104 | Public-Private Partnerships in Urban Bus Systems
Model 2: Disadvantages This structure also has some disadvantages compared with a typical model 1: • Complexity. The project structure becomes more complex, requiring more than one contract. The project requires better coordination across its various components. • Worse incentive structure. The bus operator does not have a natural incentive to operate and maintain buses adequately, which implies that the PTA must do more to monitor their maintenance (either directly or by delegating it to a third party). • Stakeholder risk. Removing bus ownership from incumbent operators may create opposition to the project.
MODEL 3: PRIVATE PROVISION OF BUS RAPID TRANSIT INFRASTRUCTURE, BUNDLED OR UNBUNDLED In this structure, a private company finances, builds, and may (or may not) maintain the project’s fixed infrastructure. In cases where PTAs have experience in delivering and maintaining roads and can leverage economies of scale, a private operator may deliver other components of infrastructure, such as bus stops and stations. The PTA is responsible for planning the system. Responsibility for bus provision and operations is the same as in bundled model 1. A separate private partner finances, operates, and maintains fare collection and ticketing systems. Figure 9.4 illustrates this project structure. This structure can be bundled or unbundled. Bundling all BRT components into a single contract would entail bundling the bus (both operations and fleet) and the technology components with the provision of infrastructure, using a joint venture consisting of operators, technology suppliers, and construction firms. Bundling all these components into a single contract may be very beneficial, as it could help to mitigate possible interface risk. Moreover, given that infrastructure construction is usually paid for by public funds and represents the bulk of project costs, a single contract can make the project more attractive to the private sector. Private sector involvement would, in turn, make the project more bankable overall and reduce costs for the public sector. However, while bundling BRT components into a single contract can help make the project more bankable, other contextual elements should be considered. For example, where there is an expectation from the government’s side that informal operators should be included in the bus component of a potential BRT intervention, this expectation would complicate the implementation of a single contract. First, informal operators might not be willing to support an approach of this kind, as their influence in the joint venture would be minimal (as the bus component represents a much smaller portion of the contract than does infrastructure). Second, infrastructure providers might struggle to estimate the payment required to offset the risks posed by the involvement of a previously informal firm. This difficulty could, in turn, increase costs for the public sector. Finally, there is a risk that the influence of the infrastructure component will dominate other project components.
