THE first package of bus services under the new Government Contracting Model (GCM) was put up for tender by the Land Transport Authority (LTA) on Friday, prompting some observers to comment that the government is treading cautiously in new territory to avoid the perception of overpaying and risking taxpayers' unhappiness.
Both local and foreign bus operators may bid for the right to operate the package, which comprises 26 routes, to be progressively implemented from the second half of 2016.
The contract is for five years but with good performance, the operator will be granted a two-year extension. The bus services will originate in three bus interchanges - Bukit Batok, Clementi and Jurong East - and end in five other interchanges - Bedok, Boon Lay, Marina Centre, Shenton Way and Toa Payoh. The buses are to be operated out of the new Bulim Bus Depot off Jurong West Avenue 2, which can accommodate about 500 buses.
The package of 26 services may start with about 380 buses in 2016, and grow to involve about 500 buses in 2021, in tandem with the growth in expected ridership and the development of Bukit Batok West and Tengah as residential areas.
With the LTA contracting operators to run public bus services through competitive tendering, the operators are paid a fee to run the services, while the government retains the Public Transport Council-approved fares, which the operators charge and collect on its behalf.
Infrastructure such as depots and operating assets such as the buses and the fleet management system will be provided by the government.
The operator will be responsible for providing, for example, bus service information at bus stop and interchanges, customer management services and a hotline for commuter enquiries. With the transition to the GCM, the government intends to raise bus-service levels above those of the expanded Bus Service Enhancement Programme.
The tender closes on Jan 5, 2015. It will be awarded in the second quarter of 2015. The tender submissions will be evaluated through a two-envelope process for quality and price; more weightage will be given to the quality proposal submitted by the tenderers.
When asked about the level of interest in the tender, an LTA spokeswoman said: "During our road shows, several overseas and local operators such as Go-Ahead (from London), Keolis (France), Transdev (Australia), Tower Transit (London), Woodlands Transport (Singapore), SBS Transit and SMRT Buses expressed interest in participating in the tender."
She said that LTA was unable to prejudge the number of operators who would submit bids.
SMRT Corp, in a statement, said it would turn in a "competitive" bid, riding on its significant experience running train and bus services.
Another company studying the tender carefully is Veolia Transport RATP Asia. Its representative said: "Singapore's well-developed public transport infrastructure makes it a very attractive market with great potential."
The French group is active in Asia, operating buses and trains in China, South Korea and India; it said Singapore's long-term vision for the public transport network is well aligned with its core objectives.
All bus routes in Singapore will be grouped into 12 packages, with three packages or 20 per cent of existing buses to be tendered out.
The remaining nine, comprising 80 per cent of existing bus services, will be operated by the incumbent operators through negotiated contracts for five years or more.
A source said strong interest has arisen in the contracting model because it is the government, not the operator, who bears the revenue risk.
He remarked that the government is treading cautiously by tendering out only 20 per cent of the routes initially.
"It is probably trying to get a better sense of this model, how it will work and, most importantly, how much to pay the operator," he said. "This is sensitive because taxpayers' money is involved."
Looking at ComfortDelGro's experience running bus services in the UK and Australia, he said the government will probably use the operating profit margin of the UK operations as a guideline, rather than that in Australia.
Last year, ComfortDelGro's bus business in the UK netted an operating profit margin of about 8 per cent; that for the Australian operations was more than double, at about 19 per cent.
"Since the UK is an established model, this benchmark means it is viable," he said.