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To competitively tender or to negotiate - Weighing up the choices in a mature market

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  • Wallis, Ian
  • Bray, David
  • Webster, Heather
Abstract
A key attribute of competitive tendering for the periodic selection of operators of subsidised public transport services is to secure the provision of specified services at efficient cost levels. This has proved particularly effective where services were previously provided by an inefficient monopoly operator. The arguments for the adoption of competitive tendering in preference to negotiation with the incumbent operator may be less clear-cut in other cases. Consideration is given to both theoretical and practical insights into the relative merits of competitive tendering and negotiation approaches in such situations. The limited literature on the topic is reviewed and insights and lessons identified. Influencing issues include prior conditions, the nature of the supplier market, features of contracts, negotiating and competitive tendering strategies and practice, accountability and transparency, and long-term market implications. The evidence suggests that [`]one size does not fit all', and the choice will depend on specific circumstances. The relative merits of the two approaches for renewal of bus contracts are considered with regard to Adelaide, for contracts which have previously been awarded through competitive tendering. The paper draws out the main factors that could influence the authority's choice between the options, and discusses the relevance of the findings to other situations.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:retrec:v:29:y:2010:i:1:p:89-98
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    References listed on IDEAS

    as
    1. Stanley, John & van de Velde, Didier, 2008. "Risk and reward in public transport contracting," Research in Transportation Economics, Elsevier, vol. 22(1), pages 20-25, January.
    2. Bray, David & Wallis, Ian, 2008. "Adelaide bus service reform: Impacts, achievements and lessons," Research in Transportation Economics, Elsevier, vol. 22(1), pages 126-136, January.
    3. Walters, Jackie & Cloete, D., 2008. "The South African experience with negotiated versus competitively tendered bus contracts," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(9), pages 1163-1175, November.
    4. David A. Hensher & Ian P. Wallis, 2005. "Competitive Tendering as a Contracting Mechanism for Subsidising Transport: The Bus Experience," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 295-322, September.
    5. Hensher, David A. & Stanley, John, 2008. "Transacting under a performance-based contract: The role of negotiation and competitive tendering," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(9), pages 1143-1151, November.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Odeck, James & Høyem, Harald, 2021. "The impact of competitive tendering on operational costs and market concentration in public transport: The Norwegian car ferry services," Research in Transportation Economics, Elsevier, vol. 90(C).
    2. 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.
    3. Ida, Yoram & Talit, Gal, 2015. "Regulation of public bus services: The Israeli experience," Transport Policy, Elsevier, vol. 42(C), pages 156-165.
    4. Wegelin, Philipp, 2018. "Is the mere threat enough? An empirical analysis about competitive tendering as a threat and cost efficiency in public bus transportation," Research in Transportation Economics, Elsevier, vol. 69(C), pages 245-253.
    5. Filippini, M. & Koller, M. & Masiero, G., 2015. "Competitive tendering versus performance-based negotiation in Swiss public transport," Transportation Research Part A: Policy and Practice, Elsevier, vol. 82(C), pages 158-168.
    6. Wallis, Ian P., 2016. "Demand and service impacts of competition for the market – Australian urban bus case studies," Research in Transportation Economics, Elsevier, vol. 59(C), pages 330-342.
    7. Mbara, Tatenda & Dumba, Smart, 2018. "Institutional preparedness to bus tendering in the context of a fragmented liberalized market: Case study of Harare, Zimbabwe," Research in Transportation Economics, Elsevier, vol. 69(C), pages 165-172.
    8. 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.
    9. 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.
    10. Vigren, Andreas, 2018. "How many want to drive the bus? Analyzing the number of bids for public transport bus contracts," Transport Policy, Elsevier, vol. 72(C), pages 138-147.
    11. 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.
    12. Sheng, Dian & Meng, Qiang, 2020. "Public bus service contracting: A critical review and future research opportunities," Research in Transportation Economics, Elsevier, vol. 83(C).
    13. Pedro, Marisa J.G. & Macário, Rosário, 2016. "A review of general practice in contracting public transport services and transfer to BRT systems," Research in Transportation Economics, Elsevier, vol. 59(C), pages 94-106.
    14. Hensher, David A. & Mulley, Corinne & Smith, Neil, 2013. "Towards a simplified performance-linked value for money model as a reference point for bus contract payments," Research in Transportation Economics, Elsevier, vol. 39(1), pages 232-238.
    15. Wegelin, Philipp & von Arx, Widar, 2016. "The impact of alternative governance forms of regional public rail transport on transaction costs. Case evidence from Germany and Switzerland," Research in Transportation Economics, Elsevier, vol. 59(C), pages 133-142.
    16. Wallis, Ian, 2020. "Value for money in procurement of urban bus services – Competitive tendering versus negotiated contracts: Recent New Zealand experience," Research in Transportation Economics, Elsevier, vol. 83(C).

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