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Disruption costs in bus contract transitions

Author

Listed:
  • Hensher, David A.
  • Ho, Chinh
  • Mulley, Corinne
Abstract
This paper investigates the role of assessment criteria in assisting members of the competitive tendering evaluation committee to choose their preferred operator. In a world where there are increasing numbers of jurisdictions moving to competitive tendering, there is an increased incidence of a change in operator when the term of the contract comes to an end. In many jurisdictions, the anecdotal evidence on the disruption caused by this change in operator is growing. We investigate this issue using a stated choice experiment in which members of evaluation committees are presented with a series of alternative operator bids that include, ex ante, a measure of the transition costs identified as a proportion of the lowest offer for the contract, and two proxy descriptors of operator reputation. A mixed logit choice model is estimated to identify the role that transition costs play in influencing the preferences of evaluation committee members, providing evidence for the first time on the extent to which the often unreported role of such transition costs, perceived or real, appear to play in the minds of competitive tender evaluation.

Suggested Citation

  • Hensher, David A. & Ho, Chinh & Mulley, Corinne, 2016. "Disruption costs in bus contract transitions," Research in Transportation Economics, Elsevier, vol. 59(C), pages 75-85.
    • Handle: RePEc:eee:retrec:v:59:y:2016:i:c:p:75-85
    DOI: 10.1016/j.retrec.2016.04.002
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    References listed on IDEAS

    as
    1. Wallis, Ian & Bray, David & Webster, Heather, 2010. "To competitively tender or to negotiate - Weighing up the choices in a mature market," Research in Transportation Economics, Elsevier, vol. 29(1), pages 89-98.
    2. Hensher, David A. & Stanley, John, 2010. "Contracting regimes for bus services: What have we learnt after 20 years?," Research in Transportation Economics, Elsevier, vol. 29(1), pages 140-144.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Hensher,David A. & Rose,John M. & Greene,William H., 2015. "Applied Choice Analysis," Cambridge Books, Cambridge University Press, number 9781107465923, September.
    5. Wallis, Ian P. & Bray, David J., 2014. "The contracting of urban bus services – Recent Australian developments," Research in Transportation Economics, Elsevier, vol. 48(C), pages 48-61.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Rosell, Jordi, 2017. "Urban bus contractual regimes in small- and medium-sized municipalities: Competitive tendering or negotiation?," Transport Policy, Elsevier, vol. 60(C), pages 54-62.
    2. Liping Ge & Stefan Voß & Lin Xie, 2022. "Robustness and disturbances in public transport," Public Transport, Springer, vol. 14(1), pages 191-261, March.
    3. Wong, Yale Z. & Hensher, David A., 2018. "The Thredbo story: A journey of competition and ownership in land passenger transport," Research in Transportation Economics, Elsevier, vol. 69(C), pages 9-22.
    4. Merkert, Rico & Mulley, Corinne & Hakim, Md Mahbubul, 2018. "Trade-offs between transaction cost, operation cost and innovation in the context of procurement and asset specificity – The example of the bus industry," Research in Transportation Economics, Elsevier, vol. 69(C), pages 173-179.
    5. Hensher, David A., 2021. "The case for negotiated contracts under the transition to a green bus fleet," Transportation Research Part A: Policy and Practice, Elsevier, vol. 154(C), pages 255-269.

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    More about this item

    Keywords

    Contract transition; Disruption costs; Stated choice; Offer assessors; Mixed logit; Bus contracts; Operator reputation;
    All these keywords.

    JEL classification:

    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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