Cost efficiency under negotiated performance-based contracts and benchmarking for urban bus contracts –are there any gains through competitive tendering in the absence of an incumbent public monopolist?

Author: Hensher, D.A. (2013)

Journal: Journal of Transport Economics and Policy (in press).

Keywords: bus contracts, gross and net cost efficiency, negotiated performance based contracts, competitive tendering, Australia, benchmarking, normalization

This paper uses data obtained from numerous sources in Australia to assess the extent to which negotiated performance-based contracts with actionable benchmarking can achieve as good as, or better, improvement in cost efficiency compared to competitive tendering when incumbents are not public operators. Stakeholders who promote the position that Government should choose to test the market for value for money through tendering, especially where incumbent operators demonstrate benchmarked cost efficiency, given the primary responsibility to the taxpayer, appear on the evidence in this paper to be inappropriately claiming noticeable benefits to society.