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November 28, 2016, 09:06:46 AM by #Metro in Infrastructure

Open Queensland’s Rail and Bus Service Contracts to All
Metro. Rail Back on Track Forum contributor.

(This post is available for republication under CC BY-ND 4.0)

IMAGINE THAT it’s Melbourne Cup day. Although it’s your first time at the races, your thoroughbred has been trained all year for the big day. Faster than Puffing Billy, it’s never won a Melbourne Cup, but it’s done well in other events. It has a good chance of winning today. Stewards inspect your horse. Withdrawing into a corner, discussion in quiet tones begins. There is a long delay. What is going on?

The lead steward comes back. “Sorry Bob, but your horse isn’t running today.”

“What is wrong with it?”, you ask.

“Well, we already know the race will be won by that horse over there - Queensland Bale.” the steward replies.

“What?” you stare in shock.

“It’s the best - and it won the Melbourne Cup last year”, the steward goes on, “even if it were a bit slow, the owner could train it up a bit more and it would in no doubt win. Nothing to see here!”

“That’s absurd!” you reply.

“Sorry Bob, we have a winner, and it’s not you. We have now cancelled the race.”



Absurd? That is essentially how bus and train services - both public and private - are administered in Queensland. TransLink - the government’s public transport agency - reviews and writes contracts with existing monopoly bus and train operators. Brisbane City Council’s bus contract is soon up for review, and guess what - there is only one contender for it!


Existing public transport operators love this - they get to win every time. Status quo bias and political correctness means that nobody dares to question it. Outsiders must buy an existing operator to get in. For Brisbane’s buses or South East Queensland’s trains, government ownership means there exists no prospect of entry. The merit principle - that lucrative government business should be awarded in an open and fair process on competence and ability - doesn’t apply.


But have you heard about what happened in Melbourne?

Ah, Melbourne. In any conversation about contracting out Melbourne will come up, just as surely as comments about Melbourne’s legendary “four seasons in one day” weather will. In 1997, an extended industrial action during Melbourne’s Grand Prix so frustrated the then Victorian Premier Jeff Kennett that he vowed to open bus, train and tram contracts to external competitors.


Yet in doing so, the Victorian Government made an error - it chose a franchise model - one that linked payments to passenger patronage levels. Franchises work well for businesses that can influence demand for its service or product. A fast-food restaurant chain that wants more business can advertise more, change the pricing, introduce specials, change the location or opening hours of its stores, or change the menu.


In public transport, however, patronage is largely determined by factors outside of the operator’s control. Urban density, ticket prices, population growth, population demography, the cost of petrol, the frequency, span, speed, and location of services can’t easily be changed by a corporate head office. This is why linking payments to passenger patronage does not make sense. Getting the patronage forecasts wrong - which is essentially what Melbourne’s operators did - could see your business go bust.


That’s why here in South East Queensland, operators - both public and private - are paid subsidies for services provided, and not passengers carried. All revenue is retained by a government agency, TransLink, as it should be. This stable revenue environment means that existing private bus operators are happy to drive buses to even the most unprofitable locations for a passenger’s set TransLink fare.


The lesson is clear - if you don’t want a Melbourne experience, don’t choose Melbourne-style franchising. TransLink’s proven service-for-subsidy model has worked well in South East Queensland for over a decade. Rail operations under competitive contracting should continue to use this existing model.


But Queensland Rail is already the best, and we might make the “wrong” choice!

Competitive contracting does not automatically assume that a private operator is better than a public one or vice versa. Many so-called “private” operators are actually commercialised arms of publicly-owned agencies in other countries. Yarra Trams and Gold Coast Light Rail are operated by Keolis, a company that can be linked back to SNCF, France’s government railway.


Opponents will, of course, complain that competitive contracting doesn’t “guarantee” that a “rogue” operator - like Melbourne’s former Connex - could take over the system. But keeping the monopolies we have now doesn’t guarantee that either. And is it also not true that voting in a democracy also doesn't “guarantee” that a “rogue” political party might come to power and run the state of Queensland? Should Queensland thus do away with elections and become a one-party state to guard against this dangerous possibility? Of course not, the notion is ridiculous.


Like an election, competitive contracting guarantees that a mechanism will exist to remove and replace a poorly performing operator. Most train operators now have a known track record, the result of competitive contracting being applied in other cities. Just as removal of a poorly performing political party at an election is not evidence of the failure of democracy, the removal of a poorly performing train operator (such as Melbourne’s former Connex) is not evidence of competitive contracting failing either. It is the removal process working as it should.


This threat of contract loss and profit-eating penalties provides a constant financial tension that incentivises performance during service delivery. This works whether the organisation is ultimately publicly or privately owned. The trick is in the competition.


TransLink needs reform. Reforms must give TransLink the power to reject a contract and seek an alternative operator for both trains and buses.


But there won’t be competition - nobody will apply!

Consider a race with one horse - we know who will win. Now consider the same race with two horses - isn’t that an improvement?


People opposed to the idea of competitive contracting insist that Queensland Rail has excellent customer service, a good track record of maintenance, and strict punctuality. We have the best operator already they will claim, or if not, we can make (minimal) changes to it so that it does become best, and therefore no competition is required.  Perhaps Queensland Rail really is the best. After all, its website slogan says “We aim to be Australia’s best performing railway.”


Rhetoric aside, our Melbourne Cup tale tells us that still does not justify closed monopoly train or bus services. What it does justify is including Queensland Rail as a horse in the race, on the same level playing field as the others. This is absolutely essential. A competitive contracting process should be vigorously opposed by all if it does not include the incumbent operator.


Queensland Rail should be built up by the Queensland Government to be in a position not only to defend its service contract but also win service contracts in cities outside of Queensland. For the avoidance of all doubt, The Constitution of Queensland, section five to be exact, gives the Queensland Government the powers to do exactly that. The Queensland Government pontificates at business and universities all over the state to be more innovative, invest, and commercialise. Well Premier, here is the perfect opportunity for your own government to do exactly that. Through the Queensland Government’s Queensland Investment Corporation (QIC) and superannuation fund QSuper, the Queensland Government already has a stake in multiple commercial businesses and properties both within Australia and abroad. Indeed, QIC recently bought a stake in the privatised Port of Melbourne.


Build Queensland Rail up to compete for contracts running trains outside of Queensland. Doing so will only enhance competition.


Who would potentially bid for train services in South East Queensland?

Judging by the recent competitive tendering of city rail services in New Zealand, here is a speculative list of potential bidders for South East Queensland’s rail network. A formal ‘Expressions of Interest’ (EOI) process can test the level of interest.

- Queensland Rail
- MTR Hong Kong / Metro Trains Melbourne
- Veolia Transport / TransDev
- Keolis Downer
- Serco
- Abellio


Abellio is one I have not heard of before, but some quick research reveals that it is the international subsidiary of The Government of Netherlands Railways (Nederlandse Spoorwegen).


In addition to trains, some of these potential bidders run buses and trams. It opens up the possibility that a single operator could run both Brisbane's buses and trains. This would finally unify both bus and train networks into a co-ordinated whole. Brisbane’s current bus operator, Brisbane City Council, has resisted bus reforms and improved bus integration with trains despite intense community lobbying over many years. It is now fixated on a ridiculous capacity-reducing ‘metro’. In 2013, at the height of the Brisbane bus review, Lord Mayor Graham Quirk declared that he would “never ever” accept TransLink’s bus reforms and that they were “off the table”. Council staff were instructed not to attend bus reform meetings with TransLink on six occasions. In contrast, all private bus operators in all other regions of South East Queensland happily complied with Translink and introduced bus reforms.

With an attitude like that, competitive tendering cannot come to Brisbane and South East Queensland soon enough. A private operator could not afford to engage is such behaviour and would be more than happy to run buses across council boundaries without complaint. If anything, “getting the politics out of public transport” is an attractive prospect that competitive tendering brings.


Conclusion

Crises catalyse change because they force people to question the status quo. How competitive bus and train contracting can work in Queensland can be summarised thus:

- TransLink must be an independent, strong regulator with the power to turn down a contract and seek an alternative supplier.

- Queensland Rail to be built up to a position where it can make competitive bids for rail network operations outside Queensland and Australia.

- Queensland Rail branding and identity are retained within SEQ for continuity and heritage reasons.

- Consider penalties for late or cancelled services based on ‘number of stations not serviced on time’.

- Cap penalties to a maximum each month and waive them during industrial disputes.

- No Franchising - pay operators for services provided, not patronage levels.

- Queensland Rail must participate as a bidder in any opening of the South East Queensland Rail Network to competition. We want to make sure what we get is better than what we already have, don’t we?

- The two most “value for money” bids should be scrutinised so that calculations are realistic and that “low-balling” or “loss leading” does not pay.

- Every time contracts are up for renewal, a public servants should prepare a “return to public operation” base case to compare against. Failure to do this is to assume that private is always best - this is not always so.

- Contracts should feature an extension option as a reward for good performance.

Enough excuses, apologies, faux outrage and anger. Chart a course for change and commit to it. Stop contracting unchallenged monopolies in public transport and choose operators on merit, not privilege. May the best horse win.


References

A Review of Melbourne’s Rail Franchising Reforms
https://www.lta.gov.sg/ltaacademy/doc/J09Nov-p36Currie_RailFranchising.pdf


The contracting of urban bus services – Recent Australian developments
Research in Transportation Economics
Volume 48, December 2014, Pages 48–61
http://www.sciencedirect.com/science/article/pii/S0739885914000729


Constitution of Queensland Act (2001)
http://www.legislation.qld.gov.au/LEGISLTN/CURRENT/C/ConstofQA01.pdf


Auckland Transport Rail Contract Tender
https://at.govt.nz/about-us/news-events/aucklands-rail-contract-tender-postponed/ 


Wellington Rail Contract Tender
http://www.gw.govt.nz/short-list-finalised-for-rail-contract/


Abellio
https://www.abellio.com/about-us/company-history


METRO Trains Melbourne satisfaction levels, showing steady improvement over time
http://railbotforum.org/mbs/index.php?topic=12563.msg184094#msg184094


List of Government Owned Operators on the TransLink Network

Brisbane Transport (Brisbane City Council)
Queensland Rail (State of Queensland)


List of Private Operators on the TransLink Network

Gold Coast Light Rail (GoldLinQ)
Brisbane City Council CityCat & Ferries (TransDev TSL, a Veolia Company)
Airtrain - Private (but operated by QR staff under contract)

Bay Islands Transit Ferry (SeaLink) - Private
Bribie Island Coaches - Private
Brisbane Bus Lines - Private
Buslink - Private
Bus Queensland - Private
Caboolture Bus Lines - Private
Clarks Logan City Bus Service - Private
Hornibrook Bus Lines - Private
Kangaroo Bus Lines - Private
Mt Gravatt Bus Lines - Private
Park Ridge Transit - Private
Southern Cross Transit - Private
Sunshine Coast Sunbus - Private
Surfside Bus Lines - Private
Thompsons's Bus Service - Private
Veolia Transport - Private
Westside Bus Company - Private

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