The Business Times

Sweeping changes to public bus sector

Move seen as addressing fundamental issues plaguing the system

Nisha Ramchandani
Published Wed, May 21, 2014 · 10:00 PM
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[SINGAPORE] The Land Transport Authority (LTA) yesterday announced sweeping changes to the public bus industry, in a move seen as addressing fundamental issues plaguing the system.

In a shake-up that overhauls Singapore's bus industry, the current, privatised model - where operators SBS Transit (SBST) and SMRT own their buses and keep all fare revenue - will give way to a government contracting model starting from the second half of 2014. Under the new system, the government will own the buses as well as bus infrastructure such as depots, while contracting bus routes out in 12 packages via a tender process to both local and foreign players. Operators will be paid a fee to run and maintain the services, while the government will retain all fare revenue.

The restructuring is largely aimed at raising service standards by increasing competition and creating a more flexible system where the government can make tweaks more swiftly and nimbly in response to changes in ridership and commuter needs.

Higher service standards will be built into the contract as operators will be expected to run bus services at shorter intervals during peak hours, with at least half of all bus services to operate at intervals of no more than 10 minutes. Such improvements, if pulled off, would be substantial enough for commuters to feel the difference, said industry observers.

"The quality of the public transport service (would) now (be) determined by . . . how much money (the government) is willing to spend on improving service standards, rather than profitability concerns for private operators," said the head of SIM University's urban transport management programme, Park Byung Joon.

At the same time, Dr Park warned that the pursuit of enhanced service standards could potentially end up proving costly for taxpayers. "Public transport with a high service standard does not come cheap. It is very unlikely that the whole expense will be passed onto commuters in the form of fares," highlighted Dr Park, adding that Seoul's government has faced a steady increase in operating subsidy payments to bus operators since 2003.

In a Facebook post yesterday, Transport Minister Lui Tuck Yew said: "Any changes to a system that we've been running for many years means that there will be adjustments needed at various levels and possibly some transitional issues. We will pay careful attention during implementation to minimize inconvenience to commuters."

Foreign firms such as France's Keolis, Australia's Tower Transit and Britain's Go Ahead have been mooted as possible entrants into the market. Woodlands Transport Service, which has one of the largest private transport fleets in Singapore, said that it would be keen to look into the tender and study the details.

Meanwhile, the incumbent operators will have to work even harder if they want to remain in the business and maintain their scale, Lee Der-Horng, deputy head (research) at NUS' Department of Civil & Environmental Engineering, pointed out. But income streams for the two transport operators would also be more predictable with the new model in place.

SBST described yesterday's development as a "more sustainable option for the future", although it acknowledged it would have a "major impact" on the way it operated. "We are, however, prepared and will be able to tap on the experience of our sister companies in London and Sydney which operate in a similar tender regime," SBST added. Meanwhile, SMRT said that it is geared up to participate in the tendering exercise, and will continue to prioritise service excellence and operational performance in its existing bus operations.

Analysts expect an asset-light SBST and SMRT, with depreciation off their balance sheets, to be strongly positioned even with the introduction of competition. NUS' Prof Lee does not rule out a joint venture between a local and overseas player either.

To start, three packages - or 20 per cent of the existing bus routes - will be offered up for tender starting from H2 2014, with the new operators to start handling the routes from H2 2016. The contract for each package will last five years, with a possible two-year extension based on performance.

Over the last two years, LTA has studied other markets, such as London and Australia, where similar models have been implemented successfully.

When their bus service operating licences expire on Aug 31, 2016, SMRT and SBST will initially continue to operate the remaining nine packages under the contracting model to minimise disruptions to service. Progressively, these too will be offered up for tender. After 2022, all packages will be tendered out, with the aim of having at least three to five bus operators in the market.

Details of the first bus package will be released next week.

To safeguard the interests of staff employed by existing bus operators, the government will require new operators to make job offers to all workers servicing the tendered bus routes at similar terms and conditions to their current contract. This will be overseen by the Public Transport Tripartite Committee which comprises LTA, the Ministry of Manpower and the National Transport Workers Union.

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