses each. The number of bus packages was previously announced to be twelve back in 2014 at the start of the Bus Contracting Model scheme. The contracts will last for five years, and can be extended by another two years with good performance.

With the negotiations with the incumbent operators (SBS Transit and SMRT) complete, the Bus Service Operating License (BSOL) for the remainder 11 packages not tendered out as of 2016 has been extended for 2-10 years, starting from 01 Sep 2016. After these negotiated contracts expire, the bus services in the 11 packages will be gradually tendered out.

This gradual, phased transition will allow LTA to refine and improve the management of contracts, as well as the tendering and handover process, and minimise the risk of service disruption.

Each new tender or change in contract for bus services can result in the movement of bus employees from one employer to another. To safeguard the welfare of the affected employees and ensure their smooth transition to the incoming operator, the Public Transport Tripartite Committee (PTTC) released the Guidelines on Good Employment Practices in the Public Bus Industry (the “Guidelines”) on 16 September 2014, detailing the obligations and responsibilities of both incoming and outgoing bus operators. These include the timeline for the offer of employment, recognition of the length of service, employment terms to be safeguarded, treatment of affected bus industry employees including those who choose to stay with the outgoing operator, as well as training for those who choose to join the incoming operator.

The three key assurances proposed by the PTTC are:

1. All affected employees must be offered a job by the incoming operator;
2. Affected employees must be offered employment terms which are not worse-off than what they have been enjoying before transition; and
3. Affected employees can choose to join the new operator or be redeployed by their current employer, where feasible.

These employee aspects of the Guidelines have been incorporated into LTA’s tender documents, and will also be included in LTA’s subsequent contract with the Operator.

With the transition to a bus contracting model, the Government intends to also raise bus service levels to beyond those of the expanded BSEP.

Current (Pre-BCM) Service Levels during 2-hour AM and PM Peak Periods:

• About 30% of bus services operating at headway of no more than 10 minutes
• 100% of bus services operating at headway of no more than 30 minutes

Expanded BSEP during 2-hour AM and PM Peak Periods

• About 35% of bus services operating at headway of no more than 10 minutes
  100% of bus services operating at headway of no more than 20 minutes

Bus Contracting Model during 2-hour AM and PM Peak Periods

• 50 or more % of bus services operating at headway of no more than 10 minutes
• 100% of bus services operating at headway of no more than 15 minutes
• All Feeder Services operating at intervals of 6 to 8 minutes.

As a result, an estimated 45% of bus services will have shorter intervals during peak periods when compared to the expanded BSEP service levels.

All tender submissions will be evaluated by LTA through a 2-envelope process for quality and price with greater weightage given to the quality proposal submitted by the tenderers. This was evident when UK bus operator Tower Transit won the Bulim Bus Package despite offering the third lowest bid of $125.6 Million per year, in contrast to the lowest $93.7 Million per year bid from SMRT.

LTA awards route packages (tenders) based on “Gross Cost Model”. The Operator which the tender would be awarded will be required to set up a local company to operate the Route Packages, with senior management overseeing its operations to be based in Singapore for better oversight and accountability.

There will also be provisions for additional bus capacity in the contract which will enable the Government to make expeditious adjustments to the Route Packages when necessary, in response to changes in ridership and commuter needs.

During the contract period (5-7 years), the service fee which is the Operator’s bid price for the package, will be adjusted to better reflect the operating climate by taking into consideration inflation, changes in wage levels, and fuel costs.

Separately, the Operator will be able to tap the Bus Driver Training Grant for new bus drivers trained and deployed on the bus services from the date of award of contract to December 2016.

The Operator will be paid the service fee on a monthly basis with deductions for non-operated mileage that is within its control, such as driver absenteeism.

Tendering requirements

Among other requirements, bus operators bidding for the package must have a proven track record of operating a fleet of at least 250 buses.