Wednesday, November 25, 2015

De-privatizing the public transport system

Singapore has been operating a privatized public transport system for the past 30 years. It has been unsuccessful,. The transport operators, i.e. SMRT and SBS, were profit-oriented. They increased their profit by reducing maintenance expenses, leading to frequent breakdowns in the train system. They are reluctant to operate bus routes that are unprofitable.

The public are unhappy with the decline in service and deterioration in the public transport system. They are now in favor of the government taking back ownership of the system. Someone has coined the term "de-privatization" to describe this action.

The government has already started to de-privatize the public transport system. The recent award of the Loyang bus services to the UK operator, Go-Transport, is the first step in this complicated exercise.

Under the de-privatized model, the operator collects the fares and pass them to the government agency, i.e. the Land Transport Authority. The LTA sub-contracts the operation of the transport services to the operator for a fixed fee under a term contract of say 5 years.

The contractor has to meet the operating and service standards specified in the contract and receive the agreed fees. By operating efficiently, they aim to make a profit. But they are not affected by the actual revenue, the setting of the fares or the planning of the routes. These activities remain under the control of LTA.

Contracting model
Singapore organizations has a wealth of experience with the contracting model. The building of HDB flats and MRT stations are carried out under the contracting model. The contractor tenders a price based on the performance standards of the contract. The contract is awarded by the principal to the successful tenderer.

The principal has the ability to monitor the performance of the contract. The contractors are also experienced in handling their part of the contract. There is also an established mechanism for handling disputes in the contracts.

Is this the right strategy?
The contracting model that is being implemented now has operated successfully in the case of London Transport. I believe that it is the right model for Singapore as well.

We should not expect everything to operate smoothly in the initial years. But it should operate better than the current privatized model. We can expect problems to arise with the new contracting model, but they can be sorted out and improved with experience.

We can look forward to a better public transport system. Of course, we need the Land Transport Authority to be competent in managing the new model. We hope that they have the right people to manage the change and to run the new model.

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