This is in contrast to what they have done with the municipal water companies, the majority of which have taken the corporate option, and have already attracted outside investment. In that many past problems of MTCs were due to political interference in decisions concerning service routes and frequencies employment, salaries, and capital investments, the cities would do better to retain the regulatory role for themselves, and let the mass transport services be provided by independently managed organizations, whatever their ownership structure. Service contracts are mostly based on direct negotiations between a city and a single supplier, typically the city's own transport operator. The contracts contain agreed service requirements, remuneration, and penalties for non-performance. With a single exception, operators take the cost risk only.
Remuneration is based on cost patterns dating from the preceding period of monopoly provision.
This practice does little to pressure operating costs downward or generate better services. Two improvements are recommended. Firstly, assuming that contracts are awarded under direct negotiations with a single operator, specific productivity targets and incentives should be built into service contracts, based on cost arbitration and comparisons with other cities and countries. Secondly, competition should be introduced by requiring multiple bidders. The stage has been set for this in cities where multiple operators already exist.