J. JSCE, Ser. D3 (Infrastructure Planning and Management), Vol.67, No.5, Special Issue, I_837-I_848, 2011.

THE ORGANIZING OF PUBLIC TRANSPORTSERVICEUNDER SERVICE CONTRACTSWITH PUBLIC PLANNING
Emri Juli HARNIS1 and Shoshi MIZOKAMI2
1

Member of JSCE, Ph.D. Candidate, Dept. of Civil and Environmental Eng., Kumamoto University(2-39-1, Kurokami, Kumamoto, 860-8555, Japan)
E-mail: 093-d9407@st.kumamoto-u.ac.jp
2
Member of JSCE, Professor, Dept. of Civil and Environmental Eng., Kumamoto University(2-39-1, Kurokami, Kumamoto, 860-8555, Japan)
E-mail: smizo@gpo.kumamoto-u.ac.jp

Regulatory reform in public transport has become one of important issues in many countries, in order toimprove efficiency and provide better services to users. Since regulatory reform will bring about institutional and structure changes of the organization, then it will imply the way of the public transport services
regulated and managed.
This paper highlights how public transport service is organized under service contracts system, as one ofgrowing trends recently. That is to say a system of which the service delivery of public transport is conducted by business enterprise on specified target which is planned by authority, which works under contract
agreement between them.
The study focuses on the two cases namely both London’s and Seoul’s models. These will illustrate how
they are put into practice in those cities. It could be significant as an alternative in undertaking local public
transport reform efficiently.
Key Words: regulatory reform, public transport, service contract

1. INTRODUCTION
Recently, many local public transport agencies
are trying to improve efficiency and provide better
services of their public transport. Regulatory reform
is one of growing options for these purposes. Indeed,
there are various underlying reasons which are confronted by them each, such as the reducing of government funding for public sector, the changes ofregulations in the provision of public transport, orother reasons concerned with the improvement ofservices quantity and quality.
The extensive evidence internationally showedthat subsidized public transport services, provided ona monopoly basis by government’s operators in bothdeveloped and less developed countries tended to
become inefficient1). They were partial to produce
services for more than necessary (at above competitive rates), and service quality was often inferior2).
The experiences when such services were opened tocompetition, usually through a competitive tenderingand contracting process, were that substantial costsavings were achieved3). In the mean time, the usingof deregulated system in the provision of public
transport in some large cities, showed the drawbacks
in several aspects, mainly related to the market failure4).
In many countries, governments are pushing forthe introduction of competition in the organization of
public services and more broadly in public procurement5). The development of public-private
partnerships around the world is a good illustrationof this trend6). Moreover, the emerging of new hybrid model which is implemented in some countries
around the world over the last three decades has been
one of alternative choices in the provision of public
transport service. In other word, a model of which
the public and private sectors share responsibility indelivering the service7).
The service contract system is one of the growing
trends under hybrid model. The main feature of thesystem which is intended here is that the public
transport services are planned by a public agency,
and procured from business enterprises under service
contracts, often with competitive tendering8). In addition, although this system works under contract

I_837

agreement between government as authority andbusiness enterprises as operators but then authority
takes active responsibility for planning of the service.
This paper focuses on discussing of this kind ofsystem. In a rather simpler way, the term of service
contract system will then be used to represent such asystem hereafter.
In view of the regulatory reform is a process ofchange, it will bring about the institutional changes
or rule of the game, even in public transport sector.
Consequently the functions of each stakeholder
would also be changed. The new institutional setting
including the applying of service contract systemcreates new roles for all actors to run the system.
This will also change the structure of the public
transport organization itself. Thus, in the context ofpublic transport service, it will imply and influence
the way of the services to be provided, so become
important to organize it within an efficient manner.
This paper studies how the public bus transport
service is organized in such an organizational form,
as explained previously. The two cases, both London’s and Seoul’s model are used as illustration. It is
preceded by explaining the shifts toward the service
contracts system in those cities respective. This isthen followed by highlighting the organizing of
public bus transport services under such systems in
the cities, which covers some aspects namely planning, operating, and monitoring. In turn, it could be
worthwhile as input for local public transport in
conducting regulatory reform.

2. THE SHIFTS TOWARD SERVICECONTRACTS SYSTEM IN LONDONAND SEOUL
Both London’s and Seoul’s cases are interesting
to study since they had difference backgrounds inintroducing the service contracts system into their
public transport service. Moreover, their previous
systems in the provision of public transport service
were different each other. In case of London, its
regulatory framework in public transport has
evolved over the last three decades. It has moved
toward new system by introducing competitive tendering and undertaking the privatization of its publicly owned bus company gradually. It was very
different from the Seoul’s experience in conducting
its innovative public transport reform, which was
prepared in a short time, only around two years,
before going into operation in the year 2004.
In historical perspective on regulatory reform of
the bus industry, the United Kingdom led the way insignificantly deregulating the urban and rural public
transport market when it introduced the 1985
Transport Act9). Under the Act there are two distinct
systems in providing public bus transport services

through all The United Kingdom. The provision of
public bus transport services for local and regional
areas outside London is on the basis of unregulated
system. This means that the initiative to run public
bus transport services for passenger comes fromprivate companies. They can apply and chooseroutes, arrange timetable and fare to be charged,
based on a commercial basis.
At variance with outside London, bus service inLondon is operated by private bus companies as
operators, which work under contract to London
Buses (LB), a subsidiary of Transport for London(TfL). In addition, TfL is a functional body that responsible for delivering the Mayor of London’sTransport Strategies. LB manages bus services, byplanning routes, specifying service levels and ensuring the quality of services, and also responsible
for providing other support services, such as bus
stations, and bus stops. The contracts are awarded to
private companies through a competitive tendering
process, as a selection mechanism.
Previously, the provision of London's public bus
service was a publicly owned and subsidized bus
operation. Its service operation was an increasingly
costly public monopoly at that time. Under the
London Regional Transport Act 1984, London
Transport (LT), which was then replaced by a neworganization called TfL in 2000, was required to set
up subsidiary companies to run both bus and underground. It was also demanded to introduce competitive tendering to ensure LT operated economicallyand required less financial assistance from publicfunds. In 1985 LT set up a subsidiary known as
London Buses Limited (LBL), which was then split
into 13 locally based subsidiaries companies. In thesame year, LT also set up the Tendered Bus Division
to begin the process of competitive tendering. In a
consequence of the Act, LBL had to compete withprivate bus companies in order to get the right to run
public bus transport service. Finally, LBL was soldto private sector in 1994, and all of public bus
transport services are run by private companies after
that. The introduction of competition for the market
and the involvement of the private sector had therefore been gradual in London6).
The average number of bus passenger in London,
carried per day, had increased by 46.92% since 1985,
up from 3,124,658 passengers to 5,886,800 passengers in 200810). Most of the increase occurred after theprivatization. Moreover, based on his study on the
deregulation in bus systems of the UK’s metropolitan areas, White found the indication that total operating costs declined by 10.5% in London11). The
reduction in operating cost had been wholly swallowed up by subsidy cuts and mileage increase12).
The average number of bus passengers per day in

I_838

London andd Seoul can beb seen in Fig.1.
In contraast to London, before thee reform, thee operation of ppublic bus seervice in Seo
oul was run bby alarge numbeer of private bus companiies with virtuuallyno governm
ment control ofo routes, schhedules, or ootheraspects of sservice. Onlyy the fare waas determinedd by
the Seoul M
Metropolitan Governmentt even thouggh its
system was not reasonabble either. Since there waas nocoordinationn among thhe different bus compannies,
many routees were highhly circuitou
us, overlappping,and not adeequately inteegrated withh metro servvices
13
3)and betweenn bus routes themselvest. It was diffi
ficultby the time for bus passsengers to traansfer to anootherbus or subw
way. Else, whilst bus com
mpanies avooided
the operatioon in unproffitable areas,, there was hhighoverlappingg of service ono the most profitableprouutes.
Due to perm
manent licennses to routees owned by private compaanies, it was difficult to adjustaroutess according to ppassenger dem
mand at thatt time.
Public bbus transportt being suchh and the coonditions naturaally increased the numbeer of privatee vehicles, and led to agggravating traaffic congesttion.
Consequenttly, it reduceed the punctu
uality and sppeedof buses, aand made peeople to avo
oid travellingg by
taking bus if possible14). The declinin
ng of the num
mberof bus passeengers continnually broughht about less farerevenue, annd escalated deficit of bus
b operatioon in
turn. For instance, the averageanumb
ber of total ddaily
passengers pper bus fell fromf
1,093 in 1989 to 4994 in
200215).
The eminent action ofo Seoul pub
blic transporrt reform was thhe radical ideea of changinng its publicc bus
operation ssystem. It inntroduced whatw
so calleed asemi-publicc operation syystem that reetains privatee bus
firms but leeaves route, schedule, an
nd fare decissions
to the Seoull Metropolitaan Governmeent13). In addiition,
under this ooperation sysstem, it appllies a joint m
management off revenue, and competitiv
ve tendering system for trunnk lines, andd also contro
ols buses serrvice
operation prrovided by privatepcomppanies14). In supporting the achieving of the reform purposes, a fullscale reorgaanization of thet bus routees that integrrates
bus and subbway was put
p into pracctice. Bus rooutes
were groupped based onn functions into four liines,nam
mely trunk, feeeder, circulaation and wid
de-area liness.
Thee exclusive medianmbus lanes were also put onn
conngested streetts. Thereby, iit enabled thee adoption off
a bu
us rapid transsit (BRT) sysstem, in ordeer to increasee
the speed of trransit in Seooul. Moreover, the inte-gratted distance-based fare system wass applied ass
welll, so that citizens may trransfer to a bus
b or a sub-way
y without paying an addditional feee for certainn
disttance. As a result, the average num
mber of busspassengers in Seoul,S
carrieed per day, increased off
14.6
61%, from 3,932,000
3
inn 2003 to 4,6605,000 pas-seng
gers in 2009
9. Meanwhilee, the averag
ge daily fareebox
x revenue perr bus increaseed from US$$ 164 in 20044
to US$
U 392 in 200916).

3. THET
ORG
GANIZING
G OF PUB
BLIC BUS
S
TRANSPOT
ORT SERVVICE IN LONDON
N
AND
A
SEOU
UL
DespiteD
the previouspbuss operation systemssbothh
in London
Land Seoul weree different one
o another,,howwever, they changed theeir systems into hybridd
moddel after the reform. Thee public and private sec-torss share respo
onsibilities inn the provision of publicc
bus transport services in thoose cities fortth.
UnderU
the newnarrangeement, the operation
o
off
pub
blic bus tran
nsport servicce is run by private busscom
mpanies as operators.
oThhey work unnder contractt
withh local goveernment as aauthority to deliver ser-vicees on the asssigned routees, for a cerrtain period,,
based on plannning preparred by authhority or itss
agency.
Fig.2
Fshows the public bbus operatioon system inn
Lonndon and Seeoul before aand after th
he change orr
refoorm. Meanw
while, the serrvice characteristics anddsom
me aspects ofo public buus operationn system inn
Lonndon and Seo
oul recently ccan be seen ini Table 1.
(1) PlanningP
ressponsibility
The
T implementation of service contract systemmbothh in London and Seoul inn the provisiion of publicc
bus transport seervice showss the separattion of plan-ningg from operaation. The pub
ublic authority retains fulll
con
ntrol over pollicy and plannning, and also monitorss
opeerator’s perfo
ormance in delivering anda pursuingg
the previous defined objectiives. By sep
parating suchh

Fig.1 The aaverage numberr of bus passeng
ger per day in Loondon
and S
Seoul.

I_839

Fig
g.2 The change of bus operatioon system in Lo
ondon and Seouul.

Table 1 The service characteristicscanda some aspeccts of public bus operation systtem in London and Seoul receently.

ITEMS
Service chharacteristicss:
9 Area off service (kmm2)
9 Populaation (people)
9 Populaation density per
p km2
9 Bus passengers per day
9 Numbeer bus routes
9 Numbeer of bus com
mpanies
9 Numbeer of buses
Level of governmental administration, reesponsible foor service
Functionall body, responnsible
for servicee provision
Planning ccompetence::
9 Route pplanning
9 Frequenncy of servicce
9 Fare strructure
9 Bus stoop and terminnal
Operationn and managgement
9 Procureement systemm
9 Contracct system
9 Fare syystem
9 Fare mmanagement
9 Bus operation manaagement
Monitorinng system
Methods oof monitoringg

LO
ONDON

SEOUL

• 1,5721• 7,753,600
7• 4,9324• 5,886,800
5
• 700
7
• 17
1
• 8,000
8• LocalLlevel, thhat is the Greeater
LondonL
CounncilT
for London (TfL
L) via its• Transport
subsidiarys
Loondon Bus (LB)

• 605.25
6• 10,208,302
1• 16,866
1• 4,605,000
4
• 369
3
• 66
6
• 7,748
7• LocalLlevel thhat is the Seouul MetropolitanpGoverrnment (SMGG)• The
T SMG thrrough its com
mpetenttransporttauthhority

• LB
L
• LB
L
• TfL
T
• LB

• SMG
S
team
• SMG
S
team
• The
T SMG
• The
T SMG

C
T
Tendering (CCT) sys• Competitive
temt for entiree routes• Extension
Eof ggross cost un
nder
Quality
Q
Incenntive Contractt• Separated
S
andd flat fare sysstem• By
B third partyy in behalf off TfL• Authority,Acarrried out by iBUS
systems• Competitive
C
T
Tendering (CCT) systemforf trunk line s• Basically,Bgrooss cost contrract underjoin managem
ment of revennue• IntegratedI
farre system• By
B third partyy in behalf off SMG• Authority,A
cararried out byBus
B Managem
ment System (BMS)• In
I various meethods manuaally• In
I various meethods, includ
des using of
sophisticatedstechnology

functions, tthe public trransport agenncy's role iss focused on thhe mission of maximizzing service andridership wiithin public resource con
nstraints2). Inn themean time,, operator iss just accou
untable for ddaily
service opeeration on sppecific target determinedd byauthority.
Seen froom governmeental level off administrattion,
the responsiibility of pubblic bus tran
nsport servicees in
London andd Seoul recently is left to local levell authorities. Itt gives themm more pow
wer in deciision
making proocess for prooviding of theirtpublic bus
transport service.
As an inttegrated bodyy which is reesponsible forr thewhole of caapital's transpport system, TfL implem
ments
the Mayor of Londonn's Transporrt Strategy andmanages thee transport services wholly. It is direectedby a board whose membbers are chosen for theirr understandingg of transport matters and appointed byy the
Mayor of Loondon who chairscthe board. The poliicies
are implemeented by the Commission
ner for Transpport.
The while, in setting trransport strategy in Lonndon,
the Mayor of London has to consu
ult with Greeater

I_840

Fig.3 The workingw
relatioonship of organ
nizationsin thee provision of L
London’s bus seervice.

Fig.4 The mmechanism of thhe provision of bus
b service in S
Seoul.

London Asssembly as weell17).
Fig.3 shhows the worrking relatio
onship of thee organizations in the provission of publiic bus servicees in
London. Meeanwhile Figg.4 shows th
he mechanism
m ofthe provisioon of public bus
b service inn Seoul.
Moreoveer, the preseent of Londo
on Travel W
Watch(LTW) whhich is offficially know
wn as Lonndon
Transport U
Users Commmittee comes to the aid off thecomplaints of the bus services.
s
It is
i particularlly as
bus operatoor who operaates specified target orddered
by LB has not satisfacttorily resolved them. Ass theofficial waatchdog orgganization, representingtherinterests of transport users, despite thist organizaationis sponsoredd and funded by the London Assem
mbly,
which is paart of the Grreater London Authority,, butthen it is inndependent ofo the bus operators and T
TfL.
In addition,, based on thhe law, LB mustm also connsult
with LTW iin proposingg the changess of bus servvices
in London177).
In contrrast to Lonndon, the responsibilityy ofproviding ppublic bus trransport serv
vice in Seouul isgiven over tto the SMG. It is assistedd by some puublicagencies, inn carrying out
o planning, operating, andmonitoring functions. A team of thee SMG planss bus
ng for trunk llines,
routes, enfoorces competiitive tenderinalso evaluattes and monittors the wholle bus servicees in
Seoul. In prractice, the SM
MG coordinaates the plannningof routes whhich are preppared by themm with operaators
through the Seoul Bus Association.
A
It is includinng incoordinatingg the allocattion of subsidy to bus opperators, and thee distributionn of revenue ofo bus operattion,
which is colllected by designed organ
nization in beehalfof the SMG
G, under jointt revenue sysstem.
csystem(2) Procurement and contract
In most cases, as haad been the practice,p
the implementatioon of servicee contract systemsoftenn involved com
mpetitive tenndering in order to fooster
competitionn in public transport seervices. It iss intended to inncrease efficiiency of pub
blic bus transsport

serv
vices. Therefore, this is expected too reduce theeleveel of fundingg assistance ffrom authoritty in turn.
Practically,P
the organiziing of comppetitive ten-deriing system ini London aand Seoul ap
ppear in dif-fereent configuraations, thouggh basically making useeof a routes-based contract. Inn London casse, routes areegennerally tenderred individuaally, but often
n at the samee
time as other routesrin thee same area to facilitatee
serv
vice changess. It is taken effect to enttire network..
Theere are 700 routes approxximately which has beenn
put for competittive tenderingg in London. In addition,,
befo
fore the privaatization of its public coompany, theecom
mpetition waas between pprivate and public com-pannies initially.
As
A part of surface transpport within TfL, LB re-view
ws every rou
ute prior to ttender. In addition, to doo
so, LB takes in
nto account oof views froom the inter-esteed parties. ThisT
input wiill be used tot provide a
serv
vice specificcation, whicch covers th
he route theebuses will take, the frequenccy of the serv
vice, the typee
andd capacity off vehicles too be used, annd the mini-mum
m performaance standarrd. Operatorrs are thennasked to provid
de a schedulee to deliver the level off
serv
vice, and the total costt plus profit margin forr
prov
viding the servicesto thhe specificatiion. Further,,
LB issues Invittations to Teender (ITT) to approvedd
opeerator based on pre-quallification pro
ocess in ad-vannce. Contractts are awardded with the intention off
achhieving the most econnomically advantageouss
outccome withinn the resourcces availablee. Nowadaysstend
der evaluatio
on is based oon best valuee for money,,takiing into accoount of qualitty and safety
y as essentiall
feattures under Quality
Q
Incenntive Contraccts (QIC)17).
DifferD
from London,Lcom
mpetitive tenddering is justt
appplied for trun
nk lines in SSeoul, as a newnconcept,,
partt of the refoorm, which iis held by a team of theeSM
MG. This sysstem works on the division of theegreaater metropo
olitan area innto four zonees, centeringg
on thet public bu
us depots. W
When it was firstly intro-ducced, it was comprisedcoff 10 major axesaand 199
routtes. The opeerators formeed consortium
ms of 4 or 5
commpanies eachh. There werre 8 consorttiums whichhwerre establishedd from 38 com
mpanies, witth 2 tenderedd
bidss in each zon
ne. They werre evaluated on the basissof operatingocost, service aand operationn plans. Theefinaal four were selected foor a set of periodpof sixxyeaars14).
Basically,B
the contract syystem which is used bothhin London
Land Seoul nowaadays is on the basis off
Gro
oss Cost Con
ntract (GCC)). The implem
mentation off
QIC
C in London currently is aan extension
n of the grosss
costt model withh direct finanncial incentiv
ves for oper-atorrs linked to the quality of services, insofar TfL
Lretaains the revenue. This is in response to the olderr
net cost and gro
oss cost conttracts which had no suchh
1
an incentiveito achieve quaality targets17). In Seoul,,

I_841

Table 2 Competitive tendering and contract system in London and Seoul.

ITEMS

LONDON

SEOUL

Competitive Ten- • Route tendering system for entire
networkdering (CT) system
Executor of CT • LB as subsidiary of TfL
The number of• Increase, since enables potential opoperator
erators to take part in the process ofCT
Process of CT• Competition was between private andpublic companies before privatization• Apply pre-qualification system, before issuing Invitations to Tender(ITT) toapproved operators
Evaluation criteria of CT
Contract system

Contract period• Route tendering system for trunk lines
only• The team of SMG• Reduce, since some operators had toform consortium to take part for CT• Work on division of the greater
metropolitan area into four zones,
centering on the public bus depots• Comprised of 19 routes, with 2 tendered bid in each zone when it was
introduced• Operating cost, service andoperation plans• The best value for money, taking
into account of quality and safety
by Quality Incentive Contract• The Quality Incentive Contract which • Under joint management of revenue,is the extension of Gross Cost ConSMG retains fare revenue, and reimtractburse bus operators based on total
distance of service per vehicle• TfL retains fare revenue, contract
payments related to mileage operated • Shortage will be subsidized by SMG
and overall reliability of the service• A 5 year contract with possibility to a 2 • A 6 year contract for trunk lines whichyear extent based on performanceare put for tendering system

Table 3 The type of contracts based on the division of risks between authority and operator.

Type of Contracts

Production risk:
Authority

Revenue risk:

Operator

Authority

Gross Cost Contract√√

Net Cost Contract√

Management Contract√

Operator√√

under joint revenue management system, the SMG
retains fare revenue, and operators are secured thereimbursement in compliance with total distance ofservice, according to bus operation each. In addition,in case of shortage, the SMG will subsidize bus operators. Table 2 shows some aspects of competitive
tendering and contract system in London and Seoul.
Due to the authority retains fare revenue of bus
operation then it involves the central pooling of farerevenues, and payments to operators which concerned with the services and performance which isdelivered. Consequently, there must be agency that

responsible for collecting and distributing it. In
London and Seoul, such tasks are carried out by atraffic card company in behalf of authority, in thismatter TfL and the SMG.
Under GCC, despite the risk of service productions is transferred to private companies, but thenthey are still protected from full commercial risk,
since revenue risk is born by authority. It is different
from net cost contract where operator bears bothproduction and revenue risk. The while under management contract, both production and revenue risk
are borne by authority18). The type of contracts on the

I_842

basis of the division of risks between contracting
parties, both authority and operator, in the provisionof public bus transport service can be seen in Table
3.
However, in London, there was an attempt totransfer the both risks to operators under net cost
contract, which was applied in preparation for theprivatization of its publicly owned company, London
Bus Limited (LBL), until routes were tendered. It
was not only to shift the revenue risk to the operators
but also gave them the incentive to generate more
revenue by increasing the quality of the services.
Initially this contract system was not subject tocompetition as the routes were allocated to the incumbent operators by negotiating. However, thistrial seemed not successful, and only gross cost
contracts have been offered since 199919).
Concerned with the contractual form, the time
period of contract should be considered as well.
Under Quality Incentive Contract, LB signs up thecontract with operator for a 5 year contract with thepossibility to a 2 year contract extension on the basisof operator’s performance. In Seoul, under competi-

tive tendering, all contracts are signed for finite time
period of 6 years. The longer contract term will allow
for the bidder to offer the low price related to scaleeconomies, but reduce the opportunity for competition amongst potential operators.
(3) Monitoring of bus services
The monitoring is an important part in management cycle, including public transport sector. This isbeing more significant as the right of operating public transport service is left to some operators. Under agross cost regime, operators always have an incentive to supply less than the contracted amount ofservice, so the agreement needs to be enforced19).
Thus, the establishment of an efficient monitoring
system is required to ensure bus services are provided as defined target. Further, it could also be usedas feedback for policy formulation and development
to provide better public transport services to citizen
as users.
As part of efforts to maintain the quantity andquality of public transport service which is provided,
there are various monitoring systems which have

Table 4 Bus monitoring systems in London.

Monitoring
SystemObjects

Methods

Mileage
operated

Lost mileage within • Compare to contract agreement
operator control

Reliability

Operator’s ability
to schedule

Driver andvehicledeliveryService quality incompliance with
contract• Roadside survey about regularityand punctuality of service (3-5%of the whole services)• Mystery traveler survey, covers:
9 Static audit, survey at bus stands
9 Mystery shopping survey

Executor

London Bus(LB)

Attributed tobonus & deduction of payment
Yes

LB

Yes

Researchagency inbehalf of LB

Yes

Driver quality Driving skill ofdriver• Covertly assessment• Driver receives a graded score

Specialist
Contractor
of LB

No

Engineering
quality

Maintenance procedure and vehicles mechanicalcondition• Regular check of 25 % of each
operator’s fleet the whole year
• The average number of point per
vehicle, by scoring any defects

Independent
contractor
of LB

No

Costumersatisfaction
surveySatisfaction ofusers• Interview, includes: safety andsecurity, information, reliability,
cleanliness, staff behavior

LB

No• Made by phone, email and letter• Data is analyzed at route level

LB

No• Regular visits to operating garages, focus on administration system, handling and accounting forbus revenue and LB’s owned
equipment

Team of LB

No

Public corre- Public informationspondence data
Contract
compliance
auditsOperator’s compliance with thespecifications in
the contract

I_843

been applieed in London recently.. They incllude:
mileage opeerated, reliabbility, driverr and vehiclee delivery, driveer quality, enngineering quality,qcostuumer
survey satiisfaction, puublic corresspondence ddata,
contract com
mpliance auddits, and otheers sanctionss andremedies cooncerned witth the perforrmance of opperators17). The monitoring systems in London
Lreceently
are shown inn Table 4.
The threee earlier off the monito
oring system
ms asmentioned above, nameely mileagee operated, reeliability, driveer and vehiccle delivery monitoring,, areused to deteermine finanncial bonusess and deducttions
on the basiis of operatoor’s performance under QIC
which is im
mplemented inn London nowadays. It reefers
to Minimumm Performannce Standard (MPS) whicch isagreed betw
ween LB andd operator at the beginninng of
the contractt signed.
The deduuction of payyment for th
he lost mileagge isjust executeed for some reasonsrwithhin operator ccontrol, such ass non availabbility of stafff and vehicless not
being mechhanically fitt to be useed on the rroad.
Moreover, tthe reliability of service is expressedd on
the basis oof assessmeent of operaator’s abilityy toschedule, coontrol and adjustaservicee, by using data
result from roadside suurvey of 3-5% of the w
wholeservices. M
Moreover, the monitoring system unnder
driver and vvehicle delivvery, focuses on service qquality and in compliance withw contracttual requiremment,
by carrying out mysteryy traveler surv
vey whilst buus inservice. Besides it is associatedawith the finanncial
bonus and ddeduction payyment, the daata of this surrvey
is also shareed with operrator, so they
y can take acction
to address aany area of weaknesses
w
which
w
are ideentified. Furtheer, driver quaality and eng
gineering quaality
being conceern of moniitoring objeccts also, desspite
these are noot attributed directlydto in
ncentive paym
ment
under QIC.
The while, the custoomer satisfaction survey enables LB annd bus operaators to mon
nitor the leveel ofsatisfaction of customerrs in term th
he quality off serwhere
vices whichh is provided, and identtify areas w
improvemennt needed. It is includ
ding informaation
system, saffety and secuurity, cleanlliness, reliabbility
and drive bbehavior. Moreover,M
LB
B also uses andcollates pubblic informaation to rev
view, undersstandand addresss specific cooncerns, inclu
uding by unndertaking fieldd investigatioon, so as to beb more respponsive to userr’s need and satisfaction. All of availlable
informationn will be takeen into accou
unt in the evvaluation of tendders and recoommendationn for awardinng of
new contracts. Basicallly LB will resolver
any performance isssues througgh normal coontract mannagement, but thhen it retainns the right tot terminate any
contract as aan ultimate sanction.
s
In addition,areceently,
nearly all mmonitoring methodsm
are undertakenummanually, howeever, TfL hass started usingg a combinaationagenerallof technologiees, satellite tracking andpacket radio serrvice (GPRSS) data transsfer, to trackkd assure of timelytbus ooperation. ThisT
trackingg
andsysttem allows bus controlllers, so called iBUs, too
regu
ulate services to make thhem more reliable.
In
I Seoul, thee managing of public bu
us operationn
whiich is deliverred by somee operators iss undertakenn
by thet Bus Man
nagement Syystem (BMS), as a func-tion
nal body, a partp of the SM
MG. By utilizing intelli-gen
nt transport systems(ITS)) technology, this allowss
for a central bus control cenntre to monittor bus loca-tion
ns and speed
ds, adjust thhe number ofo buses as-sign
ned to any given
groute, communicaate with buss
driv
vers, and pro
ovide real-tiime informaation to pas-seng
gers waitingg at bus stopps or via thee internet. Inn
adddition, by maanaging and ttracking buss operation itt
cou
uld more ensu
ure the puncctuality and safetysof buss
opeeration. Furthher, as part oof the monitoring of bussopeerator’s perfo
ormance whholly, the reecorded dataa
andd information concerninng both relliability andd
safeety of bus seervice operattion will later on be con-cern
ns for the SM
MG in givingg incentives anda penaltiess
to busb companyy accordinglyy 14).
Moreover,Mth
he monitorinng of bus operation
o
inn
Seo
oul is under control
cof thhe Transportaation Opera-tionn and Information Servicee (TOPIS) th
hat functionss
as integratedi
traansport manaagement system to mon-itorr and coordin
nate all of traaffic conditio
ons and situ-atio
ons. It colleccts and proccesses all trransportationn
info
ormation deriived from rellevant sourcees, includinggBMMS, T-Moneyy card whichh is automaatic paymenttsysttem, automaatic violatioon enforcem
ment system,,poliice agency, anda transportt broadcastin
ng.
Other
O
than BMS andd TOPIS, some otherrmeaasures to mo
onitor busess operation are
a also un--I_844

Fig.5 Mon
nitoring system of bus service in Seoul.

Fig.6 The eelement of Seouul Bus Reform Citizen
C
Commiittee.

dertaken inn Seoul. Thee SMG open
ns up accesss topassengers to make reeport or sug
ggestion in tterm
services whhich is proviided, and co
onducts fieldd investigation as well. Somme concerns of citizen ssatisfaction survvey focus on:o mobility of bus servvice,economic ffeasibility cooncerning feee, convenieence,
reliability, ssafety, driverr attitude, andd bus systemm thatcovers the adequate off routes, buss stops, trannsfer
circumstancce, information and fare systems
as weell20).
In the earlyy of the refo
form, the citizen satisfacction
survey was used to get informationn and ensure thatthe new systtem which was
w implemen
nted was runnningwell. The reesult of conttinuous surv
veys was useed totake quick action to sollve the problem in questtion,and to be ffeedback forr the improv
vement of ssomeareas wherre some obsstacles still happened. The
monitoring system of publicpbus seervices in S eoul
can be seen in Fig.5.
The invoolvement of independentwatchdog is alsoirequired to complete innformation co
oncerning unnsatisfactory off users against public bus servicee. In
London, thhat sort of thingtis left to the Lonndon
Transport U
Users Commiittee, the while in Seoul too the
Bus Reformm Citizen Coommittee. The
T later playays asignificant rrole particulaarly at the beginning of S eoul
public transsport reform, likes in the eventeof drawwing
agreement aamong intereested partiess, and produucing
reform propposal focusiing on the conveniencee ofcitizens. Evven after puublic transpo
ort reform it hascontinued too operate as the new con
ntrolling boddy ofSeoul publiic transport, byb reviewing
g and discusssinga variety isssues from citizens perrspective. Ass an
independentt committeee, it consistts of the reepresentative off governmentt, bus industry, expert grooups,
and citizen groups in Seeoul14). The element
eof S eoul
Bus Reformm Citizen Com
mmittee is shhown in Fig..6.
(4) Consenssus buildingg and policy support
Other thhan some asppects which deal with pplan-ning
g, operating
g and monnitoring of public busstran
nsport service both in Loondon and SeoulS
as ex-plaiined previou
usly, the recoognition and understand-ing of the prob
blems whichh are confronting in thee
prov
vision of pub
blic transportt service itseelf, should bee
a significant con
ncern and meeasure as preeceding stageeof th
he reform prrocess whollyy. It has to bee undertakenncom
mprehensivelly and accuraately. Since the deliveryyof transportt
serv
vices shouldd respond to the differenttandd specific neeeds of users.. It will give guidance too
the clearly statedd reform objeectives and th
he designinggof thet reform underuapproppriate circum
mstance. Alllavaailable inform
mation as a reresult of grassping the ex-istence conditio
on will contr
tribute to thee discussionnrpartties accordingly.
substance with relevant
It
I is just posssible that connflict of interest would bee
obstacles. Sincee the changee of the systeem could in-flueence the importance off concerned parties thattmig
ght so enjoy existing situuation. Diffeerent groupssmay
y have diffeerent views cconcerning thet reform’ss
goaal. Therefore,, it is being ssignificant to assure themmto th
he whole objjectives of thhe reforms.
The
T rejectionn of driver unnion, bus com
mpany unionn,andd citizens, at the beginninng of the inttroduction off
the Seoul publlic transportt reform, refflected suchhthin
ngs as explained previouusly. In this regard theecom
mpetent authoority must pllay a role in anticipatingg
andd managing suchskind off conflicts byy facilitatingg
inteense and worrth discussioon. This proccess will en-cou
urage to mutual understtanding amo
ong relevantt
partties. It could also functioon to lessen thet hesitancyy
andd afraid of them in terms of guaranteeeing the pro-tecttion against theirtinterest..
The
T Seoul’s experience inn public tran
nsport reformmshowed that wiith his stronng commitm
ment, and as-nowhow stafffs, the May
yor of Seoullsisted by his kn
cou
uld make effforts in a ccertain direction variouss
objeections and oppositionsooof the interesst groups. Hee
wass also helpedd by the Buus Reform CitizenC
Com-mitttee, which was
w born to suupport and sm
mooth publicc
tran
nsport reform
m in Seoul. By doing intense andd
conntinued meetting and disccussion the SMG couldd
finaally reach th
he reform prroposal conssensus to bee
imp
plemented onn the basis oof collective understand-ing..
In
I conductinng the refoorm, the ex
xperience off
Lonndon was soomewhat diffferent fromm the Seoul..
Beyyond all queestion, it exttremely depends on theeform
m of legal auuthority whiich is left to empowereddboddy or institution to run suuch function
ns prescribedd
by the acts or regulations. In case of London, theegovvernment initiated the reform by introducinggcom
mpetition und
der tenderingg system and undertakingg
the privatizationn of its publiic bus compaany, in orderr
to increase the efficiencye
off its public bus
b transportt
serv
vice. This was
w realized by stipulatiing formerlyy

I_845

order to organizze public buss transport service underrservice conttracting sys-hyb
brid model, particularlyptem
m with public planning. Itt can be seen in Fig.7.

4. SOMES
MERITSM
O
OF PUBL
LIC BUSSOPERATIOOON SYTEM
M IN LONDON AND
D
SEOUL
S

Fig.7 Some consideration in organizing pu
ublic bus transpportm.
servicee under service contract systemsome undeerlying acts or regulatio
ons accordinngly
which was followed by technical prrocess to brinng it
into reality, either throu
ugh managem
ment buyoutts orsole it to laarger bus opperators17). All bus servicce inLondon is ru
run by privatee companies thereupon.
Absoluteely, the policcy support iss highly requuiredin performinng public traansport reformm. The overvview
of concerneed existing reegulation is importantiforr thecreating of aappropriate legallinstitutional framew
work
as referencee in applyinng the new system.
s
It coould
probably enncompassingg the regulaation about bus
operation syystem, and competitioncsystem,s
the role
definition of involvedd parties, and regulaatory
measures off financial suupport, likes a large amoountof subsidy w
which possibble needed forf the system
m torun. Therebby it could seecure an effecctive realizattion.
In turn it w
will also facilitate to elabo
orate concernning
the role andd responsibiliity of each paarty who invvolvein the provission of publiic transport service, and w
work
relation betw
ween them ini detail lateer on. Since, it isvery likely that lack off any of thesee areas couldd beconsiderable obstacles for the refo
orm to run w
well.
Thus the avvailability ofo sufficient institutionall capacity becomes crucial issues in thee implementaationbsence of it, thisof service ccontract systeem. In the aboption may not be possiible7).
osysstemMoreoveer the changee of the bus operation
perhaps impplies to som
me issues within organizaation
itself. Somee related mattters of resou
urces transfeer, inconsequencce of the reguulatory reformm, such as aasset,
staff membeers, and driver status, sho
ould be manaaged
well before the implementation. In the meantim
me, itcould also hhave some im
mplications an
nd consequenncesin term of operating syystem. It req
quires the inntroduction of tthe new systeem to both authorityaandd operator who will managee and operatee it. Thus, thhings
like workshhop and trainning should become siggnificant concerrn so as to im
mprove the skill and unnderstanding too members ofo staff, driv
vers, and otthers
relevant parrties concernned, in advance.
above, theree are
Based onn all of the explanationsesome considderations whhich could be paid intentioon inThe
T implementation of tthe new arraangement off
pubblic bus operation systemem both in London
L
andd
Seo
oul seems to havehthe samme purposes. They
T
controlltheiir public bus transport seervices underr service op-erattion carried out by privaate managem
ment. Publicc
authhority or its agencyatakess active respo
onsibility forr
plan
nning and leaaves the bus service deliv
very to somee
opeerators under gross cost ccontract systeem.
In
I London caase, notwithsstanding pub
blicly owneddcom
mpany had beeen privatizedd and public bus servicess
has been run byy private com
mpany, howwever the au-thorrity still maaintains coorrdinated stru
ucture of itss
pub
blic transportt services byy managing entireeroutess
netw
work. Meanwhile the chchange of bu
us operationn
systtem in Seoul is actually inntended to reestore publicc
resp
ponsibility in controllinng the prov
vision of itss
pub
blic bus serv
vices whichh was weak previously,,wheere authority retains all rooutes as welll thereafter.
By
B managin
ng entire rouutes networkk, it permitss
authhority to ou
utline servicee specification and per-form
mance targett. Thereby iit is much easier for au-thorrity to plan anda achieve th
the goals of thet provisionnof its public buss transport seervices. It alsso allows forr
the authority to maintain thee quantity annd quality off
serv
vice adequattely, respondd to passeng
ger demand,,ach
hieve the soccial goals off service pro
ovision, andd
faciilitate the in
ntegrated sysstem of public transportt
serv
vice. In addition, the inteegrated systeem seems too
havve played a majormrole inn Seoul. By grafting in-form
mation technnology ontoo their publlic transporttbusiness, it is veryv
helpful iin creating a more relia-bilitty public transport and eenhancing effficiency andd
quaality of pub
blic transporrt service. A concretee
meaasure as man
nifestation off integrated systems
is thee
intrroduction of trunktlines annd feeder lin
nes system. Itt
is notn only to integrateian unorganizedd public busstran
nsport operaation previouusly, but alsso has con-vertted highly coompetition bbetween busees and otherss
modde of public transport beiing a mutuallly beneficiall
linkking system. It also enabbles to securre others ad-van
ntages in term of efficieency of the services byy
avo
oiding dupliccation of serrvices withinn the wholeesysttem. It is in
ncluding the integration of fare andd
info
ormation system whichh has also beenb
imple-men
nted.
However, thet service coontact system
ms which areeapp
plied in Lond
don and Seouul require thee empowereddboddy of authoritty to undertaake some funnctions underrsuch
h a system. This
T is not oonly to condu
uct planningg

I_846

tasks, but also to procure the service from operators,
manage bus operation, and monitor the service provided by operators.
Despite both London and Seoul apply service
contract systems under control of local level authority directly, however, the structure of organization
which is responsible for planning, procuring, andmonitoring the service in those cities emerge in different forms practically. Indeed, it is concerned withthe underlying acts and process of the reform itself.
All of such functions are held and coordinated by
London bus in London. The while, in Seoul, to do so,
the SMG is assisted by some specific organizations
and competence authority. Moreover, the Seoul Bus
Association, who represents the interest of bus
companies in Seoul, plays a part in bridging the coordination between bus operators and the SMG.
With the total number of routes which is great,round about 700 routes, LB holds competitive tendering every 2-4 weeks. Therefore, it seems to bereasonably the present of LB as particular organization in handling such functions of public bus
transport services in London. This is not only responsible for enforcing continued tendering but also
executing other tasks concerning planning, operating,and monitoring of bus service in London.
Under a quasi public system, not all bus routes are
put on competitive tendering system in Seoul. As a
new concept, part of the reform, competitive tendering was just applied for 19 routes (5.2% of total
number of routes), when it was first introduced. It
was just applied for trunk lines, while for the feeder
lines, public bus service operation is still run by alarge number of private companies that work basedon agreement with the SMG under joint revenue
management. This system is adopted as a new rule inSeoul, results from consensus of the interested parties who involved in the reform process, particularly
the SMG and the Seoul Bus Association who played
leading roles in the reform process.
Indeed, the establishing of organization to plan,manage and coordinate the whole services should
consider the efficiency and effectiveness of its function. Since, it requires additional budget allocationfrom authority to support the operation of the organization. The choosing of organization form could
be associated with task’s function and responsibility,
including the size of area to be served, the complexity of service, and the usage of kind of technology
just like the scientific bus operation system which
has been applied in Seoul.
In term of the competitive tendering system as aselection mechanism to designate operators to run
public bus services, it has been successful in London.
Direct savings from competitive tendering have averaged 15 to 20 percent21). In the meantime, London

Transport found that competitively tendered service
had generally higher quality, and that when the
public operator provided service in a competitiveenvironment (faced with the threat of contract cancellation, like private carriers), service quality improved on the same services2). The while, competitive pressure from tendering process leads to situations in which operators must innovate in order to becompetitive in the market22). This indicates thatcompetitive tendering is not only could increase
production cost efficiency through direct saving as aresult of its process but also enhance service quality.
Further, for the authority it could reduce asymmetry
information as some operators offer the best competitive price and quality of service, in order to get
the right to run the services on the certain routes.
In the context of monitoring system, in London,
under quality incentive contract, the reliability ofservice, concerning both regularity and punctualityof service provided by operators, is measured bycarrying out roadside survey. It is very different ascompared to Seoul, which has applied the using ofappropriate technology for such functions. By utilizing an intelligent transport system (ITS), global
positioning system (GPS), and using a sophisticatedfare collection system, it could be conducted effectively. Under this system, authority can also monitor
the safety of bus service operations, and analyze thestatistic performance of bus companies by utilizing
smart card’s recorded data and others related information. All of available information will be analyzed
by TOPIS, and then used by the SMG as consideration in decision making policy for better service tocommunity as users. This system is not only to help
in creating flexible and efficient control over integrated public transport, but also in ensuring demand
responsive routing and scheduling, based concretedemand data.

5. CONCLUSION
This paper focuses on the study of organizing of
local public transport service, based on London’sand Seoul’s experiences. This describes the two
previous different systems of public bus operation,
which move toward the service contract system,
under various rational behind their reform respective.
It shows that the previous systems of public bus
operation both under public monopoly and unregulated system run by a large number of private companies are allowed for shifting toward such a system.
The changes toward the new arrangement ofpublic bus operation system in those cities werehighly concerned with the underlying acts or regulations and the processes which took effect in conducting the reforms themselves. These determined

I_847

the way of the competence authorities to take initiative to start, perform, and encourage the reform
process to come up with their expected goals, andinfluenced the result itself as well. It became more
relevant due to the reform process involved many
interested parties.
The separation of planning from operation undergross cost model which are applied in those cities
shows the role of involved parties both authority andprivate operators clearly. Moreover, since authority
more focuses on maximizing the service and delegates operational right to provide public bus services
to operators, so the availability of an effective organization and appropriate technology become significant in supporting to run and control public bus
services. Indeed in applying such a system, the solution adopted by one city cannot be directly transferred to another city. However, it is important torecognize that local circumstance of an area is different individually. Therefore it should be seen andput in particular situation of an area in question,
including by linking it with policy objectives of theservice provision, as is the case in London and Seoul.
The information on service contracts system of theirbest practices, should be developed and fitted withreal situation by making the best use of the advantages, things like competitive tendering system,
the utilizing of appropriate technology for planning,
managing, and monitoring of service, and considering obstacles to effective service contract system of acertain area, like institutional capacity, the availability of reasonably operators, and the choosing ofprocurement and contractual type as well.
This study doesn’t come to the conclusion ofwhich one is the better of those experiences. It isbeyond of the scope of the study, in view of the
backgrounds, the former systems, and the processesof change both in London and Seoul were different at
all. The stressing is more given to the way of organizing public bus transport service in those cities
each. Finally, it could be useful inputs and alternatives in conducting local public transport reform
under service contract with public planning.
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I_848(Received February 25, 2011)