The Challenges of Private Sector Participation in Urban Bus Systems | 13
that they have previously offered. In traditional bus systems, private operators provide and operate fleets (under license and operation agreements), while the public sector provides infrastructure. Second, typical operating revenue barely covers the costs of operations and maintenance (O&M) in most systems, and the public sector likely faces fiscal constraints that limit its ability to expand private provision to other components (this is especially true in low- and middle-income countries). Although the market for fleet provision is voluminous, the average size of a fleet provision transaction pales in comparison with deals in other sectors dependent on large infrastructure. Banks are not able to justify the high transaction costs involved, or they face difficulties (including lack of capacity) assessing project-specific risks. The nature, complexity, and structure of urban bus PPPs relate to the features of project components. The components most often provided, financed, or operated under urban bus PPPs reflect traditional patterns of private sector provision. Table 1.1 generalizes the diversity of components in an urban bus project, including whether the different tasks (design, build, finance, operate, maintain) of the delivery model are almost always public (− −), usually public (−), usually private (+), or almost always private (+ +). Beyond this generalization, from left to right, the table shows a parallel gradient in (a) each component’s suitability to generate or capture revenue, (b) its traditional provider, and (c) the degree to which its operations feature the private sector’s competitive advantage (over the public sector). All the tasks related to delivering individual project components add complexity to the legal and financial structure of projects. Each task under each function can result in independent contractual arrangements. Similarly, all components require funding, and user fares are not enough. On the one hand, the costs of lane infrastructure, especially when not used exclusively for public transportation, are seldom charged to users (regardless of whether they travel in private vehicles or public transportation). On the other hand, the provision and operation of rolling stock are commonly funded totally or partially with user fares. Meanwhile, the project requires all components to achieve financial closure.
TABLE 1.1 Components
of an urban bus project, by function and typical type of provision, public or private
LANE INFRASTRUCTURE
SIGNALING AND TRAFFIC LIGHTS
TERMINALS AND STATIONS
DEPOTS AND WORKSHOPS
ROLLING STOCK
PROJECT-SPECIFIC FARE COLLECTION SYSTEM
Design
−−
−−
−
++
++
++
Build
−−
−−
−
++
++
++
COMPONENT
Finance
−
−
−
+
++
++
Operate
−−
−
+
++
++
++
Maintain
−−
−
+
++
++
++
Suitability to generate or capture revenue during operation Private sector competitive advantage or experience in provision Traditional private provision of component
Source: World Bank. Note: − − = almost always public; − = usually public; + = usually private; ++ = almost always private.
