However there are several other considerations which might make a gross cost contract more attractive. Since the net cost scheme allows operators to increase revenues by operating a service which attracts new passengers, it might be expected that the degree of competition for such a potentially lucrative contract would be high. Halvorsen shows that in the US the cost-plus schemes have generated more bids than those for gross cost with incentives schemes by investigating the extent of competition for 98 competitively awarded contracts. 53 of these simply had contracted paratransit services. Where an operator will carry a larger amount of risk under a franchise, fewer bids are received.
Operators appear to be risk averse.
White and Tough have used UK evidence to illustrate the different levels of competition for contracts awarded competitively under gross and net cost schemes. The UK provides an interesting testing ground for this since different mechanisms have been used by the same authority for different contracts. Here again the higher the risk to the operator, the lower the extent of competition. Table 2 shows, from White and Tough's investigation, that none of the net cost contracts produced more competition than those for gross cost contracts. 3.05 3.66 Costs Competition itself is not important, however.