Contents - SPAD

The current model of Regulatory Regime in GKL/KV has been outlined in Section 2 and is
considered to be in the area of quantity licensing. However in reality the level of enforcement and
monitoring is affected by a lack of precise operational data such that operations are not strictly
regulated and operations tend to demonstrate some open market characteristics. However the
operations as characterised at present will not provide the level of regulation necessary to achieve
effective integration, develop a planned network to respond to the changes outlined in Chapter 4
or to raise standards. Hence there is a need for significant changes to the regulatory and
operational regimes, starting with a quick win – the commencement of a service registration
process where operators are required to supply SPAD with precise data on their operations and
then update when they introduce new services, modify them or withdraw.
It is widely accepted that, in order to improve the existing situation, a revised regulatory and route
licensing model, involving some form of contract (or as a minimum or interim requirement, a
partnership or service level agreement) should be introduced. This would enable SPAD to exercise
greater public sector control over the industry and introduce better governance processes at least
in the short to medium term (perhaps the next five years) whilst planning and regulatory processes
and capacity develop. The models which are likely to be able to support this change are towards
the right hand side of the structure diagram (Public Monopoly; Gross Cost and Net Cost
Contracting).
In order to exact change on the industry whilst ensuring that effective competition that is in the
public interest takes place it is recommended that a contracting regime should be implemented as
the basis of the relationship between SPAD and the bus industry. This may take a variety of
detailed forms but in essence a contracting regime is one which sees the public sector plan the
network to its exacting requirements. However, service delivery is secured through the
privatisation, or outsourcing, of the operations (or supply) side of the network. It does afford the
wider public sector the ability to:
Define the network– this enables the state to design the bus network to exacting
specifications, outlining service standards; vehicle specifications; bus frequencies and
headways
Set fares and ticketing structure – fare levels should be set at an appropriate level for the
public to afford; but at levels which generate revenues that enable the operators to reinvest
within their organisations and meet the service level standards required as part of the
contractual arrangements. Fare levels should be reviewed on a regular basis, such as annually
to account for any changes within the economic environment and to account for factors such as
fuel prices that may unduly impact on operating costs
Tender services or corridors or clusters of services on a competitive basis but, significantly,
with the competition taking place off the road in order to secure some form of exclusive
contract, rather than on the road between operators whether they are operating legitimately
or in breach of licensing regulations
This form of contracting can see the public sector taking the financial risk and simply requiring the
operator to provide a cost for running services, or passing the risk to operators or in some way
sharing it. In the KL situation it would be appropriate for the public sector to bear the revenue
risk, at least for an initial period of say five years. Thus all revenues would be banked with the
public body (in a developed system much off-bus revenue is gathered in any case through public
sector outlets, agents such as retail shops, and other non-operator outlets) and the operators
receive a predicted sum for provision that can include a reasonable (sometimes capped) profit
margin. In this model the public sector retains the surpluses on well used services and can use
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