Friday, 23 May 2014

Understanding the Bus Contracting Model

<WARNING: Rated M for language>

[You would have met the Angry Singaporean. You can find him on any forum on Singapore issues. 

Meet The Angrier Singaporean. His pet peeves are people who comment without understanding the issues, people who hijack discussions to talk about their pet peeves, people who do understand the issues or who don't even bother to read and understand the news report. 

Today, he has a beef with The Angry Singaporeans who have not understood the Bus Contracting Model. Here is his rant.]

I just love reading the comments on FaceBook in reaction to the news about the Bus Contracting Model for our public bus system.

All that angst, the sense of  betrayal, the horror, the fear, the ignorance, the stupidity.

All because they did not bother to read the news. Or if they did they did not understand. Or if they thought they understood, they did not really understood.

If they had read and had a basic understanding of the report, this is what they would have found out.
  1. The SG government will take over all the assets ("all your bus are belong to us") of the bus companies.
  2. The fares will be set by the Govt, and all fares collected, will go the to government.
  3. The  routes and service standards will be set by the government.
  4. So based on the routes and the standards they have the meet, the bus companies will bid for the contracts, as in quote a price to run those route to the standard required. This contracted price is what the government will pay to the company to run the bus routes.
  5. The bus company will need to hire drivers, plan driver's workload, schedule shifts, etc in order to have drivers available to drive buses to meet service standards.

We will now take stupid questions from the floor.

Q: Does this mean that fares will go up?
A: No you dumb fuck! See point 2. The fares will be set by the govt, and fares collected will go to the govt. One of the problems with the current system is that fares are part of the revenue of the bus company, which were private, for-profit commercial business that needed to make a profit. So in the current arrangement, fares are part of the company's revenue, and the higher the fare the higher the revenue. In the contracting model, the companies revenue will be the contracted fee the govt will pay the company to run the bus routes. In all likelihood there will be a basic fee for meeting the minimum service standards. There may also be "bonuses" for meeting stretched targets. The company may also increase profit by cutting costs.

Q: Isn't the government in effect subsidising and bailing out unprofitable bus companies? Aren't tax payers' money being used to bail out these companies at the expense of the tax-payer?
A: Listen, you dumb fuck, if the government were to give you a subsidy, where the fuck do you think the money is coming from? Yes, tax payers. You complain that bus fares are too high. You want a subsidy? Where the fuck do you think the money's coming from? Yes. Taxes. No. Not TEXAS! Complaining about how tax payers are paying for subsidies is fucking STUPID! Government is generally about collecting money in taxes to either buy services, buy goods, or give money to groups who need money, i.e. financial assistance or subsidies.

OK, so say your complain is not about subsidies per se, but subsidies to commercial bus companies. HOW is a contract to provide service a subsidy to the bus company? Say one of the packages to be rolled out for tender and contracting is to operate 20 bus routes in Bishan, with a bus frequency of no more than 10 minutes during peak hours, and no more than 15 minutes during non-peak hours, and buses should not be more than 90% full more than 20% of the time on any day. Two companies bid for it. One want $100m per year to run these 20 routes. The other will do it for $90m. The contract is awarded to the lowest bid.

Where is the subsidy?

Q: Isn't there an implied subsidy to the bus company since the govt is taking over the buses and even the bus interchange, etc.?

A: Then what about bus-stops then? Why don't we make bus companies own and operate bus stops? After all bus stops are necessary for bus services, just like depots and interchanges. And while we are at it, why don't we make SIA own and operate Changi Airport? Aren't we subsidising SIA by NOT making them run Changi Airport?

The proposed approach is simply about operational viability and costs.

For commercial operators it is simply a matter of costs. If you make the operators own the buses, all that means is that when they quote for the contract they will include the cost of purchasing the buses and maintaining the buses. So the $100m and $90m quote? It may become $200m or $300m or however much the costs of owning and maintaining a fleet of buses will costs. And/or the costs of owning and operating a bus interchange.

But having the government (thru the LTA) own these assets, there are some economies of scale. One workshop (or one contractor) can maintain all the rolling assets. One interchange can be used by all the bus service contractors, if one company fails to meet service standards, they can be kicked out and a replacement can step in almost immediately to drive all the buses. The replacement don't have to get new buses which will take time and investment.

Subsidy? Sure. It is a subsidy. If you do not understand what a subsidy is. Or you just want "subsidy" to mean "something that I don't understand, but I think I don't like it".

Q: Why are Angry Singaporeans so angry?
A: People get angry for mainly one reason - fear. They fear what they do not understand. They fear change. They fear what is different. Anytime you see an angry person, deep down he is afraid.

The irony is that Singaporeans have been asking for change. And when change comes they are afraid.

The irony is that Singaporeans have asked for a transport system that is more affordable, and when there is a proposal for one that can better control fares and keep them low, they believe that it is just to raise fares.

The irony is that Singaporeans have been asking for the government to be more open to the idea of helping the lower income and to give subsidy, and when it does, the Angry Singaporean believe that it is a subsidy to commercial companies.

The irony is that the PAP has so long told the people that subsidies are wrong, that they people now believe it.

The irony is that the people has been saying the PAP must change. Now the PAP is trying to change the way they do things and the people don't want them to change.

Don't like the Angrier Singaporean's view? Here are two more civilised commentaries.

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