Public-Private Partnerships in Urban Bus Systems by World Bank Publications

Public-Private Partnerships in Urban Bus Systems

Defining the Essential Elements of a Bus Project’s Concession Contract

Planners are not expected to draft a concessions contract at the preparation stage; however, essential elements should be identified and preliminarily defined by the end of this stage. Drafting concession contracts is part of the structuring stage. This chapter supports the preparation stage by listing and briefly d iscussing the essential elements of a bus project’s concession contract, which is the most common contract in urban bus public-private partnerships (PPPs).1

TECHNICAL ELEMENTS Operators’ remuneration plans Remuneration plans are used to pay operators or concessionaires for providing the transportation service as incentives to provide an adequate level of service and to reduce risk to the concessionaire’s income. Despite the diverse range of procurement and payment mechanisms used, there are some core elements (Wallis, Bray, and Webster 2010; Wallis and Hensher 2007). These core elements are characterized by some mixture of demand and supply baseline and incentive-linked contracts: • Fixed payments. This type of payment covers the passenger transportation services provided without considering the kilometers traveled and the demand served. Fixed payments protect operators from fluctuations in demand and thus make the operator’s revenue profile less risky (which is especially important if the operator needs to access finance). They do not necessarily provide an incentive to the operator to maintain the quality of service, but they can serve to increase demand, improve services, and decrease the possibility of default. • Payments based on operational variables. Payments per seat-kilometer or vehicle-kilometer are set at a fixed price for the number of kilometers traveled while providing the service. These payments depend not on demand but on the offer made by the concessionaire for the number of vehicles and seats used to provide the service. Therefore, they assure the operator stable revenue during the project term. This mechanism represents a risk to the quality of 131

Public-Private Partnerships in Urban Bus Systems

Articles inside

A.16 Lessons learned from the business collaboration agreements in Singapore

partnership

A.13 Lessons learned for urban mobility in Port-au-Prince, Haiti A.14 Lessons learned from the TransOeste bus rapid transit project in

C.4 Essential elements of an operation concession contract

A.15 Lessons learned from the business collaboration agreements in Medellín, Colombia

Rio de Janeiro, Brazil

A.11 Lessons learned from the Metrobús-Q System in Quito, Ecuador A.12 Lessons learned from the Avanza Zaragoza concession in Zaragoza,

Spain

A.8 Lessons learned from the SYTRAL integrated public transportation system in Lyon, France

A.9 Lessons learned from the DART Phase I bus rapid transit project in Dar es Salaam, Tanzania

Cali, Colombia

Acapulco, Mexico A.7 Lessons learned from the Metrocali bus rapid transit project in

Monterrey, Mexico A.6 Lessons learned from the Acabús bus rapid transit project in

Mexico City, Mexico A.5 Lessons learned from the Ecovía bus rapid transit project in

Bogotá, Colombia A.4 Lessons learned from the Metrobús bus rapid transit project in

A.2 Lessons learned from the Transantiago bus rapid transit project in Santiago, Chile A.3 Lessons learned from the TransMilenio bus rapid transit project in

in Lima, Peru

11.2 Situations affecting economic equilibrium A.1 Lessons learned from the Metropolitano bus rapid transit project

Economic and financial elements

Institutional and regulatory elements

11.1 Remuneration arrangements and incentives

Technical elements

Setting up subsidies

Funding sources

Private financing instruments

10.1 Summary of the World Bank Group’s instruments

Structuring a project’s capital

Model 4: Private finance and operation of electric buses

Model 1: Bundled private finance and operation of buses

bundled or unbundled

Topical bibliography

Macroeconomic risks

Topical bibliography

7.13 International lessons for achieving quality and level of service

7.8 International lessons for managing fare evasion and cash risk

7.7 International lesson for managing affordability risk

7.1 International lessons for acquiring land

Planning

6.5 International lessons for defining technology components

6.2 International lesson for dealing with incumbent operators

5.1 Categories and types of direct risk, organized by project stage

5.2 Definition of direct project risks

Dealing with incumbent operators

Identifying project risks

Overview and guiding principles

Institutional and regulatory elements

Fiscal capacity

Implement punctual infrastructure-related interventions

Technical elements

Support private sector initiatives to promote user-friendly technologies

References

References

and Tendering

2.2 Examples of the objectives and restrictions of key stakeholders

References

public or private

1.2 A public-private partnership: Three reasons why

Notes

What is a public-private partnership in urban bus systems?

Notes

References

Further discussion

Key Messages