ATC240222: Report of the Portfolio Committee on Transport on its Attendance at the Tender and Contracting in Public Transport Training Hosted by the International Association of Public Transport in Brussels, Belgium From 26 – 28 September 2023, dated 20 February 2024

Transport

Report of the Portfolio Committee on Transport on its Attendance at the Tender and Contracting in Public Transport Training Hosted by the International Association of Public Transport in Brussels, Belgium From 26 – 28 September 2023, dated 20 February 2024

 

The Portfolio Committee on Transport (the Committee), having attended the course on Tender and Contracting in Public Transport in Brussels, Belgium from 26 - 28 September 2023, hosted by the training academy of the UITP (Union Internationale des Transports Publics), also referred to as the International Association of Public Transport, reports as follows:

 

1. INTRODUCTION

 

The Committee attended the Course on Tender and Contracting in Public Transport in Brussels, Belgium from 26 - 28 September 2023, hosted by the training academy of the UITP. The UITP was established in 1885 and is the only worldwide network to bring together all public stakeholders and all sustainable transport modes. As a passionate champion of sustainable urban mobility, UITP is internationally recognised for its work to advance the development of this critical policy agenda. UITP has a long history to its name and is the only worldwide network to bring together all public transport stakeholders and all sustainable transport modes.

 

 

 

 

 

 

1. DELEGATION

 

The Delegation was Ms RM Lesoma (Chairperson and Leader of the Delegation), Ms M Ramadwa (ANC), Ms F Khumalo (ANC), Mr T Mabhena (DA) and Ms L Tito (EFF). The Delegation was supported by Ms V Carelse (Committee Secretary).

 

1.2      BACKGROUND TO THE TRAINING

 

The training was proposed for Members of the Committee as it would outline the tender and contracting processes applied internationally. The training covered different contracting models based on competitive tendering and was aimed at addressing general considerations and high-level discussion on contracting and tendering. The course assisted Members to learn the general practice and approach of contracting in terms of the international context and different models of contracting. The learning objectives were:

 

•         To broaden knowledge on institutional and regulatory framework of public transport.

•         Allow Members to gain a deeper understanding of the Route tendering and Network tendering including the roles and competences of various actors, risks and responsibilities sharing between authority and operator, quality incentives in contracts, etc.

•         The course would further sharpen Members’ oversight role to ask relevant technical questions and make informed technical and policy suggestions and recommendations. Importantly, most of the Bills before the Committee regulates technical bodies in terms of transportation, in general, and the maintenance and management thereof.

 

The training focused on how the roles of public transport authorities vary between countries and regions in their relationship with public transport operators. It also focused on the various forms of contracting in public transport; the main challenges facing transport authorities for the future of contracting; and what it takes to organise a competitive tendering procedure for public transport services. It also looked at whether operators or the transport authorities should plan public transport services.

 

1.2.1 METHODOLOGY

 

Members participated in interactive plenary sessions which included an introduction and presentation from the course leaders and the trainer, followed by open discussions with participants and learn from skilful trainers. The UITP Training Programmes and all related processes are certified for ISO29990:2010 – the standard for learning services for non-formal education and training.

 

1. COURTESY VISITS: 25 SEPTEMBER 2023

2.1          COURTESY VISIT TO THE SOUTH AFRICAN EMBASSY IN BRUSSELS

 

The Ambassador Xasa welcomed the Delegation and gave a background to the South African relationship with the European Union and the strategic partnerships. South Africa is the only African country with a strategic relationship with the European Union. The Delegation was briefed on the upcoming South Africa / European Union summit. The Ambassador outlined the impact of the Russian and Ukrainian war on access to grains and fertiliser; the impact of the Carbon Negative Mechanism on South African imports; and on grey listing South African Business and Financial Institutions. The cost of travel to the European Union was highlighted as it was noted that from 30 October 2023, there would be no direct flights to South Africa as it was deemed too expensive.

 

2.2          COURTESY VISIT WITH VICE-CHAIRMAN OF THE COMMITTEE ON TRANSPORT AND TOURISM (TRAN) OF THE EUROPEAN UNION

 

The Delegation met with Mr Jan-Christoph Oetjen, a German Liberal Member of the European Parliament (MEP) from Rotenburg, Lower Saxony who is the Vice-Chairman of TRAN and leads the work of his party in the European Parliament in the areas of aviation, railways, and roads.  The European Parliament was not meeting during the time of the Committee’s visit to Brussels and Mr Oetjen attended the courtesy meeting. The discussions of the courtesy meeting focused on the funding by the EU (Global Gateway Infrastructure Fund) with respect to clean jet fuel projects and on the difference between the EU compulsory vehicle insurance cover policy compared to the South African state-supported insurance fund provided by the Road Accident Fund (RAF). The exchanges focused on the decarbonization of aviation, maritime and road transport in terms of affordability and the use of data to increase mobility.  The Delegation wanted an opportunity to learn from the EU on how they deal with vehicle accidents within the union, especially with reference to foreign drivers or passengers as it may assist the Committee in its work going forward with the RAF and the proposed legislation to amend the RAF Act on the aspects that affect claims for vehicle accidents involving foreign drivers or passengers. Mr Oetjen outlined the membership of the European Parliament and the individual competence of member states regarding road insurance and registration of cars.

 

1. COURSE ON TENDER AND CONTRACTING: 26 – 28 SEPTEMBER 2023

 

The Delegation attended the 3-day course on tendering and contracting presented by the UITP at the Novotel Hotel, Brussels and the content of the training is summarised below.

 

3.1       REGULATORY FRAMEWORKS AND THE RELATIONSHIP BETWEEN OPERATORS AND AUTHORITIES (PRESENTER: DIDIER VAN DER VELDE)

 

3.1.1     DIFFERENT OPTIONS OF TENDERING AND CONTRACTING

 

The introduction to the course outlined the different Public Transport actors, the types of authorities, their role and competences and the options for the allocation of decision-making in public transport between various actors from strategic, tactical to operational levels. It further focused on the potential roles for competition, concepts of competitive tendering in public transport and the type of contracts, levels of risk and sharing of risks and responsibilities between operator and authority. An overview was given of organisational forms in local public transport including route tendering, network tendering and direct award and deregulation.

The different options in tendering and contracting are:

• Competitive Tendering by route such as applied in London and Scandinavia. The operator has no power to determine the transport services.
• Competitive tendering by network which is the preferred French and Dutch mode. The operator has to determine the transport services (Netherlands) or should help to do so (Netherlands and France).
• Deregulation such as used in Great Britain (outside of London). The operator is free to provide whatever services are profitable. The authority orders additional (non-profitable) services via competitive tendering.
• Direct award. Many municipal operations are organised this way.  The operator needs to be incentivised for efficiency by other means than direct competitive pressure.

The decisions for the options to be taken depends on transport policy, mobility, accessibility, price level, energy transition, property regime and personnel takeover, allotment, duration of contracts, periodicity of competition, allocation of contractual risks and the procurement procedure. Further considerations are how to invite potential competitors, whether to negotiate or not, the attribution model and the control of competition. The various contractual obligations regarding services, vehicles, personnel, Information Technology (IT), revenue, monitoring, must be stated, along with the flexibility of the order during the contract and the quality management system, which may include monitoring and continuous improvement procedures, contract management attitude, the categories of incentives and level of potential penalties as well as the evaluation meetings.

 

3.1.2     MAIN CONTRACTING RISKS

 

The principle of good contracting is to position risks with the economic actor best able to manage them. The main contracting risks are proposed as follows:

Costs

• Unit cost of inputs
• Productivity: production management
• Investments: contract duration and depreciation, technology and obsolescence
• Productivity: external influences: infrastructure availability, congestion

Revenues (if allocated to operator)

• Income (dependent on service design and quality of service as well as fares)
• Economic development

Linked to incentive regime (“multiplies”)

• Regulated to quality, revenues, production.

Risks linked to changing context.

• Competition, legislation/regulation, investments

Contracting, if done well, is a source on clarity on the aims of the authority in its relationship with the operator and ensures transparency (costs and revenues) in the relationship between the authority and service provider. However, contracting alone is not enough: a mobility policy (urban or regional) which is clear and stable, is a framework for the contractual relationship. It also requires stable funding and an enhanced follow-up and reasonable attitude by the authority in the day-to-day management of the contract.

 

3.2       EUROPEAN UNION AFFAIRS: FOCUS ON REGULATION 1370/2007 (PRESENTER: CHRISTOPHE PHILIPPE)

 

The general purpose of the Regulation 1370 /2007 is to impose the provision of services of general interest on the EU Member State authorities when the forces of the market alone are not sufficient. The Public passenger transport services are rail (heavy rail and other tracked based mode) and road transport. It imposes Public Service Obligations (PSOs) through Public Service Contracts (PSC) and/or General Rules (GR).

The Regulation creates the framework applicable if exclusive rights and/or financial compensations are granted when contracting/imposing PSOs. The main elements of the Regulation are: Public Service Contracts, Obligations regarding the content of PSC (with some exceptions), competitive tendering procedure required (some exceptions apply, notably internal operators), information and publications requirements and the exemption of state aid prior notifications. The Regulation must be applied for national or international operation of public passenger transport services by rail (and other track-based models) and by road, when services are submitted to PSOs, and there is a granting of financial compensation and/or exclusive rights for the fulfilment of the PSOs.

The Regulation makes public service contracts (PSCs) almost compulsory, defines the minimum content of PSCs, defines the award procedures of PSCs and establishes specific State Aid rules applicable to the public transport sector. It does not interfere with the institutional structure of Member States or impose or define any PSOs. It further does not impose social, environmental, or quality criteria's and does not interfere with authorities' decisions on how to organise public transport services. Deregulated markets are allowed, controlled competition is the rule, closed markets are allowed under conditions and specificity for rail (open access).

The Regulation sets out the PSC and the minimum content of contracts, and the awarding rules for PSCs. Competitive tendering is the norm, but direct awarding may apply in certain cases. The procedures for public procurement might be applicable with competitive tendering. The Regulation sets out the tendering procedures that must be open to all operators, fair, transparent and non-discriminatory. Tender documents shall be transparent about social aspects, quality standards and subcontracting. After the tenders’ submissions, a preselection can be organised and negotiations are possible. Direct awarding is allowed in the case of an internal operator that is controlled by the competent local authority and it is operating its public transport services within the territory of the local authority, in cases of derogation (the size of the contract) and as emergency measures (maximum 2-year contract).

The Regulation sets out the contract’s duration: bus services: 10 years, rail and other tracked-based modes: 15 years and mixed modes services: 15 years if rail and other tracked-based modes exceed 50% (extended durations allowed under specified conditions).

The Regulation states the EU state aid rules to ensure fair competition within the EU's single market. When the four cumulative Altmark criteria are met, there is no state aid. The criteria are the operation of a service of general economic interest; the parameters for calculating the compensation must be established in advance; the compensation cannot exceed what is necessary to cover the costs of discharging the public service obligations (including a reasonable profit); and the provider selected through a competitive process or the compensation must be calculated based on the costs of a well-run company.

3.3       PUBLIC TRANSPORT REGULATION AND ORGANISATION: THE ROLE OF PUBLIC TRANSPORT AUTHORITIES (PTA) (PRESENTER: EMMANUEL DOMMERGUES)

 

An overview was given of the role of Public Transport Authorities. A Public Transport Authority (PTA) is a public agency responsible for the organisation of the public transport market, the definition and provision of public transport services either directly or indirectly through an operator. It is usually responsible for public transport fare levels, route designations and other public transport operating system policies, supervision, regulation and award of operating contracts and franchises. In some cases, the transport operating company and the authority are within the same government unit and perform policy, regulatory, planning, and operating functions.

In other cases the authority is a separate public agency that does not have any operating responsibilities, but establishes public transport system policies and acts as the system’s regulator.

Generic Principles for a PTA are:

• The power to act, more specifically the legislative authority, effective financing and ability to set operating standards;
• Longevity, in the form of long-term planning which can overcome ‘political short-termism’ inherent in city political terms of office;
• A strong partnership between a political champion and a strategic administrator to drive the integrated transport agenda in a city;
• An investment logic to the transport authority, that looks at transport holistically through including other aspects that impact on the financial sustainability of the public transport system, such as the location of housing;
• Data-driven planning which enables evidence-based decision-making that underlines the investment logic and enables the effective monitoring of the performance of transport operators.

 

3.3.1     DIFFERENT TYPES OF PUBLIC TRANSPORT AUTHORITIES

3.3.1.1 NETWORKS AND MODAL INTEGRATION

 

The PTA oversees integrating networks, to make public transport more accessible and more affordable in terms of Ticket integration, Fare integration, Timetable integration and framing a fragmented organisation of public transport.

 

3.3.1.2 SERVICE PROVISION AND FUNDING: INCREASING EFFICIENCY AND REDUCING COSTS

 

The PTA oversees determining the level of services in terms of supply and offerings. It is ensuring value for money and the operators in competition are expected to deliver the service at the best price for a certain length of time. It is also in charge of framing retributing the operator(s).

 

3.3.1.3 NEED FOR WIDER POLICY INTEGRATION: TOWARDS MOBILITY AGENCIES

The PTA encompasses associated mobility competences for public and private transport: car traffic, parking management, taxi regulation, road charging, bicycle sharing, car sharing, etc.. Beyond mobility, the PTA can also be involved in land use planning, social inclusion and economic development, sustainable development and “green” streets and investment in infrastructure. Public Transport Authorities face challenges with manpower resources gaps, climate change adaptation, energy transition, tactical urbanism, public transport inclusivity and public transport financial sustainability.

 

3.4       CASE STUDIES: PRESENTING THE OPTIONS IN TENDERING AND CONTRACTING

3.4.1     GROSS-COST ROUTE-BASED COMPETETIVE TENDERING: COPENHAGEN (PRESENTER: PIA PREIBISCH BEHRENS)

 

Movia is the Public Transport Agency that is responsible for buses and certain local rail lines in Copenhagen. It is owned and financed and works on behalf of the two regions and the 45 municipalities. Its goals are defined in its Strategic Mobility Plans every four years and orders for traffic are placed every year. Movia’s turnover is 600 million euros and approximately 180 million passengers a year are transported on 450 bus lines, 9 local railway lines and demand responsive services. The 1 315 buses are owned and run by 8 private companies. The tender is awarded to an operator who is responsible for the buses, drivers, depots, charging infrastructure, service, quality and operations control.  Movia is responsible for the timetables, marketing and traffic information, fares and sales, coordination with other public transport companies, coordination on infrastructure and follow up.

 

Division of risks

• Movia applies index-regulation of costs due to changes in salaries, diesel, electricity etc. along with limits and compensation for changes in service quantity/number of timetable hours and buses. There is flexibility of service quantity for long contract periods. A maximum of 30%. expansion of timetable-hours and a maximum of 20% reduction of timetable-hours
• Maximum expansion of 3 buses per contract with up to 20 buses (6 buses with 21-40 buses, 9 buses with 41-60 buses etc.) is allowed, with a maximum reduction of 3 buses per contract with 15 buses per contract with 15-20 buses (6 buses with 21-40 buses etc.)
• There is a limit on the annual numbers of changes of timetables.
• Compensation if Movia does not meet the deadlines for changes and if there are changes in the quantity of empty running buses. There is also compensation if there are changes in distribution between timetable hours and layover.
• Movia also compensates for ineffective use of the drivers if it changes distribution between timetable hours (open for passengers) and layover between ‘blocks’ (e.g. changes of the bus route frequency).
• There is compensation for changes in the distribution of working hours during the day, evening, nights or weekends and for changed salary costs if Movia changes the distribution of timetable hours (e.g. extension of driving in the evening/night or on weekends where labor costs are higher).

 

Movia changed its Tender Award Criteria to simplify the tender and contract management, improve the level of quality performed and with the implementation of Zero Emissions the environment criteria was diluted.  More weight was added to the quality criteria. In order to lower the cost of transition to Zero Emissions, Movia extended the ordinary period of the contract from 6 to 10 years. The longer contract period (10 years and 2 years) minimises the operators’ risk of not being able to depreciate the buses over the normal service life of a bus and minimises the risk for the operator not to perform the quality level they bid at the tender. An ordinary contract period of 6 years with extension options for 2 x 4 years gives incentive to focus on quality during the whole contract period.

 

Quality Management System

Movia implemented a quality management system that is based on passenger satisfaction, service level / reliability and quality breaches.  Passenger satisfaction is measured for 6 targets, namely the noise limitation from the bus, compliance with timetable, the bus driver’s driving, the service and appearance of the bus driver, the interior condition of the bus, and the indoor climate of the bus.

The passenger satisfaction is based on interviews of passengers on the bus. The result of passenger satisfaction is calculated as an index based on answers from “very satisfied” (value: 100) to “very unsatisfied” (value: 0).  Reliability is the percentage of realised driving of planned driving. If the performance is minimum 99,90% the operator can achieve the right to extent the contract. The reliability is primarily based on real-time data (GPS tracking of the bus) and the ticketing system.

Quality breaches are based on inspections at depot, in operating buses and data based follow ups. The quality breaches are early driving from end station or more than 2 minutes late departure; maintenance and cleanliness, not correct announcement of bus stops, late reporting of operational irregularities, non-current or lack of passenger information and incorrect ticketing.

Errors and lack of performance is categorised in “error-groups” with different level of penalties, from “error-group” A to D with differing financial penalty levels and measured over a period of 1 year.  If the penalty for quality breaches is less than 5.000 DKK (670 EUR) per bus, the operator can achieve the right to extend the contract.

 

3.4.2     DIRECT AWARD CONTRACT: AMSTERDAM (PRESENTER: PETER DE WINTER)

 

The public transport system, per the Public Transportation Act (2001) is based on the decentralisation of 13 Public Transport Authorities. Tendering is mandatory, usually without negotiation (except for the four biggest cities where there is a possibility of Direct Awarding to an “internal operator”. Vervoerregio Amsterdam, the Public Transport Authority, has a partnership of 5 municipalities. The Public Transport Authority grants concessions by tendering or direct awarding, subsidises operational costs and infrastructure and monitors and manages the concessions. It has the following 4 concessions:

1. Amsterdam City (Bus, tram and Metro) - which is directly awarded

2. Zaanstreek (Bus) – public tender of network

3. Waterland (Bus) – public tender of network

4. Amstelland Meerlanden (Bus) – public tender of network

 

Amsterdam City

 

The Amsterdam Concession Area was created when the 2 000 Passenger Transport Act came into force. The main aims of the legislation were to reduce  political influence, increase ridership and revenues and increase efficiency. The former Municipal Transport Company of Amsterdam, GVB, then passed into the Concession “Stadsvervoer Amsterdam”, with Vervoerregio Amsterdam as concession grantor.  It follows Direct Awarding based on two conditions: decisive control of Transport Region over “internal operator” GVB (agreements with 100% shareholder being the Municipality of Amsterdam) and agreements on requirements, performance and budget via benchmarking against comparable parties, whether or not in combination with growth/efficiency targets during the term.

 

Amsterdam Concession: Parties and Roles

The roles of the parties in the Amsterdam Concession are set out as follows:

Vervoerregio Amsterdam (Public Transport Authority)

• Grants concessions by tendering or direct awarding
•    Subsidises operational costs and infrastructure.
• Monitors and manages the concessions.

 

GVB (Public Transport Operator)

• Local Operator, 100% shareholder: City of Amsterdam
• Maintains rolling stock and most rail infrastructure.

 

City of Amsterdam

• Largest and most important/influential municipality
• Political majority in favour of direct awarding
• Owner of strategic rail assets (infrastructure and rolling stock)
• Maintenance mainly contracted out to GVB Rail Services

 

The network consists of 5 Metro lines, 2 Light-rail lines (1 under construction), 14 Tram lines, 44 Bus lines (22 daytime and 10 nighttime), and 8 ferry lines (which are not public transport). The public transport budget for Vervoerregio Amsterdam was approximately € 350 million in 2010. With the installation of new (right-wing) national government (“Rutte 1”) in 2010 mandatory tendering of public transport was done in the 4 big cities (Amsterdam, Rotterdam, The Hague, Utrecht) with a structural budget cut of 20% for Vervoerregio Amsterdam. In 2013, the government “Rutte 1” fell, and since the new government “Rutte 2” came into force, no more mandatory tendering for public transport was done in the big cities and direct award was also possible. The budget cuts remained due to the economic crisis. The analysis of the Amsterdam network showed that the Amsterdam (tram) network evolved organically from 1900 and that the system was originally set up to serve local transport demand. There was no change of the concept/structure while the city grew therefore the network no longer fits on the needs of (potential) travellers. The growth of agglomerative traffic and by heavy rail compels Vervoerregio to reconsider network layout, but the current contract leaves little room for GVB to implement fundamental changes to raise network efficiency.

 

Contract revision

The Daily Board Vervoerregio decided to adapt the existing contract with GVB to respond to recently changed circumstances/views which included the major national budget cuts starting from 2012 and the current network which no longer fits the (potential) travellers’ needs. The aims of the adapted contract were higher transport volume(passengers/trips) for a lower subsidy: “more for less” and a network that better suits the demand of (potential) passengers. GVB should have more freedom to develop network, there may be a need to change the way the GVB is “steered”, GVB determines the right incentives and contractual mechanisms for a new contract and invest in infrastructure to create a more reliable and faster network.

A new financial (subsidy) model was implemented. Part of the subsidy is lump-sum, and part is variable and depends on the performance by GVB (based on growth of passenger-kilometers during peak hours), with performance indicators in conjunction with new control mechanisms. Output-indicators are embedded in the contract with a Bonus/Malus- and a penalty-system. Presently there is no extra freedom on Tariffs and Distribution in the contract and the framework is fixed by SRA. GVB can use the available room within the boundaries.

The concession period was revised from 2012-2018 to 2014-2024. More operational freedom was given to GVB. The minimum requirements are lower and there is no more prescription of lines by the SRA. New incentives were added in the contract. The subsidy is partly based on traveller-kilometers during peak-hours with a bonus on traveller satisfaction. There is a decrease in the operational subsidy from € 103 Million (2012) to € 36 Million (2024). There is a new approach for Social Safety (output-based) with more room for GVB to commercially exploit the metro stations.

The revision of the contract increased patronage by 40% of trips over 10 years. At the same time the operational subsidy was reduced. There is an increase of 15% more efficiency in rail infrastructure maintenance.  Vervoerregio was able to save the subsidy and invest in rolling stock (new metros and trams).

 

3.4.3     MULTIMODAL NETWORK TENDERING: DIJON METROPOLE (PRESENTER: NOLWENN LEGUILLON)

Dijon metropole has 160 000 inhabitants. Keolis is the public transport operator. From 2017 it was awarded the contract for operating the bus and tram network and from 2017 - 2022 was awarded the global mobility contract. Dijon Metropole renewed a new global mobility seven-year contract from 1 January 2023 with Keolis worth € 576 million. The global mobility plan facilitates travel within the metropolitan area that covers 2 tram lines, the bus network, 10 underground car parks and on-street parking spaces, self-service bikes and bikes for long-term lease. The contract, under the DiviaMobilites brand, brings together public transport, parking and cycling with the use of multimodal tickets across the network. The offers for the tenders are evaluated on the quality of the service (45%), financial and economic conditions (40%), legal engagements (10%) and environmental engagements (5%).

 

4.         PUBLIC TRANSPORT TENDER AND CONTRACTING IN SOUTH AFRICA

In the South African space of public transport contracting or tendering for operations of types of public transport on routes, the mode predominantly benefitting from these contracts or tenders are Bus services, either for subsidised contracts, Bus Rapid Transit services or as feeder services for supplementing Gautrain services. The following prescripts should be adhered to by all national government departments, and bidders, namely Constitution of the Republic of South Africa, 1996; Preference Procurement Policy Framework Act, Act No.5 of 2000; Public Finance Management Regulations (Framework for Supply Chain Management published on 05 December 2003, Public Finance Management Act (PFMA); all national and provincial practice notes on supply chain management and other sectoral legislations. The PFMA, in general provides a clear regulatory framework for the tendering.

 

4.1       THE SOUTH AFRICAN PUBLIC TRANSPORT INDUSTRY

 

The public transport industry in South Africa consists of three main modes of transport: the traditional commuter rail system and the Gautrain high-speed rail between Johannesburg, Tshwane (Pretoria) and the Oliver Tambo International Airport; the subsidised and unsubsidised commuter bus industry, including the Bus Rapid Transit (BRT) systems and a 16-seat minibus taxi industry.

Provincially managed and subsidised commuter bus services are mainly funded by the nine provincial governments by means of a public transport operations grant (PTOG) in accordance with Schedule 4 of the Division of Revenue Act (DORA). These funds are transferred via the Department of Transport (DoT) to the provinces for contracted commuter bus operations. This is a conditional grant that can only be used for provincially contracted bus commuter services. The commuter rail system is funded by the DoT by means of a transfer of funds from the DoT to the Passenger Rail Agency of South Africa (PRASA). The taxi industry is not directly subsidised by government but participates in a Taxi Recapitalisation Programme (TRP), in terms of which taxi operators receive a once-off capital grant, which aims to assist taxi operators in replacing their vehicles. This grant is budgeted every year by the DoT.

One of the first tasks of the DoT post-1994 was to establish a new policy framework for transport in South Africa. The foundation of the new policy approach was embedded in the 1996 White Paper on National Transport Policy (DoT 1996). As far as commuter transport was concerned, the White Paper recommended that subsidised commuter bus services be put out to competitive tender. In 2000, the government adopted the National Land Transport Transition Act (NLTTA), which gave legal status to the contracting of commuter bus services as well as the acceptance of negotiated contracts under specific circumstances (DoT 2000).

Interim Contracts

As a transition measure to competitive tendering, the DoT concluded interim contracts (ICs) with all subsidised bus operators in 1997 with the aim of putting such services to competitive tender by July 2001 (Naude 1999:181). Between 1997 and 1999, a number of competitive tender contracts were already entered into with bus operators. Between 1999 and 2001, the process gained momentum but began stalling after a court case in the Western Cape where the local operator, Golden Arrow Bus Services, took the DoT to court for failing to meet the requirements of the NLTTA that stipulated that services had to be put out to tender, based on public transport plans. An additional concern to government was the substantially higher costs of the competitive tenders when compared to the original subsidy system which it was replacing (see Walters & Cloete 2001) and the lack of sustainable funds to fund the contracting system. At this time organised labour also voiced its concern about the impact of the tendering system on job security and wage levels. This caused the DoT to put a moratorium on further competitive tenders in 2001 (DoT 2012:10).

 

Negotiated Contracts

A number of negotiated contracts were concluded between 2000 and 2003 as labour’s concerns could be dealt with in the negotiation process and the cost of the services could be negotiated with the operator. Contracts that reached their end-of-term since 2003 were automatically extended on the same conditions as originally agreed to but on a month-to-month basis (DoT 2012:7).

In a further development in 2009, the National Treasury and the DoT informed the bus industry that all ICs had to be converted to kilometre-based contracts in order to limit the subsidy claims of operators (DoT 2009). Prior to 2009, these contracts were all based on a passenger subsidy base – the more passengers that were carried, the higher the operator’s claims. These operators experienced substantial passenger growth over a prolonged period because of a vibrant South African economy and inroads being made in the taxi industry market. This resulted in increased and unpredictable subsidy claim amounts, which complicated DoT budgeting. Following the conversion of these contracts to kilometre-based contracts, all contracts were ‘frozen’ at the agreed kilometres that operators produced under their respective contracts (E. Cornelius [Executive Manager: SABOA], pers. comm., 12 May 2014). No additional subsidised kilometres were allowed. Other forms of contracting, such as tendered and negotiated contracts, were already kilometre-based and limited to the originally agreed upon network kilometres in those contracts.

Some of the ICs are now 26 years old – although they were foreseen originally to be valid for a maximum of 3 years – and operators have been on short-term extensions of contracts for 20 years (from 2003, when the first originally tendered contracts expired). Since 2001, no expansion of the commuter bus system has been allowed despite significant in-migration into the urban areas and community needs for affordable, safe and regular transport services.

It remains government policy to tender and negotiate subsidised commuter transport services, but there has been no market movement since 2001, when the moratorium came into effect. A number of negotiated contracts were concluded up until 2003.

 

4.2       APPLICABLE LEGISLATION

 

The South African White Paper on National Transport Policy of 1996 makes provision for tendered contracts and stipulates amongst other that no service may be subsidised if such service is not competitively tendered. Following the White Paper, further discussions between government and the organized bus industry took place on how to accommodate government-owned and operated bus companies in the tendering system, as these operators were not able to competitively tender for services (not financially ring- fenced in terms of the requirements to tender, and their fleets were generally run-down and under maintained). Hereafter the policy was amended to make provision for negotiated contracts where the government would, once only, negotiate a contract with government-owned (parastatal) and municipal transport operators, for the delivery of services. The National government tender process is a subject to a range of legislation. The following acts and regulations have been identified as being the most pertinent in this regard:

 

Constitution

In terms of Sections 217(1) of the Constitution (1996), when an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.

 

Public Finance Management Act (PFMA)

PFMA was promulgated in 1999 and is mainly focused on the provision of sound financial practices to promote effective service delivery to people of South Africa through effective, efficient and economical use of existing resources (Luyinda et al., 2008:30).

Section 38(1) (a) (iii) of the PFMA stipulates that the accounting officer of a department must ensure that the department has and maintains an appropriate procurement and provisioning system, which must be fair, equitable, transparent, competitive, and cost-effective. Section 76 (4) (c) states that the National Treasury may make regulations or issue instructions concerning the determination of a framework for an appropriate procurement and provisioning system which complies with the same criteria. These sections support section 217 (1) of the Constitution.

 

Treasury Regulation

Treasury Regulations and General procurement Guidelines linked to procurement and tender procedures which are updated from time to time. Proper and successful government procurement rests upon certain core principles of behaviour - the Five Pillars of Procurement. They are best described as pillars because if any one of them is broken the procurement system falls. The Five Pillars are: Value for Money, Open and Effective Competition, Ethics and Fair Dealing, Accountability and Reporting and Equity.

 

The Preferential Procurement Policy Framework Act, (PPPFA) Act 5 of 2000.

This Policy Strategy is provided against the background of the provisions of the Constitution and subsequent enabling legislation and the promulgation of new BEE legislation and amendments to the PPPFA as contemplated by government.

 

National Treasury Practice Notes (NTPN)

Although NTPN is regularly amended, practice notes are issued by National Treasury with additional information regarding policy matters or instructions regarding procedures. An example is NTPN practice note 7 of 2009/10 which deals with declaration of interest by all involved in the tendering process.

 

National Land Transport Act 5 of 2009 (and Notice 568 of 2013 – model tender and contract documents for public transport services per regulations)

Sections 40-46 sets out the prescripts for the Integration of bus contract system into larger public transport system, Negotiated contracts, Subsidised service contracts, Commercial service contracts, the requirements to qualify as tenderer for commercial or subsidised service contracts, the involvement of municipalities in public transport services and the existing contracting arrangements.

 

5.         COURSE WORK COMPARED TO THE SOUTH AFRICAN EXPERIENCE

 

Although the aim is always to provide the international accepted best standards or best practices in the provision of public transport, South Africa is unique and has its own set of policy considerations for the provision of public transport within the country as well as within the African Union (AU) and the Southern African Development Community (SADC) region.

 

Our public transport modes are managed and operated by both private as well as state owned agencies, with the largest public transport mode being the private owned minibus taxi industry, followed by the state-owned passenger rail services provided by the Passenger Rail Agency of South Africa (PRASA) operating Metro Rail and the Gautrain Management Agency (GMA) operating the Gautrain. The next tier is the privately owned but state contracted (either municipal, provincial or national contracting authorities) subsidised bus services such as PUTCO and Golden Arrow (under the Public Transport Operations Grant) as well as the municipal owned Metro Bus services (Joburg Metro, Durban Metro and Tshwane Metro to list a few under the respective municipal budgets) and municipal contracted and concessioned Integrated Bus Services or Bus Rapid Transit services (under the Public Transport Network Grant) such as the A Re Yeng, Rea Vaya and MyCiti to list a few. Although we have the Cross-Border Road Transport Agency (C-BRTA), - which manages and regulates transport operating licences for the cross-border transportation services provided by some private public transport operators, - we do not yet have a specific transport service contract, similar to those in the European Union, for the provision of public transport services across state borders within the continent or region.

 

The various transport policies and legislative provisions listed above do, however, share similarities with the contract types, contracting via open and transparent tendering processes and industry regulation as well as the types of contracting authorities presented during the UITP Course. Our legislation also provides for agreements that can be concluded within  SADC and AU regions for purposes of allowing cross border transportation.

 

South African public transport legislation does provide for tender as well as negotiated contracting for road based public transport modes and even provides sample contracts for contracting authorities to make use of. Furthermore, it allows for these types of contracts to be concluded by all three spheres of government (national, provincial and local) independently as well as proposed Public Transport Authorities (such as the Transport Authority for Gauteng) as allowed for in the amendment provisions per the National Land Transport Amendment Bill [B7-2016] which is still under consideration by the National Council of Provinces (NCOP).

 

The successful use of these legislative provisions and quality contracting to provide quality public transport, will depend on the eradication of fraud and corruption in contracting institutions as well as the improvement of supply chain management policies to ensure proper public financial management by all state institutions and entities involved in the provision and regulation of public transport.

 

6. RECOMMENDATIONS

The Committee recommends the following:

6.1 Delegations of Committees to attend these training sessions or study tours should be more inclusive and not limited to such a number that excludes Members of smaller parties;

6.2 Annual Performance Plans and Strategic Plans of Committees that indicate the attendance of these types of training sessions or planned study tours must be taken into account when approvals are sought as these should allow Parliament management to adequately allocate funds for these events.

 

Report to be considered