Designing new performance-based incentive regimes for operating contracts in the Province of Gipuzkoa, Spain

Abstract

Over the last several decades, local transport authorities in Europe and around the world have introduced competitive bidding in concessions for providing bus service, often resulting in reduced costs for service. The main caveat to this approach is that without proper oversight by the authority, operators may reduce quality to cut costs and maximize profits. To counter this, performance regimes are developed and incentives are typically offered to achieve the policy goals of the authority. Through an analysis of current theory and practice, this thesis is intended to serve as an introduction to the end-to-end process of transport contracts- drawing from the fields of contract economics, organizational structure, service quality, and performance measurement as they relate to public transport service. Expanding on current practice, suggestions are offered for future interurban bus operations contracts in the Province of Gipuzkoa, Spain. First, several recommendations regarding contract structure and bidding procedures are discussed, proposed, and demonstrated. Then, under the framework of the European standard on quality management in public transport, a selection of performance measures are proposed. These measures were especially selected and designed for the technological capacities and operational conditions of Gipuzkoa. Several of these measures (ridership, on-time performance, and completed service) are then suggested for incentives within future contracts. Representative incentive levels and methods for calculating and paying each are proposed for an upcoming contract currently under consideration in Gipuzkoa.