Abstract:
South African cities implementing Integrated Public Transport Networks (IPTNs) have
entered into negotiated bus operating contracts with a term of 12 years, designed to
facilitate the formalisation and inclusion of existing public transport operators, and
establish experienced and capacitated companies to compete for future contracts.
International best practice indicates that competitive bidding for bus operating contracts
typically lowers costs. This is supported by the National Land Transport Act 5 of 2009,
which stipulates that the first contracts can be negotiated, but from the second round must
be competitively tendered. Negotiated rates have had to build in risk premiums to
incentivise existing operators to relinquish their current operations, which has led to high
operating costs and contributed to the financial sustainability challenges faced by IPTNs
across the country. This suggests that a competitive bidding process may help to improve
financial sustainability, together with other complementary adjustments. However, there is
likely to be resistance to these processes if incumbent operators are unsuccessful in
winning the competitive tenders, which could result in significant challenges and delays.
As such, the design of the competitive bidding process requires careful consideration. This
paper reflects on the possible outcomes after the 12-year contracts end and identifies key
factors to consider when designing an approach to manage the transition.
